Finance (No. 2) Bill (HC Bill 134)

Finance (No. 2) BillPage 80

(2) In section 12AA (partnership returns) after subsection (1A) insert—

(1B) Where a partnership to which subsection (1) applies (“the reporting
partnership”) includes a partner which is itself a partnership,
references in subsections (1) and (1A) to a partner include an indirect
5partner in the reporting partnership.

(1C) For the purposes of this section, a person is an indirect partner in the
reporting partnership if the person is a partner in—

(a) a partnership which is a partner in the reporting partnership,
or

(b) 10any partnership which is an indirect partner in the reporting
partnership by virtue of the preceding application of this
subsection.”

(3) In section 12AB (partnership statements), after subsection (1) insert—

(1A) Where at any time in a period mentioned in subsection (1)(a) the
15reporting partnership is a partner in another partnership which
carries on a trade, profession or business—

(a) income or loss that the reporting partnership accrues or
sustains thereby is to be treated for the purposes of
subsection (1)(a)(i) as from a source that is separate from any
20of its other sources of income or loss,

(b) consideration in respect of the disposal of partnership
property that the reporting partnership accrues thereby is to
be treated for the purposes of subsection (1)(a)(ia) as from a
source that is separate from any of its other sources of
25consideration,

(c) income tax which has been deducted or treated as deducted
from, or paid on, any income that the reporting partnership
accrues thereby is to be treated for the purposes of subsection
(1)(a)(ii) as being deducted or treated as deducted from, or
30paid on, a source of income that is separate from any of its
other sources of income, and

(d) amounts specified in the partnership statement under
subsection (1)(a) must include—

(i) each amount which is stated to be equal to the
35reporting partnership’s share of income, loss,
consideration or tax in any partnership statement
made under this section in relation to the other
partnership for the period for which the return is
made or a period which includes that period or any
40part of it, and

(ii) a statement as to which of the assumptions in
subsection (1B) was applied in calculating that
amount.

(1B) If at any time in a period mentioned in subsection (1)(a) the reporting
45partnership includes a partner which is itself a partnership (“the
participating partnership”), the amounts referred to in subsection
(1)(b) must be calculated and included in the partnership statement
applying each of the following assumptions to the participating
partnership—

(a) 50that it is a UK resident individual;

Finance (No. 2) BillPage 81

(b) that it is a non-UK resident individual;

(c) that it is a UK resident company;

(d) that it is a non-UK resident company.

(1C) But subsection (1D) applies if the partnership return includes—

(a) 5the name of every person who was an indirect partner in the
reporting partnership at any time in a period mentioned in
subsection (1)(a), and

(b) at least some of the following information—

(i) whether a person named under paragraph (a) is an
10individual, company or partnership (or something
else),

(ii) in the case of such a person who is an individual,
whether the individual was or was not resident in the
United Kingdom in the year of assessment for which
15the partnership return is made, and

(iii) in the case of such a person who is a company,
whether the company was or was not resident in the
United Kingdom for each accounting period of the
company which includes all, or any part of, a period
20mentioned in subsection (1)(a).

(1D) In subsection (1B)—

(a) ignore either or both of paragraph (a) and (b) if it is apparent
from information provided under subsection (1C) that none
of the indirect partners of the reporting partnership is a
25person of a description specified in that paragraph at any
time in the year of assessment for which the return is made,
and

(b) ignore either or both of paragraph (c) and (d) if it is apparent
from that information that none of the indirect partners is a
30company of a description specified in that paragraph at any
time in any of its accounting periods which include all, or any
part of, a period mentioned in subsection (1)(a).”

(4) In that section, in subsection (5), at the appropriate places insert—

  • ““indirect partner”, in relation to the reporting partnership, is to
    35be construed in accordance with section 12AA(1C);”;

  • ““reporting partnership” means the partnership to which the
    partnership statement referred to in subsection (1) relates;”.

(5) The amendments made by this paragraph have effect in relation to
partnership returns relating to the tax year 2018-19 or any subsequent tax
40year.

7 (1) F(No.2)A 2017 is amended as follows.

(2) In section 60, in paragraph 17 of Schedule A1 to be inserted into TMA 1970—

(a) the existing provision becomes sub-paragraph (1);

(b) after that sub-paragraph insert—

(2) 45Where a partnership (“the reporting partnership”)
includes a partner which is itself a partnership, references
in this Schedule to a partner include an indirect partner in
the reporting partnership.

