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

Finance (No. 2) BillPage 130

(5) A “ring-fenced body sub-group” is a group of entities consisting
of—

(a) an RFB parent undertaking and its subsidiaries, or

(b) a ring-fenced body, which is not a subsidiary of an RFB
5parent undertaking, and the ring-fenced body’s
subsidiaries.

(6) “RFB parent undertaking” means a body corporate which is
subject to rules made under section 192JA of the Financial Services
and Markets Act 2000 (rules applying to parent undertakings of
10ring-fenced bodies).”

Meaning of “the responsible member”

20 (1) Paragraph 54 (meaning of “the responsible member”) is amended in
accordance with this paragraph.

(2) In sub-paragraph (3) (requirements), for paragraphs (c) and (d) substitute—

(c) 15either—

(i) during the nomination period the parent entity, or
another entity acting on behalf of the parent entity,
nominated E to HMRC to be the responsible
member, or

(ii) 20the renewal conditions are met in relation to E, and

(d) HMRC did not—

(i) in a case within paragraph (c)(i), reject E’s
nomination;

(ii) in a case within paragraph (c)(ii), make a
25determination under paragraph 55A.”

(3) In sub-paragraph (3), in the words after paragraph (d)—

(a) for “paragraph 55” substitute “paragraphs 55 and 55A”;

(b) at the end insert “and renewals”.

(4) After sub-paragraph (3) insert—

(3A) 30The renewal conditions are met in relation to E if—

(a) E was the relevant group’s responsible member at the end
of the immediately preceding chargeable period, and

(b) neither the parent entity, nor another entity acting on
behalf of the parent entity, nominated an entity other than
35E during the nomination period.

(3B) In sub-paragraphs (3) and (3A), “nomination period” means the
first 45 days of the chargeable period.”

(5) After sub-paragraph (6) insert—

(6A) Sub-paragraph (6B) applies if—

(a) 40HMRC rejects E’s nomination (see sub-paragraph
(3)(d)(i)), and

(b) within the period of 30 days after the day on which HMRC
rejects the nomination, HMRC and the parent entity, or
another entity acting on behalf of the parent entity, agree
45that another entity (“A”) which is a chargeable member of

Finance (No. 2) BillPage 131

the relevant group is to be the relevant group’s responsible
member.

(6B) Where this sub-paragraph applies—

(a) A is the relevant group’s responsible member, and

(b) 5sub-paragraphs (4) and (5) do not apply.”

(6) In sub-paragraph (7), after “(as the case may be),” insert “and sub-paragraph
(6B) does not apply,”.

21 After paragraph 55, insert—

55A (1) This paragraph applies for the purposes of paragraph 54(3)(c)(ii)
10and (d)(ii).

(2) HMRC may from time to time publish requirements as to the
information to be provided by, or on behalf of, the relevant
group’s responsible member before the end of the nomination
period.

(3) 15In a case within paragraph 54(3)(c)(ii), HMRC may determine that
E is not to be the relevant group’s responsible member for the
chargeable period.

(4) A determination under sub-paragraph (3) must be made within
the period of 30 days from the end of the nomination period.

(5) 20HMRC may make a determination under this paragraph only if—

(a) information required under sub-paragraph (2) has not
been provided to HMRC, or

(b) HMRC has reason to believe that E—

(i) has ceased to be a chargeable member of the
25relevant group,

(ii) no longer has an accounting period for corporation
tax purposes which is the same as the chargeable
period, or

(iii) will turn out not to have sufficient resources to pay
30the bank levy.”

International accounting standards

22 In paragraph 4 (bank levy to be charged in relation to certain groups of
entities), omit sub-paragraphs (5) to (7).

23 In paragraph 12 (definition of “banking group”), in sub-paragraph (7), omit
35paragraph (b) and the “or” preceding it.

24 In paragraph 13 (definition of “banking group”: exempt activities
condition)—

(a) in sub-paragraph (2)(b)(i), for “the applicable accounting standards”
substitute “international accounting standards”,

(b) 40in sub-paragraph (4), omit the definition of “the applicable
accounting standards”, and

(c) in sub-paragraph (4), in the definition of “net-basis activities”, for
“the applicable accounting standards” substitute “international
accounting standards”.

