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

Finance (No. 2) BillPage 40

(5) For example, the officer may require a relevant person to move, open
or unpack goods and containers.

(6) The officer may, for the purpose of exercising the power in subsection
(3)

(a) 5move, open, or unpack goods and containers;

(b) search containers and anything in them;

(c) mark goods and containers.

(7) The Commissioners are not to bear any costs incurred by a relevant
person in complying with a requirement under subsection (4).

(8) 10But the Commissioners are to bear the costs of anything done by the
officer under subsection (6).

(9) In this section “relevant person” means—

(a) the person to whom this Chapter applies;

(b) the occupier of the premises;

(c) 15a person who has (or appears to have) possession or control of
the goods;

(d) a person who is (or appears to be) acting on behalf of a person
within any of paragraphs (a) to (c).

(10) Section 159(2) of the Customs and Excise Management Act 1979
20(examinations of goods to be at a place appointed by the
Commissioners) does not apply to an examination under subsection
(3).”

47 Power to search vehicles or vessels

In section 163 of CEMA 1979 (power to search vehicles or vessels), after
25subsection (1) insert—

(1A) The officer, constable or member may use reasonable force if necessary
for the purpose of exercising the power in subsection (1).”

Updating of statutory references

48 CO2 emissions figures etc

(1) 30Schedule 1 to VERA 1994 (annual rates of duty) is amended in accordance with
subsections (2) to (5).

(2) In paragraph 1A(2) (meaning of “light passenger vehicle”), at the end insert
“or, as the case may be, within Category M1 of Annex II to Directive 2007/46/
EC (vehicle designed and constructed primarily for the carriage of passengers
35and comprising no more than 8 seats in addition to the driver’s seat)”.

(3) In paragraph 1G(1) (meaning of “EU certificate of conformity”), for “issued by
a manufacturer under any provision of the law of a Member State
implementing Article 6 of Council Directive 70/156/EEC, as amended”
substitute “within the meaning of Council Directive 70/156/EEC or Directive
402007/46/EC of the European Parliament and of the Council of 5 September
2007”.

(4) In paragraph 1GA (vehicles to which Part 1AA applies etc)—

Finance (No. 2) BillPage 41

(a) in sub-paragraph (2), for “has the meaning given by paragraph 1A(2)”
substitute “means a vehicle within Category M1 of Annex II to
Directive 2007/46/EC (vehicle designed and constructed primarily for
the carriage of passengers and comprising no more than 8 seats in
5addition to the driver’s seat)”,

(b) omit sub-paragraph (3)(a),

(c) for sub-paragraph (3)(d) substitute—

(d) paragraph 1G(2) (meaning of “UK approval
certificate”).”, and

(d) 10after sub-paragraph (3) insert—

(4) References in this Part of this Schedule to an “EU certificate of
conformity” are to a certificate of conformity within the
meaning of Directive 2007/46/EC.

(5) Sub-paragraphs (3) and (4) of paragraph 1A of this Schedule
15(meaning of “the applicable CO2 emissions figure”) apply for
the purposes of this Part of this Schedule as they apply for the
purposes of Part 1A of this Schedule, but—

(a) any reference to an EU certificate of conformity in
paragraph 1A(3) or (4) is to be construed in
20accordance with sub-paragraph (4) of this paragraph,
and

(b) for the purpose of determining the applicable CO2
emissions figure, ignore any WLTP (worldwide
harmonised light-duty vehicles test procedures)
25values specified in an EU certificate of conformity.”

(5) In paragraph 1H(2) (meaning of “light goods vehicle”), at the end insert “or, as
the case may be, within Category N1 of Annex II to Directive 2007/46/EC
(vehicle designed and constructed primarily for the carriage of goods and
having a maximum mass not exceeding 3.5 tonnes)”.

(6) 30In Schedule 2 to VERA 1994 (exempt vehicles), in paragraph 25(4)(b), for
“Schedule)” substitute “Schedule as read with paragraph 1GA(5) of that
Schedule)”.

(7) The amendments made by subsections (2) to (6) have effect in relation to
licences taken out on or after 29 November 2017.

(8) 35ITEPA 2003 is amended in accordance with subsections (9) to (11).

(9) In section 136 (car with a CO2 emissions figure: post-September 1999
registration)—

(a) after subsection (2) insert—

(2A) For the purpose of determining the car’s CO2 emissions figure,
40ignore any WLTP (worldwide harmonised light-duty vehicles
test procedures) values specified in an EC certificate of
conformity.”, and

(b) in subsection (3), for “This” substitute “Subsection (2)”.

