Finance Bill (HC Bill 116)

(a) after “in progress” insert “in relation to any matter to which the
amendment relates or which is affected by the amendment”;

(b) in paragraph (a), for “the closure notice” substitute “a partial or final
closure notice”;

(c) 5in paragraph (b), for “the closure notice is issued” substitute “a
partial closure notice is issued in relation to the matters to which the
amendment relates or which are affected by the amendment or, if no
such notice is issued, a final closure notice is issued”.

(4) In subsection (4)(a), after “in progress” insert “in relation to any matter to
10which the amendment relates or which is affected by the amendment”.

(5) In subsection (5)—

(a) after “in progress” insert “in relation to any matter”;

(b) for “the enquiry is completed” substitute “a partial closure notice is
issued in relation to the matter or, if no such notice is issued, a final
15closure notice is issued”.

9 In section 12B (records), in subsection (1)(b)(i), for “28A(1) or 28B(1)”
substitute “28A(1B) or 28B(1B)”.

10 (1) Section 28ZA (referral of questions during enquiry) is amended as follows.

(2) In subsection (1), after “of this Act” insert “in relation to any matter”.

(3) 20In subsection (5)—

(a) after “in progress” insert “in relation to any matter”;

(b) for “the enquiry is completed” substitute “a partial closure notice is
issued in relation to the matter or, if no such notice is issued, a final
closure notice is issued”.

11 25In section 28ZD (effect of referral on enquiry), in subsection (1)—

(a) for paragraph (a) substitute—

“(a) no partial closure notice relating to the question
referred shall be given,

(aa) no final closure notice shall be given in relation to the
30enquiry, and”;”

(b) in paragraph (b), for “such a notice” substitute “a notice referred to
in paragraph (a) or (aa)”.

12 (1) Section 28A (completion of enquiry into personal, trustee or NRCGT return)
is amended as follows.

(2) 35For subsection (1) substitute—

“(1) This section applies in relation to an enquiry under section 9A(1) or
12ZM of this Act.

(1A) Any matter to which the enquiry relates is completed when an officer
of Revenue and Customs informs the taxpayer by notice (a “partial
40closure notice”) that the officer has completed his enquiries into that
matter.

(1B) The enquiry is completed when an officer of Revenue and Customs
informs the taxpayer by notice (a “final closure notice”) —

(a) in a case where no partial closure notice has been given, that
45the officer has completed his enquiries, or

(b) in a case where one or more partial closure notices have been
given, that the officer has completed his remaining
enquiries.””

(3) In subsection (2)—

(a) 5for “closure notice” substitute “partial or final closure notice”;

(b) for “either” substitute “state the officer’s conclusions and”.

(4) In subsections (3) and (4), for “closure notice” substitute “partial or final
closure notice”.

(5) In subsection (6), for “a closure notice” substitute “the partial or final closure
10notice”.

(6) After subsection (6) insert—

“(7) In this section “the taxpayer” means the person to whom notice of
enquiry was given.

(8) In the Taxes Acts, references to a closure notice under this section are
15to a partial or final closure notice under this section.””

13 (1) Section 28B (completion of enquiry into partnership return) is amended as
follows.

(2) For subsection (1) substitute—

“(1) This section applies in relation to an enquiry under section 12AC of
20this Act.

(1A) Any matter to which the enquiry relates is completed when an officer
of Revenue and Customs informs the taxpayer by notice (a “partial
closure notice”) that the officer has completed his enquiries into that
matter.

(1B) 25The enquiry is completed when an officer of Revenue and Customs
informs the taxpayer by notice (a “final closure notice”)—

(a) in a case where no partial closure notice has been given, that
the officer has completed his enquiries, or

(b) in a case where one or more partial closure notices have been
30given, that the officer has completed his remaining
enquiries.””

(3) In subsection (2)—

(a) for “closure notice” substitute “partial or final closure notice”;

(b) for “either” substitute “state the officer’s conclusions and”.

(4) 35In subsections (3) and (5), for “closure notice” substitute “partial or final
closure notice”.

(5) In subsection (7), for “a closure notice” substitute “the partial or final closure
notice”.

(6) After subsection (7) insert—

“(8) 40In this section “the taxpayer” means the person to whom notice of
enquiry was given or his successor.

