Finance Bill (HC Bill 116)

Condition B

6 (1) Condition B is that (in a case not falling within Condition A)—

(a) HMRC have made an assessment in relation to tax,

(b) the assessment counteracts a tax advantage that it is reasonable to
5assume T expected to obtain from the arrangements concerned (“the
expected tax advantage”), and

(c) the counteraction is final.

(2) For the purposes of this paragraph an assessment “counteracts” the expected
tax advantage if the assessment is on a basis which prevents T from
10obtaining (or obtaining the whole of) the expected tax advantage.

(3) For the purposes of this paragraph a counteraction is “final”—

(a) when a relevant contract settlement is made, or

(b) if no contract settlement has been made, when the assessment in
question and any amounts arising from the assessment can no longer
15be varied, on appeal or otherwise.

(4) In sub-paragraph (3) a “relevant contract settlement” means a contract
settlement on a basis which prevents T from obtaining (or obtaining the
whole of) the expected tax advantage.

Part 4 20Persons who “enabled” the arrangements

Persons who “enabled” the arrangements

7 (1) A person is a person who “enabled” the arrangements mentioned in
paragraph 1 if that person is—

(a) a designer of the arrangements (see paragraph 8),

(b) 25a manager of the arrangements (see paragraph 9),

(c) a person who marketed the arrangements to T (see paragraph 10),

(d) an enabling participant in the arrangements (see paragraph 11), or

(e) a financial enabler in relation to the arrangements (see paragraph
12).

(2) 30This paragraph is subject to paragraph 13 (excluded persons).

Designers of arrangements

8 (1) For the purposes of paragraph 7 a person is a “designer” of the arrangements
if that person was, in the course of a business carried on by that person, to
any extent responsible for the design of—

(a) 35the arrangements, or

(b) a proposal which was implemented by the arrangements;

but this is subject to sub-paragraph (2).

(2) Where a person would (in the absence of this sub-paragraph) fall within sub-
paragraph (1) because of having provided advice which was used in the
40design of the arrangements or of a proposal, that person does not because of
that advice fall within that sub-paragraph unless—

(a) the advice is relevant advice, and

(b) the knowledge condition is met.

(3) Advice is “relevant advice” if—

(a) the advice or any part of it suggests arrangements or an alteration of
proposed arrangements, and

(b) 5it is reasonable to assume that the suggestion was made with a view
to arrangements being designed in such a way that a tax advantage
(or a greater tax advantage) might be expected to arise from them.

(4) The knowledge condition is that, when the advice was provided, the person
providing it knew or could reasonably be expected to know—

(a) 10that the advice would be used in the design of abusive tax
arrangements or of a proposal for such arrangements, or

(b) that it was likely that the advice would be so used.

(5) For the purposes of sub-paragraph (3), advice is not to be taken to “suggest”
anything—

(a) 15which is put forward by the advice for consideration, but

(b) which the advice can reasonably be read as recommending against.

(6) In sub-paragraph (3)—

(a) the reference in paragraph (a) to arrangements or an alteration of
proposed arrangements includes a proposal for arrangements or an
20alteration of a proposal for arrangements, and

(b) the reference in paragraph (b) to arrangements includes
arrangements proposed by a proposal.

(7) For the purposes of this paragraph—

(a) references to advice include an opinion;

(b) 25advice is “used” in a design if the advice is taken account of in that
design.

Managers of arrangements

9 (1) For the purposes of paragraph 7 a person is a “manager” of the arrangements
if that person—

(a) 30was, in the course of a business carried on by that person, to any
extent responsible for the organisation or management of the
arrangements, and

(b) when carrying out any functions in relation to the organisation or
management of the arrangements, knew or could reasonably be
35expected to know that the arrangements involved were abusive tax
arrangements.

(2) Where—

(a) a person is, in the course of a business carried on by the person, to
any extent responsible for facilitating T’s withdrawal from the
40arrangements, and

(b) it is reasonable to assume that the obtaining of a tax advantage is not
T’s purpose (or one of T’s purposes) in withdrawing from the
arrangements,

that person is not because of anything done in the course of facilitating that
45withdrawal to be regarded as to any extent responsible for the organisation
or management of the arrangements.