Finance (No. 2) BillPage 82

Section 12AA(1C) (meaning of “indirect partner”) applies
for the purposes of this sub-paragraph.”

(3) In Schedule 14 (amendments relating to digital reporting etc), after
paragraph 10 insert—

10A 5In section 12AB(1C) (further information to be included in
partnership return in certain cases), before “partnership return”
insert “section 12AA”.”

Part 4 Returns: overseas partners in investment partnerships etc

8 (1) 10TMA 1970 is amended as follows.

(2) In section 12AA(6) (partnership return to include information about
partners), at the end (and on a new line) insert—

“But see section 12ABZA.”

(3) After section 12AB (partnership return to include partnership statement)
15insert—

12ABZA Partnership returns: overseas partners in investment partnerships
etc

(1) There is no requirement for a partnership return to include a
declaration of the tax reference of a person (see section 12AA(6)(a))
20if—

(a) the person is not chargeable to income tax or corporation tax
for the period, or for a period which includes any part of the
period, in respect of which the partnership return is made,

(b) the partnership does not carry on a trade or profession or a
25UK property business at any time during the period in
respect of which the partnership return is made,

(c) the whole of that period is a period in respect of which the
partnership is required to set out information about the
person in one or more relevant returns, and

(d) 30the partnership return includes a statement that the condition
in paragraph (c) is met.

(2) In subsection (1)(c) “relevant return” means a return under the
International Tax Compliance Regulations 2015 (S.I. 2015/878S.I. 2015/878).

(3) If, in reliance on this section, the partnership return does not include
35a declaration of the tax reference of a person but the partnership does
not comply with the requirement mentioned in subsection (1)(c), the
partner required to make and deliver the partnership return, or that
partner’s successor, must give notice to HMRC specifying the tax
reference.

(4) 40The notice must be given within the period of 12 months beginning
with the filing date for the partnership return.

(5) The Commissioners for Her Majesty’s Revenue and Customs may by
regulations made by statutory instrument amend the definition of
“relevant return” in subsection (2).

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(6) A statutory instrument containing regulations under subsection (5)
is subject to annulment in pursuance of a resolution of the House of
Commons.

(7) In this section “filing date” has the same meaning as in section
512ABA.”

(4) In section 98 (special returns, etc), in column 2 of the Table, at the
appropriate place insert “section 12ABZA(3) of this Act”.

(5) The amendments made by this paragraph have effect in relation to returns—

(a) made after the passing of this Act, and

(b) 10whether relating to periods before or after the passing of this Act.

9 In Schedule 14 to F(No.2)A 2017 (amendments relating to digital reporting
etc), after paragraph 10A (as inserted by this Schedule) insert—

10B In section 12ABZA (partnership returns: overseas partners in
investment partnerships etc)—

(a) 15in the heading, before “Partnership returns” insert “Section
12AA”;

(b) in subsections (1), (3), and (4), before every “partnership
return” insert “section 12AA”.”

Part 5 20Returns conclusive as to shares of profits and losses

10 (1) TMA 1970 is amended as follows.

(2) After section 12ABZA (as inserted by this Act) insert—

12ABZB Partnership return conclusive as to partnership shares

(1) A partnership return is conclusive for tax purposes as to—

(a) 25whether a person does or does not have a share in the profits
or losses of the partnership for any period, and

(b) what the share of any person in those profits or losses is.

(2) That applies even where the person would not otherwise be
chargeable to tax on profits of the partnership.

(3) 30If there is a dispute between the person mentioned in subsection
(1)(a) or (b) and any one or more partners in the partnership about
whether what is given in a partnership return is correct as to the
matters mentioned in that subsection, a party to the dispute may
refer it to the tribunal for determination.

(4) 35That does not include a dispute to the extent that it is in substance
about the amount (before sharing) of the partnership’s profits or
losses for a period.

(5) A referral under subsection (3) must be made before the end of the
period of 12 months beginning with the day after—

(a) 40the day on which the partnership return was delivered, or

(b) if the dispute relates to an amendment to the return made
under section 12ABA (amendment of partnership return by
taxpayer), the day on which the amendment was made.