Finance (No. 2) BillPage 132

25 In paragraph 14 (definition of “assets”, “equity” and “liabilities”), omit sub-
paragraph (2).

26 In paragraph 24 (definition of “UK allocated equities and liabilities”)—

(a) in sub-paragraph (2)(a), omit “or UK GAAP”, and

(b) 5in sub-paragraph (2)(b), omit sub-paragraph (ii) and the “or”
preceding it.

27 In paragraph 35 (exclusion of relevant tax liabilities)—

(a) in sub-paragraph (2), in the words before paragraph (a), omit the
words from “In relation to” to “international accounting standards,”;

(b) 10omit sub-paragraph (3).

28 In paragraph 36 (exclusion of relevant retirement benefit liabilities)—

(a) in sub-paragraph (2), omit the words from “In relation to” to
“international accounting standards,”;

(b) omit sub-paragraph (3).

29 15In paragraph 42 (financial statements etc)—

(a) in sub-paragraph (8), omit paragraphs (b) and (c), and

(b) omit sub-paragraphs (9) and (10).

30 In paragraph 70 (general definitions)—

(a) omit the definition of “UK GAAP”, and

(b) 20omit the definition of “US GAAP”.

31 In paragraph 71 (definition of “asset management activities”), in sub-
paragraph (3), omit paragraph (b) and the “or” preceding it.

32 In paragraph 72 (definition of “capital resources condition”), in sub-
paragraph (7), omit paragraph (b) and the “or” preceding it.

33 25In paragraph 73 (definition of “excluded entity”), in sub-paragraph (3), omit
paragraph (b) and the “or” preceding it.

34 In paragraph 81 (power to make consequential changes), in sub-paragraph
(1)(c) omit “, UK GAAP or US GAAP”.

Part 3 30Commencement

35 The amendments made by Part 1, and by paragraphs 17 and 22 to 34 of Part
2, of this Schedule have effect in relation to chargeable periods ending on or
after 1 January 2021.

36 The amendments made by paragraphs 18 and 19 of Part 2 of this Schedule
35have effect in relation to chargeable periods ending on or after 1 January
2018.

Finance (No. 2) BillPage 133

Section 35

SCHEDULE 10 Settlements: anti-avoidance etc

Part 1 Capital gains tax

5TCGA 1992

1 (1) In TCGA 1992, after section 87C insert—

87D Sections 87 and 87A: disregard of capital payments to non-residents

(1) For the purposes of sections 87 and 87A as they apply in relation to a
settlement, no account is to be taken of a capital payment (or a part
10of a capital payment) within subsection (2), but this—

(a) is subject to subsection (3) and section 87E, and

(b) does not affect the operation of sections 87I to 87L (see, in
particular, sections 87K(2) and 87L(2) which apply sections
87 and 87A by reference to the payment mentioned in section
1587I(1)(a)).

(2) A capital payment is within this subsection if (and to the extent that)
it is in a tax year received from the trustees of the settlement by a
beneficiary who at all times in that year is not resident in the United
Kingdom, but this is subject to section 87F.

(3) 20Subsection (1) does not apply in relation to a capital payment (or a
part of a capital payment) if—

(a) the recipient beneficiary is a close member of the settlor’s
family (see section 87H) when the beneficiary receives (or is
treated as receiving) the payment (or part),

(b) 25the payment (or part) is received on or after 6 April 2018, and

(c) the settlor is resident in the United Kingdom in the tax year
in which the payment (or part) is received.

87E Sections 87 and 87A: disregarded payments to temporary non-resident

(1) If—

(a) 30as a result of section 87D, no account is taken of a capital
payment (or a part of a capital payment) for the purposes of
sections 87 and 87A,

(b) the recipient beneficiary is an individual who is temporarily
non-resident, and

(c) 35the payment (or part) is received in the beneficiary’s
temporary period of non-residence,

the payment (or part) is treated for the purposes of sections 87 and
87A as received (by the beneficiary) in the beneficiary’s period of
return, and account is to be taken of it accordingly for those
40purposes.

(2) Part 4 of Schedule 45 to FA 2013 explains—

(a) when an individual is to be regarded as “temporarily non-
resident”, and

Finance (No. 2) BillPage 134

(b) what “the temporary period of residence” and “the period of
return” mean.