Marketers of arrangements

10 For the purposes of paragraph 7 a person “marketed” the arrangements to T
if, in the course of a business carried on by that person—

(a) that person made available for implementation by T a proposal
5which has since been implemented, in relation to T, by the
arrangements, or

(b) that person—

(i) communicated information to T or another person about a
proposal which has since been implemented, in relation to T,
10by the arrangements, and

(ii) did so with a view to T entering into the arrangements or
transactions forming part of the arrangements.

Enabling participants

11 For the purposes of paragraph 7 a person is “an enabling participant” in the
15arrangements if—

(a) that person is a person (other than T) who enters into the
arrangements or a transaction forming part of the arrangements,

(b) without that person’s participation in the arrangements or
transaction (or the participation of another person in the
20arrangements or transaction in the same capacity as that person), the
arrangements could not be expected to result in a tax advantage for
T, and

(c) when that person entered into the arrangements or transaction, that
person knew or could reasonably be expected to know that what was
25being entered into was abusive tax arrangements or a transaction
forming part of such arrangements.

Financial enablers

12 (1) For the purposes of paragraph 7 a person is a “financial enabler” in relation
to the arrangements if—

(a) 30in the course of a business carried on by that person, that person
provided a financial product (directly or indirectly) to a relevant
party,

(b) it is reasonable to assume that the purpose (or a purpose) of the
relevant party in obtaining the financial product was to participate in
35the arrangements, and

(c) when the financial product was provided, the person providing it
knew or could reasonably be expected to know that the purpose (or
a purpose) of obtaining it was to participate in abusive tax
arrangements.

(2) 40In this paragraph “a relevant party” means T or an enabling participant in
the arrangements within the meaning given by paragraph 11.

(3) Any reference in this paragraph to a person’s providing a financial product
to a relevant party includes (but is not limited to) the person’s doing any of
the following—

(a) 45providing a loan to a relevant party;

(b) issuing or transferring a share to a relevant party;

(c) entering into arrangements with a relevant party such that—

(i) the person becomes a party to a relevant contract within the
meaning of section 577 of CTA 2009 (derivative contracts);

(ii) there is a repo in respect of securities within the meaning of
section 263A(A1) of TCGA 1992;

(iii) 5the person or the relevant party has a creditor repo, creditor
quasi-repo, debtor repo or debtor quasi-repo within the
meaning of sections 543, 544, 548 and 549 of CTA 2009;

(d) entering into a stock lending arrangement, within the meaning of
section 263B(1) of TCGA 1992, with a relevant party;

(e) 10entering into an alternative finance arrangement, within the
meaning of Chapter 6 of Part 6 of CTA 2009 or Part 10A of ITA 2007,
with a relevant party;

(f) entering into a contract with a relevant party which, whether alone
or in combination with one or more other contracts—

(i) 15is in accordance with generally accepted accounting practice
required to be treated as a loan, deposit or other financial
asset or obligation, or

(ii) would be required to be so treated by the person if the person
were a company to which the Companies Act 2006 applies;

20and references to obtaining a financial product are to be read accordingly.

(4) The Treasury may by regulations amend sub-paragraph (3).

Excluded persons

13 (1) A person who—

(a) would (in the absence of this paragraph) be regarded for the
25purposes of this Schedule as having enabled particular arrangements
mentioned in paragraph 1, but

(b) is a person within sub-paragraph (2),

is not to be regarded as having enabled those arrangements.

(2) The persons within this sub-paragraph are—

(a) 30T;

(b) where T is a company, any company in the same group as T.

Powers to add categories of enabler and to provide exceptions

14 (1) The Treasury may by regulations add to the categories of persons who, in
relation to arrangements mentioned in paragraph 1, are for the purposes of
35this Schedule persons who enabled the arrangements.

(2) The Treasury may by regulations provide that a person who would
otherwise be regarded for the purposes of this Schedule as having enabled
arrangements is not to be so regarded where conditions prescribed by the
regulations are met.

(3) 40Regulations under this paragraph may—

(a) amend this Part of this Schedule;

(b) make supplementary, incidental, and consequential provision,
including provision amending any other Part of this Schedule;

(c) make transitional provision.

Part 5 Amount of penalty

Amount of penalty

15 (1) For each person who enabled the arrangements mentioned in paragraph 1,
5the penalty payable under paragraph 1 is the total amount or value of all the
relevant consideration received or receivable by that person (“the person in
question”).