(9) In the Taxes Acts, references to a closure notice under this section are
to a partial or final closure notice under this section.””

14 In section 29 (assessment where loss of tax discovered), in subsection (5), for
paragraph (b) substitute—

“(b) in a case where a notice of enquiry into the return was
given—

(i) 5issued a partial closure notice as regards a matter to
which the situation mentioned in subsection (1) above
relates, or

(ii) if no such partial closure notice was issued, issued a
final closure notice,”.”

15 10In section 29A (NRCGT disposals: determination of amount which should
have been assessed), in subsection (5), for paragraph (b) substitute—

“(b) in a case where a notice of enquiry into the return was
given—

(i) issued a partial closure notice as regards a matter to
15which the situation mentioned in subsection (1)
relates, or

(ii) if no such partial closure notice was issued, issued a
final closure notice,”.”

16 In section 30 (recovery of overpayment of tax etc), in subsection (5)(b), for
20“28A(1)” substitute “28A(1B)”.

17 In section 30B (amendment of partnership statement where loss of tax
discovered), in subsection (6), for paragraph (b) substitute—

“(b) in a case where a notice of enquiry into that return was
given—

(i) 25issued a partial closure notice as regards a matter to
which the situation mentioned in subsection (1) above
relates, or

(ii) if no such partial closure notice was issued, issued a
final closure notice,”.”

18 30In section 31 (appeals: right of appeal), in subsection (2)—

(a) after “in progress” insert “in relation to any matter to which the
amendment relates or which is affected by the amendment”;

(b) for “the enquiry is completed” substitute “a partial closure notice is
issued in relation to the matter or, if no such notice is issued, a final
35closure notice is issued”.

19 In section 59AA (NRCGT disposals: payments on account of CGT), in
subsection (8)(a), for “28A(1)” substitute “28A(1B)”.

20 In section 59B (payment of income tax and capital gains tax), in subsection
(4A)(a), for “28A(1)” substitute “28A(1B)”.

21 (1) 40In Schedule 3ZA (date by which payment to be made after amendment etc
of self-assessment), paragraph 2 is amended as follows.

(2) In sub-paragraph (3)(b)—

(a) for the first “the closure notice” substitute “a partial or final closure
notice”;

(b) 45for “the day on which the closure notice was given” substitute “the
relevant day”.

(3) After sub-paragraph (3) insert—

“(4) In sub-paragraph (3)(b), “the relevant day” means—

(a) in the case of an amount of tax that is payable, the day on
which the partial or final closure notice was given;

(b) 5in the case of an amount of tax that is repayable—

(i) if the closure notice was a final closure notice, the
day on which that notice was given, and

(ii) if the closure notice was a partial closure notice, the
day on which the final closure notice relating to the
10enquiry was given.””

TCGA 1992

22 (1) Section 184I of TCGA 1992 (notices under sections 184G and 184H) is
amended as follows.

(2) In subsection (4)—

(a) 15after “completed” insert “in relation to any matters”;

(b) after “relevant notice” insert “relating to those matters”.

(3) In subsection (5), for “into the return” substitute “referred to in subsection
(4)”.

(4) In subsection (7)(a), after “period” insert “(so far as relating to the matters in
20question)”.

(5) After subsection (9) insert—

“(9A) Subsection (9) does not apply to a partial closure notice which does
not relate to any matter to which the relevant notice relates.””

(6) In subsection (10), after “completed,” insert “so far as relating to the matters
25to which the relevant notice relates,”.

FA 1998

23 Schedule 18 to FA 1998 (company tax returns, assessments and related
matters) is amended as follows.

24 (1) Paragraph 30 (amendment of self-assessment during enquiry to prevent loss
30of tax) is amended as follows.

(2) In sub-paragraph (1)—

(a) for “before the enquiry is completed” substitute “while the enquiry is
in progress in relation to a matter”;

(b) after “deficiency” insert “so far as it relates to the matter”.

(3) 35After sub-paragraph (5) insert—

“(6) For the purposes of this paragraph, the period during which an
enquiry is in progress in relation to any matter is the whole of the
period—

(a) beginning with the day on which notice of enquiry is
40given, and

(b) ending with the day on which a partial closure notice is
issued in relation to the matter or, if no such notice is
issued, a final closure notice is issued.””