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(6) Where a dispute is referred to the tribunal under subsection (3)—

(a) the party referring it must at the same time give notice of the
referral to—

(i) HMRC, and

(ii) 5the reporting partner, and

(b) the reporting partner must give notice of the referral to—

(i) every other partner in the partnership, and

(ii) any other person appearing to the reporting partner
to be a party to the dispute.

10But notice need not be given under this subsection to anyone who
referred the dispute.

(7) Where the tribunal determines that what is given in the partnership
return as to the matters referred to in subsection (1)(a) or (b) is not
correct—

(a) 15the tribunal must determine what the return should have
given, and

(b) HMRC must amend the return accordingly.

(8) Where a partnership return is amended under subsection (7)(b),
HMRC must by notice to any party to the proceedings or any partner
20in the partnership amend—

(a) their return under section 8 or 8A of this Act, or

(b) their company tax return,

if the amendments are necessary to give effect to the consequences of
the amendment of the partnership return.

(9) 25Where at any time after a referral is made under subsection (3) but
before the tribunal determines the dispute the reporting partner
gives notice to HMRC that all the partners in the partnership
(whether or not party to the proceedings) have agreed in writing that
the partnership return—

(a) 30is correct without variation, or

(b) requires correcting in a particular manner,

the like consequences shall ensue for all purposes as would have
ensued if, at the time the agreement was made, the tribunal had
determined the dispute in accordance with the terms of the
35agreement.

(10) Subsection (9) does not apply if—

(a) within the period of 30 days beginning with the date of the
agreement, a party to the agreement gives notice to the other
parties to the agreement that the party wishes to repudiate or
40resile from the agreement, or

(b) within the period of 30 days beginning with the date on
which it receives notice of the agreement, HMRC gives notice
to the reporting partner of its objection to the agreement.

(11) A partnership return which has been the subject of a referral under
45subsection (3) may not be the subject of another referral under that
subsection, unless that other referral—

(a) relates to a dispute arising in consequence of an amendment
of the partnership return under section 12ABA (amendment
of partnership return by taxpayer), and

Finance (No. 2) BillPage 85

(b) is the first referral following the amendment.

(12) In this section—

  • “reporting partner” means the partner who made and delivered
    the partnership return or that partner’s successor;

  • 5references to a partner in a partnership are to a person who was
    a partner in it at any time during the period in respect of
    which the partnership return was made.”

(3) In section 12ABA(1) (amendment of partnership return by taxpayer), after
“partnership return” insert “(including anything included in the return by
10virtue of section 12ABZB(7)(b) (amendment of partnership return following
referral to tribunal))”.

(4) In section 12AC (enquiry into partnership return)—

(a) in subsection (2), after paragraph (c) insert—

(d) if a dispute in relation to the return is referred to a
15tribunal under section 12ABZB(3) of this Act, up to
and including the quarter day next following the first
anniversary of the day on which HMRC received
notification of the referral.”;

(b) in subsection (3), at the end insert “or in consequence of the referral
20of a dispute about the return under section 12ABZB(3) of this Act”;

(c) in subsection (4), for “, subject to the following limitation” substitute
“and including anything included in the return by virtue of section
12ABZB(7)(b), subject to the following limitations”;

(d) after subsection (5) insert—

(5A) 25If the notice of enquiry is given as a result of the referral of a
dispute under section 12ABZB(3) of this Act—

(a) at a time when it is no longer possible to give notice of
enquiry under subsection (2)(a) or (b) above,

(b) after a final closure notice has been issued in relation
30to an enquiry into the return, or

(c) after a partial closure notice has been issued in such
an enquiry in relation to the matters to which the
dispute relates or which are affected by it,

the enquiry into the return is limited to the matters to which
35the dispute relates or which are affected by it.”

(5) In section 12AD (amendment of partnership return by taxpayer during
enquiry)—

(a) in the heading, after “taxpayer” insert “, or referral of dispute,”;

(b) in subsection (1)—

(i) 40after “taxpayer)” insert “, or a dispute about the return is
referred to the tribunal under section 12ABZB(3) of this Act,”;

(ii) after “the amendment”, in both places it occurs, insert “or
dispute”;

(c) in subsection (2), after “amendment” insert “or dispute”.

(6) 45In section 28B(2)(b) (completion of enquiry into partnership return), after
“return” insert “(including anything included in the return by virtue of
section 12ABZB(7)(b) (amendment of partnership return following reference
to tribunal))”.