87F Sections 87 and 87A: disregarded payments in year settlement ends

(1) This section applies in relation to a settlement if—

(a) 5in a particular tax year, the settlement ceases to exist,

(b) two or more beneficiaries (“the recipients”) in the year receive
capital payments from the trustees, and

(c) at least one of the recipients is, and at least one is not, a non-
resident beneficiary.

(2) 10Those capital payments, so far as received by such of the recipients
as are non-resident beneficiaries, are not within section 87D(2).

(3) In this section “non-resident beneficiary” means a beneficiary who at
all times in the year is not resident in the United Kingdom.

87G Settlor liable if capital payment received by close family member

(1) 15Subsection (2) applies if in the case of a settlement—

(a) a beneficiary of the settlement receives a capital payment
from the trustees in a tax year,

(b) the settlor is resident in the United Kingdom at any time in
that year, and

(c) 20the beneficiary (“the original recipient”) is a close member of
the settlor’s family (see section 87H) at the time of receipt.

(2) Sections 87 and 87A have effect as if the capital payment—

(a) was received from the trustees by the settlor—

(i) as a beneficiary of the settlement (whether or not the
25settlor is otherwise a beneficiary of the settlement),
and

(ii) at the time it was received by the original recipient,
and

(b) was not received by the original recipient.

(3) 30Where any tax is chargeable on the settlor as a result of subsection (2)
and is paid, the settlor is entitled to recover the full amount of the tax
from the original recipient.

(4) For the purpose of recovering that amount, the settlor is entitled to
require an officer of Revenue and Customs to give the settlor a
35certificate specifying—

(a) the amount of tax paid, and

(b) the amount of the gains on which the tax is paid,

and any such certificate is conclusive evidence of the facts stated in it.

87H Meaning of “close member of the settlor’s family”

(1) 40For the purposes of sections 87D, 87G and 87L as they apply in
relation to a settlement, a person is a close member of the settlor’s
family at any time if the settlor is living at that time and—

(a) the person is the settlor’s spouse or civil partner at that time,
or

(b) 45the person—

Finance (No. 2) BillPage 135

(i) is a child of the settlor, or of a person who at that time
is the settlor’s spouse or civil partner, and

(ii) at that time has not reached the age of 18.

(2) For the purposes of subsection (1)—

(a) 5two people living together as if they were spouses of each
other are treated as if they were spouses of each other, and

(b) two people of the same sex living together as if they were civil
partners of each other are treated as if they were civil partners
of each other.

87I 10Non-UK resident settlements: recipients of onward gifts

(1) Sections 87J and 87K apply if in the case of a settlement—

(a) a capital payment (“the original payment”) is received in a tax
year (“the payment year”) by a person (“the original
beneficiary”) from the trustees of the settlement,

(b) 15at the time of receipt—

(i) there are arrangements, or there is an intention, as
regards the (direct or indirect) passing-on of the
whole or part of the original payment, and

(ii) it is reasonable to expect that, in the event of the
20whole or part of the original payment being passed on
to another person as envisaged by the arrangements
or intention, that other person will be resident in the
United Kingdom when they receive at least part of
what is passed on to them,

(c) 25the original beneficiary makes, directly or indirectly, a gift
(“the onward payment”) to a person (“the subsequent
recipient”)—

(i) at the time the original payment is received, or at any
later time in the 3 years beginning with the day
30containing the start time, or

(ii) at any time before the original payment is received
and, it is reasonable to assume, in anticipation of
receipt of the original payment,

(d) the gift is of or includes—

(i) 35the whole or part of the original payment,

(ii) anything that (wholly or in part, and directly or
indirectly) derives from, or represents, the whole or
part of the original payment, or

(iii) any other property, but only if the original payment is
40made with a view to enabling or facilitating, or
otherwise in connection with, the making of the gift of
the property to the subsequent recipient,

(e) the subsequent recipient is resident in the United Kingdom in
the tax year in which the onward payment is received by the
45subsequent recipient (“the gift year”, but see subsection (4)),
and

(f) in the period beginning with the start of the payment year
and ending with the end of the gift year, there is at least one
tax year—

Finance (No. 2) BillPage 136

(i) for which the otherwise-liable person is not resident
in the United Kingdom, or

(ii) for which section 809B, 809D or 809E of ITA 2007
(remittance basis) applies to the otherwise-liable
5person.