(2) Particular consideration is “relevant” for the purposes of this paragraph if—

(a) it is consideration for anything done by the person in question which
10enabled the arrangements mentioned in paragraph 1, and

(b) it has not previously been taken into account in calculating the
amount of a penalty payable under paragraph 1.

(3) For the purposes of this paragraph a thing done by a person “enabled” the
arrangements mentioned in paragraph 1 if, by doing that thing (alone or
15with anything else), the person fell within the definition in Part 4 of this
Schedule of a person who enabled those arrangements.

16 (1) This paragraph applies for the purposes of paragraph 15.

(2) Where consideration for anything done by a person (“A”) is, under any
arrangements with A, paid or payable to a person other than A, it is to be
20taken to be received or receivable by A.

(3) The “consideration” for anything done by a person does not include any
amount charged by that person in respect of value added tax.

(4) Consideration attributable to two or more transactions is to be apportioned
on a just and reasonable basis.

(5) 25Any consideration given for what is in substance one bargain is to be treated
as attributable to all elements of the bargain, even though—

(a) separate consideration is, or purports to be, given for different
elements of the bargain, or

(b) there are, or purport to be, separate transactions in respect of
30different elements of the bargain.

Reduction of penalty where other penalties incurred

17 (1) The amount of a penalty for which a person is liable under paragraph 1 is to
be reduced by the amount of any other penalty incurred by the person in
respect of conduct for which the person is liable to the penalty under
35paragraph 1.

(2) In this paragraph “any other penalty” means a penalty—

(a) which is a penalty under a provision other than paragraph 1, and

(b) which has been assessed.

Mitigation of penalty

18 (1) 40HMRC may in their discretion reduce a penalty under paragraph 1.

(2) In this paragraph the reference to reducing a penalty includes a reference
to—

(a) entirely remitting the penalty, or

(b) staying, or agreeing a compromise in relation to, proceedings for the
5recovery of a penalty.

Part 6 Assessment of penalty

Assessment of penalty

19 (1) Where a person is liable for a penalty under paragraph 1 HMRC must—

(a) 10assess the penalty, and

(b) notify the person.

(2) If—

(a) HMRC do not have all the information required to determine the
amount or value of the relevant consideration within the meaning of
15paragraph 15, and

(b) HMRC have taken all reasonable steps to obtain that information,

HMRC may assess the penalty on the basis of a reasonable estimate by
HMRC of that consideration.

(3) This paragraph is subject to—

(a) 20paragraphs 21 and 22 (limits on when penalty may be assessed); and

(b) Part 7 of this Schedule (requirement for opinion of GAAR Advisory
Panel before penalty may be assessed).

20 (1) A penalty under paragraph 1 must be paid before the end of the period of 30
days beginning with the day on which notification of the penalty is issued.

(2) 25An assessment of a penalty under paragraph 1—

(a) is to be treated for procedural purposes in the same way as an
assessment to tax (except in respect of a matter expressly provided
for by this Schedule), and

(b) may be enforced as if it were an assessment to tax.

30Special provision about assessment for multi-user schemes

21 (1) This paragraph applies where—

(a) a proposal for arrangements is implemented more than once, by a
number of tax arrangements which are substantially the same as
each other (“related arrangements”),

(b) 35paragraph 1 applies in relation to particular arrangements (“the
arrangements concerned”) which are one of the number of related
arrangements implementing the proposal, and

(c) at the time when the person who entered into the arrangements
concerned incurs a defeat in respect of them, the required percentage
40of relevant defeats has not been reached.

(2) HMRC may not assess any penalty payable under paragraph 1 in respect of
the arrangements concerned until the required percentage of relevant
defeats is reached.

(3) For the purposes of this paragraph the “required percentage of relevant
defeats” is reached when HMRC reasonably believe that defeats have been
incurred in the case of more than 50% of the related arrangements
implementing the proposal.

(4) 5Sub-paragraph (2) does not apply in relation to a penalty if the person liable
to the penalty requests assessment of the penalty sooner than the time
allowed by sub-paragraph (2).

Time limit for assessment

22 (1) An assessment of a person as liable to a penalty under paragraph 1 may not
10take place after the relevant time.