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(7) In section 30B(1) (amendment of partnership return where loss of tax
discovered), in the words after paragraph (c), after “return” insert
“(including anything included in the return by virtue of section
12ABZB(7)(b) (amendment of partnership return following reference to
5tribunal))”.

(8) In section 55 (recovery of tax not postponed)—

(a) in subsection (8B), for “and (8D)” substitute “to (8E)”;

(b) in subsection (8C)—

(i) in paragraph (c), omit the final “or”;

(ii) 10after paragraph (c) insert—

(ca) any amount of tax specified in the notice by
virtue of an amendment made under section
227(7A) of that Act, or”;

(c) after subsection (8D) insert—

(8E) 15If the payment of an amount of tax within subsection (8C)(ca)
is postponed by virtue of this section immediately before
notice of the amendment is given, it ceases to be so postponed
with effect from the time that the notice of the amendment is
given, and the tax is due and payable on or before—

(a) 20the last day of the period of 30 days beginning with
the day on which the notice is given, or

(b) if later, the last day on which it would have been
payable under subsection (8D) if it had been included
in the amount specified in the accelerated payment
25notice or partner payment notice when that notice
was given.”

(9) In section 59B(5)(b) (payment of tax following amendment of self-
assessment), after “section” insert “12ABZB(8),”.

(10) In Schedule 3ZA (date by which payment to be made after amendment or
30correction of self-assessment), in paragraph 7 (amendment consequential on
correction of partnership return by Revenue)—

(a) in the heading, at the end insert “or tribunal determination of
partnership dispute”;

(b) in sub-paragraph (1), after “under” insert “section 12ABZB(8)(a) of
35this Act (consequential amendment of partner’s personal or trustee
return where partnership return corrected following reference to
tribunal) or”;

(c) in sub-paragraph (2), after “section” insert “12ABZB(8)(a) or”.

11 In section 850 of ITTOIA 2005 (allocation of firm’s profits or losses between
40partners), in subsection (1), after “850D” insert “and section 12ABZB of TMA
1970 (partnership return is conclusive)”.

12 In section 1262 of CTA 2009 (allocation of firm’s profits or losses between
partners), in subsection (1), after “1264A” insert “and section 12ABZB of
TMA 1970 (partnership return is conclusive)”.

13 (1) 45FA 2014 is amended as follows.

(2) In each of sections 220 and 221 (content of accelerated payment notice), at the
end of subsection (3) insert “(and disregarding any dispute which has been

Finance (No. 2) BillPage 87

referred to a tribunal under section 12ABZB(3) of TMA 1970 but not yet
determined)”.

(3) In section 226 (penalty for failure to pay accelerated payment), after
subsection (7) insert—

(8) 5Where an amendment to an accelerated payment notice made under
section 227(7A) (amendment following tribunal determination about
partnership return) increases the amount of the accelerated payment,
the amount of the increase is to be ignored for the purposes of—

(a) this section, and

(b) 10any other enactment imposing a penalty or surcharge for
non-payment or late payment of tax.”

(4) In section 227 (withdrawal, modification or suspension of accelerated
payment notice)—

(a) after subsection (7) insert—

(7A) 15Where—

(a) an accelerated payment notice is given, and

(b) a partnership return (as defined in Schedule 32) to
which the notice relates is amended under section
12ABZB(7)(b) of TMA 1970 (amendment following
20tribunal determination),

HMRC may by notice given to P make consequential
amendments to the accelerated payment notice.”;

(b) in subsection (13), after “subsection (2)(c)” insert “or an amendment
made under subsection (7A)”;

(c) 25after subsection (13) insert—

(13A) If, as a result of an amendment made under subsection (7A),
an amount payable to HMRC under section 223(2) is
increased, the amount of that increase must be paid before—

(a) the end of the period of 30 days beginning with the
30day on which notice of the amendment is given, or

(b) if later, the end the payment period (within the
meaning given by section 223(5)).”