(10) In section 137 (car with a CO2 emissions figure: bi-fuel cars)—

(a) 45after subsection (2) insert—

(2A) For the purpose of determining the car’s CO2 emissions figure,
ignore any WLTP (worldwide harmonised light-duty vehicles

Finance (No. 2) BillPage 42

test procedures) values specified in an EC certificate of
conformity.”, and

(b) in subsection (3), for “This” substitute “Subsection (2)”.

(11) In section 171(1) (minor definitions: general)—

(a) 5in the definition of “EC certificate of conformity”, for “issued by a
manufacturer under any provision of the law of a Member State
implementing Article 6 of Council Directive 70/156/EEC, as amended”
substitute “within the meaning of Council Directive 70/156/EEC or
Directive 2007/46/EC of the European Parliament and of the Council
10of 5 September 2007”, and

(b) in the definition of “EC type-approval certificate”, for “Council
Directive 70/156/EEC, as amended” substitute “Council Directive 70/
156/EEC or an EC type-approval certificate within the meaning of
Council Directive 2007/46/EC”.

(12) 15The amendments made by subsections (9) to (11) have effect for the tax year
2017-18 and subsequent tax years.

Final

49 Interpretation

In this Act the following abbreviations are references to the following Acts.

CAA 2001 20Capital Allowances Act 2001
CEMA 1979 Customs and Excise Management Act 1979
CTA 2009 Corporation Tax Act 2009
CTA 2010 Corporation Tax Act 2010
FA, followed by a year Finance Act of that year
F(No.2)A, followed by a year 25Finance (No.2) Act of that year
F(No.3)A, followed by a year Finance (No.3) Act of that year
IHTA 1984 Inheritance Tax Act 1984
ITA 2007 Income Tax Act 2007
ITEPA 2003 Income Tax (Earnings and Pensions) Act 2003
ITTOIA 2005 30Income Tax (Trading and Other Income) Act 2005
TCGA 1992 Taxation of Chargeable Gains Act 1992
TIOPA 2010 Taxation (International and Other Provisions) Act
2010
TMA 1970 Taxes Management Act 1970
TPDA 1979 35Tobacco Products Duty Act 1979

Finance (No. 2) BillPage 43

VATA 1994 Value Added Tax Act 1994
VERA 1994 Vehicle Excise and Registration Act 1994

50 Short title

This Act may be cited as the Finance Act 2018.

Finance (No. 2) BillPage 44

SCHEDULES

Section 11

SCHEDULE 1 Employment income provided through third parties

Part 1 5Arrangements relating to earnings charged to tax

1 In section 554A of ITEPA 2003 (employment income provided through third
parties: application of Chapter 2 of Part 7A), after subsection (5) insert—

(5A) Subsections (5B) and (5C) apply where—

(a) a payment to a person other than A, or to A as a trustee, is of
10earnings from A’s employment with B, and

(b) the earnings are, in whole or part, charged to tax under the
employment income Parts otherwise than by virtue of this
Part,

and for this purpose it does not matter whether all or some only or
15none of the tax is paid (but see sections 554Z5 and 554Z11B).

(5B) For the purposes of subsection (5C), an arrangement is a “redirected-
earnings arrangement” if it (wholly or partly) covers or relates to
redirected earnings; and for the purposes of this subsection and
subsection (5C) “redirected earnings” means—

(a) 20the payment mentioned in subsection (5A)(a), or

(b) any sum or other property which (directly or indirectly)—

(i) represents, or

(ii) is derived from,

that payment.

(5C) 25The circumstances mentioned in subsection (5A)—

(a) do not prevent a redirected-earnings arrangement being
within subsection (1)(b), and

(b) do not prevent rewards or recognition or loans being in
connection with A’s employment with B for the purposes of
30subsection (1)(c) where there is use of redirected earnings for
the provision of the whole, or part, of the rewards or
recognition or loans.”

Finance (No. 2) BillPage 45

Part 2 Close companies

Application of Chapter 2 of Part 7A to ITEPA 2003

2 In Part 7A of ITEPA 2003 (employment income provided through third
5parties), after section 554A (application of Chapter 2) insert—

“Application: close companies
554AA Application of Chapter 2: close companies

(1) Chapter 2 applies if—

(a) there is an arrangement (“the relevant arrangement”) to
10which an individual (“A”) is a party or which otherwise
(wholly or partly) covers or relates to A,

(b) it is reasonable to suppose that, in essence—

(i) the relevant arrangement, or

(ii) the relevant arrangement so far as it covers or relates
15to A,

is (wholly or partly) a means of providing, or is otherwise
concerned (wholly or partly) with the provision of, A-linked
payments or benefits or loans,

(c) a close company (“B”) enters into a relevant transaction (see
20section 554AB),

