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

Finance (No. 2) BillPage 60

(b) the relevant step concerned is within paragraph 1 of Schedule
11 to F(No. 2)A 2017 (loans etc outstanding on 5 April 2019).

(And this section does not apply in a case within this subsection.)”

Part 5 5Commencement

13 The amendment made by paragraph 1

(a) is to be treated as having come into force on 29 November 2017,

(b) has effect for the purposes of the operation of Part 7A of ITEPA 2003
in relation to relevant steps taken on or after 22 November 2017, and

(c) 10so has effect in the case of payments within the new subsection
(5A)(a) whenever made (including ones made before 6 April 2011).

14 The amendments made by paragraphs 2, 3 and 5 of this Schedule in Part 7A
of ITEPA 2003 have effect in relation to relevant steps taken on or after 6
April 2018.

15 15The amendment made by paragraph 6 of this Schedule in section 39 of
ITTOIA 2005 has effect in relation to employee benefit contributions (as
defined in that section) made, or to be made, on or after 6 April 2018.

16 The amendment made by paragraph 7 of this Schedule in section 1291 of
CTA 2009 has effect in relation to employee benefit contributions (as defined
20in that section) made, or to be made, on or after 1 April 2018.

Section 12

SCHEDULE 2 Trading income provided through third parties: loans etc outstanding on 5
April 2019

1 In Schedule 12 to F(No.2)A 2017 (trading income provided through third
25parties: loans etc outstanding on 5 April 2019), after paragraph 20 insert—

“Duty to provide loan charge information to HMRC

21 (1) Paragraph 22 applies if one of the following conditions is met.

(2) The first condition is that—

(a) a loan or quasi-loan in relation to which paragraph 1(2)
30applies is treated as a “relevant benefit” for the purposes of
sections 23A to 23H of ITTOIA 2005, and

(b) section 23E of ITTOIA 2005 applies in relation to the
relevant benefit (see section 23A of that Act).

(3) The second condition is that—

(a) 35an application is made under paragraph 20(1) by reference
to a loan or quasi-loan in relation to which paragraph 1(2)
applies,

(b) a favourable decision is made on the application before 6
April 2019, and

Finance (No. 2) BillPage 61

(c) the first condition is not met in relation to the loan or quasi-
loan.

(4) Paragraph 22 does not apply in a case if—

(a) a person agrees, with an officer of Revenue and Customs,
5terms for the discharge of liability for income tax arising
because of the application of section 23E of ITTOIA 2005,

(b) the terms cover all liability (if any) arising because of the
application of that section by reference to a loan or quasi-
loan in relation to which paragraph 1(2) applies, and

(c) 10the terms are agreed before 1 October 2019.

22 (1) T, or T’s personal representatives, must provide the loan charge
information (see paragraph 23(1)) to the Commissioners for Her
Majesty’s Revenue and Customs.

(2) The loan charge information must be provided—

(a) 15after 5 April 2019, and

(b) before 1 October 2019.

(3) The loan charge information must be provided in such form and
manner as may be specified by, or on behalf of, the Commissioners
for Her Majesty’s Revenue and Customs.

(4) 20In this paragraph and in paragraph 23, “T” is the person
mentioned in section 23A(2) of ITTOIA 2005.

“Loan charge information”

23 (1) For the purposes of paragraph 22, the “loan charge information”
consists of —

(a) 25T’s name and, if T’s personal representatives are providing
the information, their names,

(b) the address and telephone number, and e-mail address (if
any), of each person providing the information,

(c) T’s national insurance number (if any),

(d) 30the unique taxpayer reference number (if any) allocated to
T by HMRC,

(e) the name of the arrangement mentioned in section
23A(3)(a) of ITTOIA 2005,

(f) the reference number (if any) allocated to the arrangement
35by HMRC under section 311 of FA 2004 (disclosure of tax
avoidance schemes: arrangements to be given reference
number),

(g) any other reference number allocated by HMRC in
connection with the arrangement or with the loan or quasi-
40loan mentioned in paragraph 21(2) or (3),

(h) if the loan or quasi-loan mentioned in paragraph 21(2) or
(3) is made to someone other than T, the name of the
person to whom it is made,

(i) if a person has agreed terms with an officer of Revenue and
45Customs for the partial discharge of the liability for income
tax arising because of the application of section 23E of
ITTOIA 2005 in relation to the loan or quasi-loan

Finance (No. 2) BillPage 62

mentioned in paragraph 21(2) or (3), the date of that
agreement and the amount of the liability to which it
relates,

(j) if the condition in paragraph 21(2) or (3) is met by reference
5to a loan, the loan payment information (see sub-
paragraph (2)), and

(k) if the condition in paragraph 21(2) or (3) is met by reference
to a quasi-loan, the quasi-loan payment information (see
sub-paragraph (3)).

(2) 10The “loan payment information”, in relation to a loan, consists of
statements of the following—

(a) whether the loan is an approved fixed term loan,

(b) the initial principal amount of the loan,

(c) the amount that has become principal under the loan,
15otherwise than by capitalisation of interest, in each
relevant tax year,

(d) the amount of principal under the loan repaid in each
relevant tax year, ignoring any repayments not in money
made on or after 5 December 2016,

(e) 20the details of any repayment that is to be disregarded
under paragraph 3(4),

(f) the amount of principal under the loan that has been
released or written off in each relevant tax year,

(g) whether any liability for income tax arising because of the
25application of section 23E of ITTOIA 2005 by reason of the
release or writing-off has been paid, and

(h) any amount released that has, in accordance with section
97 of ITTOIA 2005, been brought into account as a receipt
in calculating the profits of the relevant trade.