25 (1) Paragraph 31 (amendment of return by company during enquiry) is
5amended as follows.

(2) In sub-paragraph (1), for “is in progress into the return” substitute “into the
return is in progress in relation to any matter to which the amendment
relates or which is affected by the amendment”.

(3) In sub-paragraph (3) for “until after the enquiry is completed” substitute
10“while the enquiry is in progress in relation to any matter to which the
amendment relates or which is affected by the amendment”.

(4) In sub-paragraph (4)(a)—

(a) for “the closure notice” substitute “a partial or final closure notice”;

(b) for “on the completion of the enquiry” substitute “when a partial
15closure notice is issued in relation to the matters to which the
amendment relates or which are affected by the amendment or, if no
such notice is issued, a final closure notice is issued”.

(5) In sub-paragraph (5)—

(a) after “in progress” insert “in relation to any matter”;

(b) 20for “the enquiry is completed” substitute “a partial closure notice is
issued in relation to the matter or, if no such notice is issued, a final
closure notice is issued”.

26 (1) Paragraph 31A (referral of questions to the tribunal during enquiry) is
amended as follows.

(2) 25In sub-paragraph (1), for “into” substitute “in relation to any matter relating
to”.

(3) In sub-paragraph (5)—

(a) after “in progress” insert “in relation to any matter”;

(b) for “the enquiry is completed” substitute “a partial closure notice is
30issued in relation to the matter or, if no such notice is issued, a final
closure notice is issued”.

27 In paragraph 31C (effect of referral on enquiry), in sub-paragraph (1)—

(a) for paragraph (a) substitute—

“(a) no partial closure notice relating to the question
35referred shall be given,

(aa) no final closure notice shall be given in relation to the
enquiry, and”;”

(b) in paragraph (b), for “such a notice” substitute “a notice referred to
in paragraph (a) or (aa)”.

28 (1) 40Paragraph 32 (completion of enquiry) is amended as follows.

(2) For sub-paragraph (1) substitute—

“(1) Any matter to which an enquiry relates is completed when an
officer of Revenue and Customs informs the company by notice (a
“partial closure notice”) that they have completed their enquiries
45into that matter.

(1A) An enquiry is completed when an officer of Revenue and Customs
informs the company by notice (a “final closure notice”)—

(a) in a case where no partial closure notice has been given,
that they have completed their enquiries, or

(b) 5in a case where one or more partial closure notices have
been given, that they have completed their remaining
enquiries.

(1B) A partial or final closure notice takes effect when it is issued.””

(3) In subsection (2), after “concludes” insert “in a partial or final closure notice”.

(4) 10After sub-paragraph (3) insert—

“(4) In the Taxes Acts, references to a closure notice under this
paragraph are to a partial or final closure notice under this
paragraph.””

29 In paragraph 33 (direction to complete enquiry), in sub-paragraphs (1) and
15(3), for “closure notice” substitute “partial or final closure notice”.

30 (1) Paragraph 34 (amendment of return after enquiry) is amended as follows.

(2) In sub-paragraph (1), for “closure notice” substitute “partial or final closure
notice”.

(3) In sub-paragraph (2)—

(a) 20for “closure notice” substitute “partial or final closure notice”;

(b) after “must” insert “state the officer’s conclusions and”.

(4) In sub-paragraphs (2A), (4)(c) and (5), for “closure notice” substitute “partial
or final closure notice”.

31 In paragraph 42 (restriction on power to make discovery assessment or
25determination), in sub-paragraph (2A), for the words from “after any” to the
end substitute “a notice within sub-paragraph (4) after any enquiries have
been completed into the return (so far as relating to the matters to which the
notice relates)”.

32 In paragraph 44 (situation not disclosed by return or related document etc),
30in sub-paragraph (1), for paragraph (b) substitute—

“(b) in a case where a notice of enquiry into the return was
given—

(i) issued a partial closure notice as regards a matter to
which the situation mentioned in paragraph 41(1) or
35(2) relates, or

(ii) if no such partial closure notice was issued, issued a
final closure notice,”.”

33 In paragraph 61 (consequential claims etc), in sub-paragraphs (1)(a) and
(3)(a), for “closure notice” substitute “partial or final closure notice”.