(2) In this paragraph “the relevant time” means, subject to sub-paragraphs (3) to
(6)—

(a) where a GAAR final decision notice within the meaning of
paragraph 24(1) has been given in relation to the arrangements to
15which the penalty relates, the end of 12 months beginning with the
date on which T incurs the defeat mentioned in paragraph 1;

(b) where a notice under paragraph 25 has been given to the person
mentioned in sub-paragraph (1) above in respect of the
arrangements to which the penalty relates, the end of 12 months
20beginning with the end of the time allowed for making
representations in respect of that notice;

(c) where—

(i) a referral has been made under paragraph 26 in respect of the
arrangements to which the penalty relates, and

(ii) 25paragraph (d) does not apply,

the end of 12 months beginning with the date on which the opinion
of the GAAR Advisory Panel is given on the referral (within the
meaning given by paragraph 34(6));

(d) where a notice under paragraph 35 has been given to the person
30mentioned in sub-paragraph (1) above in respect of the
arrangements to which the penalty relates, the end of 12 months
beginning with the end of the time allowed for making
representations in respect of that notice.

(3) Where—

(a) 35paragraph 21 prevented a penalty from being assessed before the
required percentage of relevant defeats was reached, and

(b) the required percentage of relevant defeats (within the meaning of
paragraph 21) has been reached,

the relevant time in relation to that penalty is whichever is the later of—

(i) 40the relevant time given by sub-paragraph (2), and

(ii) the end of 12 months beginning with the date on which that required
percentage was reached.

(4) Where under paragraph 21(4) a person requests assessment of a penalty, the
relevant time in relation to that penalty is whichever is the later of—

(a) 45the relevant time given by sub-paragraph (2), and

(b) the end of 12 months beginning with the date on which the request
is made,

and sub-paragraph (3) does not apply to the penalty even if the required
percentage of relevant defeats is reached.

(5) Sub-paragraph (6) applies where—

(a) at any time a declaration has been made under paragraph 44 for the
5purposes of any determination of whether a person is liable to a
penalty under paragraph 1 in relation to particular arrangements
(“the arrangements concerned”), and

(b) subsequently, facts that in the Commissioners’ opinion are sufficient
to indicate that the declaration contains a material inaccuracy have
10come to the Commissioners’ knowledge.

(6) The relevant time in respect of any penalty under paragraph 1 payable by
that person in relation to the arrangements concerned is whichever is the
later of—

(a) the relevant time given by the preceding provisions of this
15paragraph, and

(b) the end of 12 months beginning with the date on which such facts
came to the Commissioners’ knowledge.

Part 7 GAAR Advisory Panel opinion, and representations

20Requirement for opinion of GAAR Advisory Panel

23 (1) A penalty under paragraph 1 may not be assessed unless—

(a) the decision that it should be assessed is taken by a designated
HMRC officer, and

(b) either the condition in sub-paragraph (2) or the condition in sub-
25paragraph (3) is met.

(2) The condition in this sub-paragraph is that, when the assessment is made—

(a) a GAAR final decision notice has been given in relation to—

(i) the arrangements to which the penalty relates (“the relevant
arrangements”), or

(ii) 30arrangements that are equivalent to the relevant
arrangements,

(b) where a notice is required by paragraph 25 to be given to the person
liable to the penalty, that notice has been given and the time allowed
for making representations under that paragraph has expired, and

(c) 35a designated HMRC officer has, in deciding whether the penalty
should be assessed, considered—

(i) the opinion of the GAAR Advisory Panel which was
considered by HMRC in preparing that GAAR final decision
notice, and

(ii) 40any representations made under paragraph 25.

(3) The condition in this sub-paragraph is that, when the assessment is made—

(a) an opinion of the GAAR Advisory Panel which applies to the
relevant arrangements has been given on a referral under paragraph
26,

(b) where a notice is required by paragraph 35 to be given to the person
liable to the penalty, that notice has been given and the time allowed
for making representations under that paragraph has expired, and

(c) a designated HMRC officer has, in deciding whether the penalty
5should be assessed, considered—

(i) that opinion of the GAAR Advisory Panel, and

(ii) any representations made under paragraph 35.