(d) it is reasonable to suppose that, in essence—

(i) the relevant transaction is entered into (wholly or
partly) in pursuance of the relevant arrangement, or

(ii) there is some other connection (direct or indirect)
25between the relevant transaction and the relevant
arrangement,

(e) at the time B enters into the relevant transaction, or at any
earlier time in the 3 years ending with the date of the
transaction, A is a director or an employee of B,

(f) 30at the time B enters into the relevant transaction, or at any
earlier time in the 3 years ending with the date of the
transaction, A has a material interest in B (see section 554AE),

(g) a relevant step is taken by a relevant third person,

(h) it is reasonable to suppose—

(i) 35that the sum of money or asset which is the subject of
the relevant step represents (directly or indirectly), or
has arisen or derives from, the sum of money or asset
which is the subject of the relevant transaction, or

(ii) that the sum of money or asset which is the subject of
40the relevant transaction represents (directly or
indirectly), or has arisen or derives from, the sum of
money or asset which is the subject of the relevant
step, and

(i) there is a time in the relevant period when the main purpose,
45or one of the main purposes, of operating, implementing,
maintaining or terminating the relevant arrangement so far
as it covers or relates to—

Finance (No. 2) BillPage 46

(i) the relevant transaction, and the relevant step so far
as related to the relevant transaction, or

(ii) the relevant step, and the relevant transaction so far
as related to the relevant step,

5is the avoidance of​ income tax, national insurance
contributions, corporation tax or a charge to tax under section
455 of CTA 2010.

(2) In this section “close company” includes a company that would be a
close company but for section 442(a) of CTA 2010 (exclusion of
10companies not resident in the United Kingdom).

(3) For the purposes of subsection (1)(b), a payment or benefit or loan is
“A-linked” if—

(a) it is being provided to A, or a person chosen by A or within a
class of persons chosen by A,

(b) 15it is being provided to a person on A’s behalf, or at A’s
direction or request, or

(c) it is being provided to a person linked with A and it is
reasonable to suppose that the main reason, or one of the
main reasons, for it being provided is that the person is linked
20with A.

(4) For the purposes of subsection (1)(i), the “relevant period” consists of
the time of the relevant transaction, the time of the relevant step, the
times around each of those two times, and any other times between
those two times.

(5) 25Subsections (6) and (7) apply where—

(a) a payment to a person other than A, or to A as a trustee, is of
earnings from—

(i) A’s employment with B, or

(ii) A’s office as a director of B, and

(b) 30the earnings are, in whole or part, charged to tax under the
employment income Parts otherwise than by virtue of this
Part,

and for this purpose it does not matter whether all or some only or
none of the tax is paid (but see sections 554Z5 and 554Z11B).

(6) 35For the purposes of subsection (7), an arrangement is a “redirected-
earnings arrangement” if it (wholly or partly) covers or relates to
redirected earnings; and for the purposes of this subsection and
subsection (7) “redirected earnings” means—

(a) the payment mentioned in subsection (5)(a), or

(b) 40any sum or other property which (directly or indirectly)—

(i) represents, or

(ii) is derived from,

that payment.

(7) The circumstances mentioned in subsection (5)

(a) 45do not prevent a redirected-earnings arrangement being
within subsection (1)(a),

(b) do not prevent payments or benefits or loans being A-linked
for the purposes of subsection (1)(b) where there is use of

Finance (No. 2) BillPage 47

redirected earnings for the provision of the whole, or part, of
the payments or benefits or loans, and

(c) do not prevent the making of the payment mentioned in
subsection (5)(a) being entry into a relevant transaction.

(8) 5In this section and in section 554AB “relevant third person” means—

(a) A acting as a trustee,

(b) B acting as a trustee, or

(c) any person other than A or B.

(9) See also sections 554AD to 554AF (further interpretation and
10supplementary provision).

554AB Meaning of “relevant transaction”

(1) For the purposes of section 554AA(1), B enters into a relevant
transaction if—

(a) B enters into a transaction within subsection (2), and

(b) 15the transaction is not an excluded transaction (see section
554AC).

(2) B enters into a transaction within this subsection if B—

(a) pays a sum of money to a relevant third person (see section
554AA(8)),

(b) 20acquires a right to a payment of a sum of money, or to a
transfer of assets, where there is a connection (direct or
indirect) between the acquisition of the right and—

(i) a payment made, by way of a loan or otherwise, to a
relevant third person, or

(ii) 25a transfer of assets to a relevant third person,

(c) releases or writes off the whole or a part of—

(i) a loan made to a relevant third person, or

(ii) an acquired right of the kind mentioned in paragraph
(b),

(d) 30transfers an asset to a relevant third person,

(e) takes a step by virtue of which a third person acquires an
asset within subsection (4),

(f) makes available a sum of money or asset for use, or makes it
available under an arrangement which permits its use—

(i) 35as security for a loan made or to be made to a relevant
third person, or

(ii) otherwise as security for the meeting of any liability,
or the performance of any undertaking, which a
relevant third person has or will have, or

(g) 40grants to a relevant third person a lease of any premises the
effective duration of which is likely to exceed 21 years.