34 (1) 40Paragraph 88 (conclusiveness) is amended as follows.

(2) In sub-paragraph (3)(b), at the end insert “(or is completed so far as relating
to the matters to which the amount relates by the issue of a partial closure
notice)”.

(3) In sub-paragraph (4)(b), at the end insert “(or the completion of the enquiry
so far as relating to the matters to which the amount relates by the issue of a
partial closure notice)”.

Tax Credits Act 2002

35 (1) 5Section 20 of the Tax Credits Act 2002 (decisions on discovery) is amended
as follows.

(2) In subsection (2)(f), for “a closure notice” substitute “a partial or final closure
notice”.

(3) In subsection (3)(b), at the end insert “as specified in subsection (1)”.

10FA 2008

36 In Schedule 36 to FA 2008 (information and inspection powers), in
paragraphs 21(4) and 21ZA(3), at the end insert “so far as relating to the
matters to which the taxpayer notice relates”.

TIOPA 2010

37 15TIOPA 2010 is amended as follows.

38 (1) Section 92 (counteraction notices given after tax return made) is amended as
follows.

(2) In subsection (3)—

(a) after “completed” insert “in relation to any matters”;

(b) 20after “counteraction notice” insert “relating to those matters”.

(3) In subsection (4), after “enquiries” insert “referred to in subsection (3)”.

(4) In subsection (5)(a), after “return” insert “(so far as relating to the matters in
question)”.

39 (1) Section 93 (amendment, closure notices and discovery assessments in
25section 92 cases) is amended as follows.

(2) After subsection (3) insert—

“(3A) Subsection (3) does not apply to a partial closure notice which does
not relate to any matter to which the counteraction notice relates.””

(3) In subsection (4), after “completed,” insert “so far as relating to the matters
30to which the counteraction notice relates,”.

40 In section 171 (tax returns where transfer pricing notice given), after
subsection (2) insert—

“(2A) Subsection (2) does not apply to a partial closure notice which does
not relate to any matter to which the transfer pricing notice relates.””

41 (1) 35Section 256 (notices given after tax return made), so far as continuing to have
effect, is amended as follows.

(2) In subsection (2)—

(a) after “completed” insert “in relation to any matters”;

(b) after “receipt notice” insert “relating to those matters”.

(3)

In subsection (6)(a), after “return” insert “(so far as relating to the matters in
question)”.

42 (1) Section 257 (amendments, closure notices etc), so far as continuing to have
effect, is amended as follows.

(2) 5After subsection (4) insert—

“(4A) Subsection (4) does not apply to a partial closure notice which does
not relate to any matter to which the Part 6 notice relates.””

(3) In subsection (5), after “completed,” insert “so far as relating to the matters
to which the Part 6 notice relates,”.

43 10In section 371IJ (claims), in subsection (4)(b), after “completed” insert “so far
as relating to the matters to which the claim relates”.

Commencement

44 The amendments made by this Schedule have effect in relation to an enquiry
under section 9A, 12ZM or 12AC of TMA 1970 or Schedule 18 to FA 1998
15where—

(a) notice of the enquiry is given on or after the day on which this Act is
passed, or

(b) the enquiry is in progress immediately before that day.

Section 65

SCHEDULE 16 20Penalties for enablers of defeated tax avoidance

Part 1 Liability to penalty

1 Where—

(a) a person (“T”) has entered into abusive tax arrangements, and

(b) 25T incurs a defeat in respect of the arrangements,

a penalty is payable by each person who enabled the arrangements.

2 (1) Parts 2 to 4 of this Schedule define—

• “abusive tax arrangements”;

• a “defeat in respect of the arrangements”;

• 30a “person who enabled the arrangements”.

(2) The other Parts of this Schedule make provision supplementing paragraph
1 as follows—

(a) Part 5 makes provision about the amount of a penalty;

(b) Parts 6 to 8 provide for the assessment of penalties, referrals to the
35GAAR Advisory Panel and appeals against assessments;

(c) Part 9 applies information and inspection powers, and makes
provision about declarations relating to legally privileged
communications;

(d) Part 10 confers power to publish details of persons who have
incurred penalties;

(e) Parts 11 and 12 contain miscellaneous and general provisions.