(5) In Schedule 32 (accelerated payments and partnerships)—

(a) in paragraph 4(2), at the end insert “(and disregarding any dispute
35which has been referred to a tribunal under section 12ABZB(3) of
TMA 1970 but not yet determined)”;

(b) in paragraph 7—

(i) in paragraph (b), omit the final “and”;

(ii) after paragraph (b) insert—

(ba) 40the reference in section 226(8) to an
amendment to an accelerated payment
notice made under section 227(7A) were to
an amendment to a partner payment notice
made under that section as applied by
45paragraph 8 of this Schedule, and”;

(c) in paragraph 8(2)—

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(i) after paragraph (a) insert—

(aa) section 227(7A) has effect as if the reference
to a partnership return to which the
accelerated payment notice relates were a
5reference to the partnership return in
relation to which the partner payment
notice is given;”;

(ii) in paragraph (b), omit the final “and”;

(iii) after paragraph (c) insert and

(d) 10section 227(13A) has effect as if the
reference to section 223(2) were to
paragraph 6(2) of this Schedule and the
reference to section 223(5) were to
paragraph 6(5) of this Schedule.”

14 15The amendments made by paragraphs 10 to 13 have effect in relation to
returns relating to the tax year 2018-19 or any subsequent tax year.

15 (1) Schedule 14 to F(No.2)A 2017 (amendments relating to digital reporting etc)
is amended as follows.

(2) After paragraph 10B (as inserted by this Schedule) insert—

10C 20In section 12ABZB (partnership return conclusive as to
partnership shares)—

(a) in the heading, before “Partnership return” insert “Section
12AA”;

(b) in subsections (1), (3), (5), (7), (8), (9), (11) and (12), before
25every “partnership return” insert “section 12AA”.”

(3) After paragraph 43 insert—

43A In section 227(7A)(b) (withdrawal etc of accelerated payment
notice), before “partnership return” insert “section 12AA”.”

(4) In paragraph 46, at the end insert—

(5) 30In paragraph 8(2)(aa) (withdrawal etc of partner payment notices),
before “partnership return”, in both places, insert “section
12AA”.”

Section 23

SCHEDULE 7 Hybrid and other mismatches

35Introductory

1 Part 6A of TIOPA 2010 (hybrid and other mismatches) is amended as
follows.

Meaning of “tax” etc and treatment of cases where tax charged at a nil rate

2 In section 259B (“tax” means certain taxes on income and includes foreign
40tax etc)—

Finance (No. 2) BillPage 89

(a) after subsection (3) insert—

(3A) The payment of any withholding tax in respect of any
amount is to be ignored for the purposes of this Part.”, and

(b) at the end insert—

(5) 5In any case where—

(a) a person is resident in a territory outside the United
Kingdom generally for the purposes of the law of the
territory or for particular purposes under that law,
and

(b) 10the law of the territory has no provision for a person
to be resident for tax purposes under its law,

any reference in Chapter 8 or 11 to a person’s residence for
tax purposes in the territory is to be read as a reference to the
person’s residence as mentioned in paragraph (a).”

3 15In section 259BC (meaning of “ordinary income”), in subsection (3), for the
words from “it is excluded” to the end substitute

(a) it is charged to the relevant tax at a nil rate, or

(b) it is excluded, reduced or offset by any exemption, exclusion,
relief, or credit—

(i) 20that applies specifically to all or part of the amount of
income (as opposed to ordinary income generally), or

(ii) that arises as a result of, or otherwise in connection
with, a payment or quasi-payment that gives rise to
the amount of income.”

4 25In section 259FA (circumstances in which Chapter 6 applies), after
subsection (7) insert—

(7A) For the purposes of subsections (6) and (7) any increase in taxable
profits or reduction of losses is to be ignored in any case where tax is
charged at a nil rate under the law of the parent jurisdiction.”

5 30In section 259GB (hybrid payee deduction/non-inclusion mismatches and
their extent), in subsection (3)(b)(i), after “charged” insert “at a higher rate
than nil”.

6 In section 259KB (meaning of “excessive PE deduction”), after subsection (4)
insert—

(4A) 35For the purposes of subsection (4) any increase in taxable profits or
reduction of losses is to be ignored in any case where tax is charged
at a nil rate under the law of the parent jurisdiction.”

CFCs and foreign CFCs: qualifying CFC amounts

7 (1) Section 259BD (chargeable companies in respect of CFCs and foreign CFCs)
40is amended as follows.

(2) After subsection (12) insert—

(12A) For the purposes of subsection (2)—

(a) a qualifying CFC amount arising to C is treated as an amount
of relevant income,