(4) Where a notification of a penalty under paragraph 1 is given, the notification
must be accompanied by a report prepared by HMRC of—

(a) 10if the condition in sub-paragraph (2) is met, the opinion of the GAAR
Advisory Panel which was considered by HMRC in preparing the
GAAR final decision notice;

(b) if the condition in sub-paragraph (3) is met, the opinion of the GAAR
advisory panel mentioned in that sub-paragraph.

(5) 15Paragraph 24 contains definitions of terms used in this paragraph.

24 (1) In this Schedule a “GAAR final decision notice” means a notice under—

(a) paragraph 12 of Schedule 43 to FA 2013 (notice of final decision after
considering opinion of GAAR Advisory Panel on referral under
Schedule 43),

(b) 20paragraph 8 or 9 of Schedule 43A to FA 2013 (notice of final decision
after considering opinion of GAAR Advisory Panel), or

(c) paragraph 8 of Schedule 43B to FA 2013 (notice of final decision after
considering opinion of GAAR Advisory Panel on referral under
Schedule 43B).

(2) 25For the purposes of this Part of this Schedule, where the GAAR Advisory
Panel gives an opinion on a referral under paragraph 26 the arrangements to
which the opinion “applies” are—

(a) the arrangements in respect of which the referral was made (that is,
“the arrangements in question” within the meaning given by
30paragraph 26(1)), and

(b) any arrangements that are equivalent to those arrangements.

(3) For the purposes of this Part of this Schedule, arrangements are “equivalent”
to one another if they are substantially the same as one another having
regard to—

(a) 35their substantive results or intended substantive results,

(b) the means of achieving those results, and

(c) the characteristics on the basis of which it could reasonably be
argued, in each case, that the arrangements are abusive tax
arrangements.

40Notice where Panel opinion already obtained in relation to equivalent arrangements

25 (1) This paragraph applies where a designated HMRC officer is of the view
that—

(a) a person is liable to a penalty under paragraph 1 in relation to
particular arrangements (“the arrangements concerned”),

(b) 45no GAAR final decision notice has been given in relation to those
arrangements, but those arrangements are equivalent to

arrangements in relation to which a GAAR final decision notice has
been given (“the GAAR decision arrangements”), and

(c) accordingly, the opinion of the GAAR Advisory Panel which was
considered by HMRC in preparing that GAAR final decision notice
5is relevant to the arrangements concerned.

(2) A designated HMRC officer must give the person mentioned in sub-
paragraph (1) a notice in writing—

(a) explaining that the officer is of the view mentioned there,

(b) specifying the arrangements concerned,

(c) 10describing the material characteristics of the GAAR decision
arrangements,

(d) setting out a report prepared by HMRC of the opinion of the GAAR
Advisory Panel which was considered by HMRC in preparing the
GAAR final decision notice, and

(e) 15explaining the effect of sub-paragraphs (3) and (4).

(3) A person to whom a notice under this paragraph is given has 30 days,
beginning with the day on which the notice is given, to send to the
designated HMRC officer (in writing) any representations that that person
wishes to make as to why the arrangements concerned are not equivalent to
20the GAAR decision arrangements.

(4) A designated HMRC officer may, on a written request by that person, extend
the period during which representations may be made by that person.

(5) Paragraph 24 contains definitions of the following terms used in this
paragraph—

• 25“GAAR final decision notice”;

• “equivalent”, in relation to arrangements.

Referral to GAAR Advisory Panel

26 (1) A designated HMRC officer may make a referral under this paragraph if—

(a) the officer considers that a person is liable to a penalty under
30paragraph 1 in relation to particular arrangements (“the
arrangements in question”), and

(b) the requirements of paragraph 28 (procedure before making of
referral) have been complied with.

(2) But a referral may not be made under this paragraph if a GAAR final
35decision notice (within the meaning of paragraph 24(1)) has already been
given in relation to—

(a) the arrangements in question, or

(b) arrangements that are equivalent to those arrangements.

(3) A referral under this paragraph is a referral to the GAAR Advisory Panel of
40the question whether the entering into and carrying out of tax arrangements
such as are described in the referral statement (see paragraph 27) is a
reasonable course of action in relation to the relevant tax provisions.

27 (1) In this Part of this Schedule “the referral statement”, in relation to a referral
under paragraph 26, means a statement made by a designated HMRC officer
45which—

(a) accompanies the referral,