Part 2 5“Abusive” and “tax arrangements”: meaning

3 (1) Arrangements are “tax arrangements” for the purposes of this Schedule if,
having regard to all the circumstances, it would be reasonable to conclude
that the obtaining of a tax advantage was the main purpose, or one of the
main purposes, of the arrangements.

(2) 10Tax arrangements are “abusive” for the purposes of this Schedule if they are
arrangements the entering into or carrying out of which cannot reasonably
be regarded as a reasonable course of action in relation to the relevant tax
provisions, having regard to all the circumstances.

(3) The circumstances to which regard must be had under sub-paragraph (2)
15include—

(a) whether the substantive results, or the intended substantive results,
of the arrangements are consistent with any principles on which the
relevant tax provisions are based (whether express or implied) and
the policy objectives of those provisions,

(b) 20whether the means of achieving those results involves one or more
contrived or abnormal steps, and

(c) whether the arrangements are intended to exploit any shortcomings
in those provisions.

(4) Where the tax arrangements form part of any other arrangements regard
25must also be had to those other arrangements.

(5) Each of the following is an example of something which might indicate that
tax arrangements are abusive—

(a) the arrangements result in an amount of income, profits or gains for
tax purposes that is significantly less than the amount for economic
30purposes;

(b) the arrangements result in deductions or losses of an amount for tax
purposes that is significantly greater than the amount for economic
purposes;

(c) the arrangements result in a claim for the repayment or crediting of
35tax (including foreign tax) that has not been, and is unlikely to be,
paid;

but a result mentioned in paragraph (a), (b) or (c) is to be taken to be such an
example only if it is reasonable to assume that such a result was not the
anticipated result when the relevant tax provisions were enacted.

(6) 40The fact that tax arrangements accord with established practice, and HMRC
had, at the time the arrangements were entered into, indicated their
acceptance of that practice, is an example of something which might indicate
that the arrangements are not abusive.

(7) The examples given in sub-paragraphs (5) and (6) are not exhaustive.

(8) 45In sub-paragraph (5) the reference to income includes earnings, within the
meaning of Part 1 of the Social Security Contributions and Benefits Act 1992

or Part 1 of the Social Security Contributions and Benefits (Northern Ireland)
Act 1992.

Part 3 “Defeat” in respect of abusive tax arrangements

5“Defeat” in respect of abusive tax arrangements

4 T (within the meaning of paragraph 1) incurs a “defeat” in respect of abusive
tax arrangements entered into by T (“the arrangements concerned”) if—

(a) Condition A (in paragraph 5) is met, or

(b) Condition B (in paragraph 6) is met.

10Condition A

5 (1) Condition A is that—

(a) T, or a person on behalf of T, has given HMRC a document of a kind
listed in the Table in paragraph 1 of Schedule 24 to FA 2007 (returns
etc),

(b) 15the document was submitted on the basis that a tax advantage (“the
relevant tax advantage”) arose from the arrangements concerned,

(c) the relevant tax advantage has been counteracted, and

(d) the counteraction is final.

(2) For the purposes of this paragraph the relevant tax advantage has been
20“counteracted” if adjustments have been made in respect of T’s tax position
on the basis that the whole or part of the relevant tax advantage does not
arise.

(3) For the purposes of this paragraph a counteraction is “final” when the
adjustments in question, and any amounts arising from the adjustments, can
25no longer be varied, on appeal or otherwise.

(4) In this paragraph “adjustments” means any adjustments, whether by way of
an assessment, the modification of an assessment or return, the amendment
or disallowance of a claim, a payment, the entering into of a contract
settlement or otherwise.

30Accordingly, references to “making” adjustments include securing that
adjustments are made by entering into a contract settlement.

(5) Any reference in this paragraph to giving HMRC a document includes—

(a) communicating information to HMRC in any form and by any
method;

(b) 35making a statement or declaration in a document.

(6)
Any reference in this paragraph to a document of a kind listed in the Table
in paragraph 1 of Schedule 24 to FA 2007 includes—

(a) a document amending a document of a kind so listed, and

(b) a document which—

(i) 40relates to national insurance contributions, and

(ii) is a document in relation to which that Schedule applies.