(2) Where—

(a) there is a series of two or more gifts,

(b) the first gift in the series is made, directly or indirectly, by the
original beneficiary—

(i) 10at the time the original payment is received, or at any
later time in the 3 years beginning with the day
containing the start time, or

(ii) at any time before the original payment is received
and, it is reasonable to assume, in anticipation of
15receipt of the original payment,

(c) the recipient of a gift in the series is the person who makes,
directly or indirectly, the next gift in the series,

(d) the recipient of the last gift in the series is resident in the
United Kingdom in the tax year in which that gift is received,

(e) 20as regards each earlier gift in the series, its recipient is not
resident in the United Kingdom at any time in the tax year in
which it is received, and

(f) the condition in subsection (1)(d) is met in relation to each gift
in the series,

25the last gift in the series is treated for the purposes of subsection (1)(c)
as if its maker were the original beneficiary (and not its actual
maker).

(3) For the purposes of subsections (1)(c)(i) and (2)(b)(i)—

(a) if the original payment is a capital payment other than one
30that is treated as received by section 87M, “the start time” is
the time the original payment is received, and

(b) if the original payment is a capital payment that is treated as
received by section 87M in connection with the operation of
this section, and sections 87J and 87K, on a previous occasion,
35“the start time” is the time given by this subsection as the start
time on that occasion

(4) Where the onward payment is made as mentioned in subsection
(1)(c)(ii), the onward payment is to be treated—

(a) for the purposes of the provisions of this section following
40subsection (1)(c), and

(b) for the purposes of sections 87K to 87M,

as made and received immediately after the original payment is
received (and in the payment year).

(5) Where this section provides for section 87K to apply in relation to
45two or more gifts received from the original beneficiary in the gift
year by reference to the original payment—

(a) treat that section as applying in relation to a single gift equal
in amount to the total of the amount or value of each of the
gifts (and as not applying in relation to each gift separately),
50and

Finance (No. 2) BillPage 137

(b) apportion between the gifts (in proportion to their amounts
or values)—

(i) any capital payments given by section 87K(2), and

(ii) any gains given by section 87K(3),

5as a result of applying section 87K in accordance with
paragraph (a).

(6) Where this section provides for sections 87J and 87K to apply in
relation to a gift received in a tax year—

(a) take the steps required by section 87J before applying section
1087K in relation to the gift, but

(b) in taking the steps required by section 87J, have regard to the
application of section 87K in relation to gifts made in earlier
tax years.

(7) In this section—

  • 15“arrangements” includes any agreement, understanding,
    scheme, transaction or series of transactions (whether or not
    legally enforceable),

  • “gift” includes any benefit,

  • “make”, in relation to a gift that is a benefit, means confer, and

  • 20“the otherwise-liable person” means the original beneficiary
    unless section 87G(2) applies in relation to the original
    payment in which event the settlor is “the otherwise-liable
    person”.

(8) Where subsection (1)(c) and (d) are met in any case, it is to be
25presumed (unless the contrary is shown) that subsection (1)(b) is also
met in that case.

87J Relevant parts of payment from which onward gift derived

(1) Where this section applies (see section 87I), for the purposes of
section 87K treat the original payment as divided into slices as
30follows—

(a) a slice consisting of the taxed part (if any) of each matched
amount (if any),

(b) a slice (“U”) consisting of the untaxed part (if any) of each
matched amount (if any), and

(c) 35a slice (“R”) consisting of the rest (if any) of the original
payment.

(2) For the purposes of this section, if all or part of the original payment
is, in a tax year (“the matching year”) not later than the gift year,
matched under section 87A with the section 2(2) amount for the
40matching year or any earlier tax year, so much of the original
payment as is so matched is a “matched amount”.

(3) For the purposes of subsection (1), if—

(a) as a result of there being a matched amount, gains are treated
by section 87 as accruing to the otherwise-liable person,

(b) 45the otherwise-liable person is resident in the United
Kingdom for the matching year, and

(c) none of sections 809B, 809D and 809E of ITA 2007 applies to
the otherwise-liable person for the matching year,

Finance (No. 2) BillPage 138

the whole of the matched amount is its “taxed part” (and it has no
“untaxed part”).