(3) For the purposes of subsection (2) “loan” includes—

(a) any form of credit, and

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

(4) 45The following assets are within this subsection—

(a) securities,

(b) interests in securities, and

Finance (No. 2) BillPage 48

(c) securities options,

as defined in section 420 for the purposes of Chapters 1 to 5 of Part 7;
and in subsection (2)(e) “acquires” is to be read in accordance with
section 421B(2)(a).

(5) 5For the purposes of subsection (2)(f)

(a) references to making a sum of money or asset available are
references to making it available in any way, however
informal,

(b) it does not matter if the relevant third person has no legal
10right to have the sum of money or asset used as mentioned,
and

(c) it does not matter if the sum of money or asset is not actually
used as mentioned.

(6) Subsections (7) and (8) apply, for the purposes of subsection (2)(g),
15for the purpose of determining the likely effective duration of a lease
of any premises granted to a relevant third person (“the original
lease”).

(7) If there are circumstances which make it likely that the original lease
will be extended for any period, the effective duration of the original
20lease is to be determined on the assumption that the original lease
will be so extended.

(8) Further, if—

(a) the relevant third person, A or a person linked with A is, or is
likely to become, entitled to a later lease, or the grant of a later
25lease, of the same premises, or

(b) it is otherwise likely that the relevant third person, A or a
person linked with A will be granted a later lease of the same
premises,

the original lease is to be treated as continuing until the end of the
30later lease (and subsection (7) also applies for the purpose of
determining the duration of the later lease).

(9) In this section “lease” and “premises” have the same meaning as they
have in Chapter 4 of Part 3 of ITTOIA 2005.

554AC Meaning of “excluded transaction”

(1) 35In section 554AB “excluded transaction” means—

(a) a distribution made by B,

(b) a transaction that—

(i) is entered into by B in the ordinary course of B’s
business, and

(ii) 40is on terms that would have been made between
persons not connected with each other dealing at
arm’s length, or

(c) a transaction entered into in order to facilitate the disposal,
on terms that would have been made between persons not
45connected with each other dealing at arm’s length, of shares
in B.

Finance (No. 2) BillPage 49

(2) But the distribution or transaction is not an “excluded transaction” if
the avoidance of tax is the main purpose, or one of the main
purposes, of (as the case may be)—

(a) making the distribution, or

(b) 5the transaction.

(3) Part 23 of CTA 2010 has effect for determining the meaning of
“distribution” in this section as if—

(a) section 1000(1) of CTA 2010 included a paragraph specifying
any distribution made in a winding up of the company, and

(b) 10sections 1030 to 1030B of that Act were omitted.

554AD Section 554AA: meaning of “director”

(1) For the purposes of section 554AA(1)(e) “director” means—

(a) in relation to a company whose affairs are managed by a
board of directors or similar body, a member of that body,

(b) 15in relation to a company whose affairs are managed by a
single director or similar person, that director or person, and

(c) in relation to a company whose affairs are managed by the
members themselves, a member of the company,

and includes any person in accordance with whose directions or
20instructions the directors of the company (as defined in this
subsection) are accustomed to act.

(2) For the purposes of subsection (1) a person is not to be regarded as a
person in accordance with whose directions or instructions the
directors of the company are accustomed to act merely because the
25directors act on advice given by that person in a professional
capacity.

(3) For the purposes of section 5 as it applies to this Part, a person who
is a director within the meaning of subsection (1) is to be treated
(where it would not otherwise be the case) as holding an office.

554AE 30 Section 554AA: meaning of “material interest”

(1) Section 68 (meaning of “material interest” in a company) applies for
the purposes of section 554AA and, subject to subsection (2), does so
as it applies for the purposes of the benefits code.

(2) In section 68 as it applies for the purposes of section 554AA—

(a) 35each of the following is to be treated as “an associate” of A—

(i) a person (“the promoter”) who, for the purposes of
Part 5 of FA 2014, is carrying on business as a
promoter in relation to the relevant arrangement, and

(ii) where the promoter is a company, any company
40which is an associated company of the promoter;

(b) “participator”—

(i) in relation to a close company, means a person who is
a participator in relation to the company for the
purposes of section 455 of CTA 2010 (see sections 454
45and 455(5) of that Act), and

(ii) in relation to a company which would be a close
company if it were a UK resident company, means a