(4) For the purposes of subsection (1), if—

(a) as a result of there being a matched amount, gains are treated
5by section 87 as accruing to the otherwise-liable person,

(b) section 809B, 809D or 809E of ITA 2007 (remittance basis)
applies to the otherwise-liable person for the matching year,
and

(c) the whole or part of those gains is remitted to the United
10Kingdom in a tax year—

(i) that is not later than the gift year, and

(ii) in which the otherwise-liable person is resident in the
United Kingdom,

so much of the matched amount as is equal to so much of the gains
15as is remitted as mentioned in paragraph (c) is the matched amount’s
“taxed part”, and the rest of the matched amount is its “untaxed
part”.

(5) For the purposes of subsection (1), if all or part of the original
payment is in a tax year (“the pool-matching year”) not later than the
20gift year matched, under section 87A as applied by paragraph 8 of
Schedule 4C, with the section 2(2) amount in the Schedule 4C pool
for the pool-matching year or any earlier tax year—

(a) so much of the original payment as is so matched is a
“matched amount”, and

(b) 25the whole of the matched amount is its “taxed part” (and it
has no “untaxed part”).

87K Attribution of gains or payments to recipient of onward gift

(1) Where this section applies (see section 87I), G is—

(a) the amount or value of so much of the onward payment as is
30within any of sub-paragraphs (i) to (iii) of section 87I(1)(d), or

(b) if lower, the amount of the original payment.

(For the meaning of R and U, see section 87J.)

(2) If R is greater than nil, sections 87 and 87A have effect for the gift year
and later tax years—

(a) 35as if a capital payment was received from the trustees by the
subsequent recipient—

(i) as a beneficiary of the settlement (whether or not the
subsequent recipient is otherwise a beneficiary of the
settlement), and

(ii) 40at the time the subsequent recipient received the
onward payment,

(b) as if that capital payment consisted of—

(i) R, if G is greater than R, or

(ii) so much of R as is equal to G, if G is not greater than
45R, and

(c) as if so much of the original payment as is equal to that capital
payment was not received by the otherwise-liable person.

(3) If G is greater than R, and if U is greater than nil—

Finance (No. 2) BillPage 139

(a) chargeable gains are treated as accruing to the subsequent
recipient in the gift year (but see section 87L(3) and (4)),

(b) the amount of those gains is—

(i) U, if (G − R) is greater than U, or

(ii) 5so much of U as is equal to (G − R), if (G − R) is not
greater than U, and

(c) the chargeable gains treated by section 87 as accruing to the
otherwise-liable person by reason of the original payment are
treated as from the end of the gift year as reduced by that
10amount, with that reduction being made from so much of
those gains as has not by then been remitted to the United
Kingdom in a tax year in which the otherwise-liable person is
resident in the United Kingdom.

(4) If this section applies by reference to the original payment also in
15relation to a gift received from the original beneficiary in a tax year
earlier than the gift year, this section applies in relation to the
onward payment as if—

(a) the amount given by section 87J for R were reduced by the
amount of any capital payment given by subsection (2) in
20relation to that earlier year, and

(b) the amount given by section 87J for U were reduced by the
amount of any gains given by subsection (3) in relation to that
earlier year.

87L Cases where settlor liable following onward gift

(1) 25Subsection (2) applies where—

(a) ignoring this section and section 87M, a person is treated by
section 87K(2) as receiving a capital payment from the
trustees of a settlement at a time (“the time of receipt”) in a tax
year,

(b) 30the settlor is resident in the United Kingdom at any time in
that year, and

(c) the person mentioned in paragraph (a) is a close member of
the settlor’s family (see section 87H) at the time of receipt.

(2) Sections 87 and 87A have effect for that year, and later tax years, as if
35the capital payment—

(a) was received from the trustees by the settlor—

(i) as a beneficiary of the settlement (whether or not the
settlor is otherwise a beneficiary of the settlement),
and

(ii) 40at the time of receipt, and

(b) was not received by the person mentioned in subsection
(1)(a).

(3) Subsection (4) applies where—

(a) in the case of a settlement, chargeable gains are (ignoring this
45section and section 87M) treated by section 87K(3) as
accruing to a person in a tax year (“the subsequent
recipient”),

(b) the settlor is resident in the United Kingdom at any time in
that year, and