(3) 30The “quasi-loan payment information”, in relation to a quasi-loan,
consists of statements of the following—

(a) the amount equal to the value of the acquired debt,

(b) the amount equal to the value of the additional debts
acquired in each relevant tax year,

(c) 35the amount by which the initial debt amount has been
reduced by way of repayment in each relevant tax year,
ignoring any repayments not in money made on or after 5
December 2016,

(d) where the acquired debt or an additional debt is a right to
40a transfer of assets, and the assets have been transferred,
the amount of the market value of the assets at the time of
the transfer,

(e) the details of any repayment that is to be disregarded
under paragraph 9(5),

(f) 45the amount by which the initial debt amount has been
reduced by release or writing off in each relevant tax year,

(g) whether any liability for income tax arising because of the
application of section 23E of ITTOIA 2005 by reason of the
release or writing-off has been paid, and

Finance (No. 2) BillPage 63

(h) any amount released that has, in accordance with section
97 of ITTOIA 2005, been brought into account as a receipt
in calculating the profits of the relevant trade.

(4) In this paragraph “relevant tax year” in relation to a loan, or a
5quasi-loan, means—

(a) the tax year in which the loan or quasi-loan was made, and

(b) each subsequent tax year.

(5) In sub-paragraph (3), “acquired debt”, “additional debt” and
“initial debt amount” have the same meaning as in paragraph 9.

(6) 10In this paragraph and in paragraphs 26 to 29, “HMRC” means Her
Majesty’s Revenue and Customs.

24 The Commissioners for Her Majesty’s Revenue and Customs may
by regulations amend paragraph 23 so as to—

(a) add, remove or amend an entry in a list of information, and

(b) 15make incidental provision.

Duty to provide loan charge information: penalties

25 (1) A person who fails to comply with paragraph 22 is liable to a
penalty of £300.

(2) Sub-paragraph (3) applies if the failure continues after the date on
20which a penalty is imposed under sub-paragraph (1) in respect of
the failure.

(3) The person is liable to a further penalty or penalties not exceeding
£60 for each subsequent day, up to a maximum of 90 days, on
which the failure continues.

26 (1) 25This paragraph applies if—

(a) in complying with the duty under paragraph 22, a person
provides inaccurate information, and

(b) condition A, B or C is met.

(2) Condition A is that the inaccuracy is careless or deliberate.

(3) 30An inaccuracy is careless if it is due to a failure by the person to
take reasonable care.

(4) Condition B is that the person knows of the inaccuracy at the time
the information is provided but does not inform HMRC at that
time.

(5) 35Condition C is that the person—

(a) discovers the inaccuracy some time later, and

(b) fails to take reasonable steps to inform HMRC.

(6) The person is liable to a penalty not exceeding £3000.

(7) Where the information contains more than one inaccuracy, a
40penalty is payable for each inaccuracy.

Finance (No. 2) BillPage 64

Penalties under paragraph 25: reasonable excuse

27 (1) Liability to a penalty under paragraph 25 does not arise if the
person satisfies HMRC or (on an appeal notified to the tribunal)
the tribunal that there is a reasonable excuse for the failure.

(2) 5For the purposes of this paragraph—

(a) an insufficiency of funds is not a reasonable excuse unless
attributable to events outside the person’s control,

(b) where the person relies on any other person to do
anything, that is not a reasonable excuse unless the first
10person took reasonable care to avoid the failure, and

(c) where the person had a reasonable excuse for the failure
but the excuse has ceased, the person is to be treated as
having continued to have the excuse if the failure is
remedied without unreasonable delay after the excuse
15ceased.

Penalties under paragraphs 25 and 26: assessment, appeals and enforcement

28 (1) Where a person becomes liable for a penalty under paragraph 25
or 26

(a) HMRC may assess the penalty, and

(b) 20if they do so, they must notify the person.

(2) An assessment of a penalty under paragraph 25 must be made
before 1 October 2021.

(3) An assessment of a penalty under paragraph 26 must be made
before 1 October 2023.

29 (1) 25A person may appeal against any of the following decisions of an
officer of Revenue and Customs—

(a) a decision that a penalty is payable by that person under
paragraph 25 or 26, or

(b) a decision as to the amount of such a penalty.

(2) 30Notice of an appeal under this paragraph must be given—

(a) in writing,

(b) before the end of the period of 30 days beginning with the
date on which the notification under paragraph 28 was
issued, and

(c) 35to HMRC.

(3) Notice of an appeal under this paragraph must state the grounds
of appeal.

(4) On an appeal under sub-paragraph (1)(a) that is notified to the
tribunal, the tribunal may confirm or cancel the decision.

(5) 40On an appeal under sub-paragraph (1)(b) that is notified to the
tribunal, the tribunal may—

(a) confirm the decision, or

(b) substitute for the decision another decision that the officer
of Revenue and Customs had power to make.

Finance (No. 2) BillPage 65

30 (1) A penalty under paragraph 25 or 26 must be paid—

(a) before the end of the period of 30 days beginning with the
date on which the notification under paragraph 28 was
issued, or

(b) 5if a notice of an appeal against the penalty is given, before
the end of the period of 30 days beginning with the date on
which the appeal is determined or withdrawn.

(2) A penalty under paragraph 25 or 26 may be enforced as if it were
income tax charged in an assessment and due and payable.”

Section 13

10SCHEDULE 3 Pension schemes

Amendments of and relating to Part 4 of the Finance Act 2004

1 (1) Part 4 of FA 2004 (pension schemes etc) is amended in accordance with sub-
paragraphs (2) to (8).

(2) 15In section 150 (meaning of “pension scheme”), after subsection (5) insert—

(5A) This Part applies in relation to certain pension schemes that are not
occupational pension schemes as it applies in relation to
occupational pension schemes (see section 274B and paragraph
1(4A) of Schedule 36).”

(3) 20In section 153 (registration of pensions schemes), in subsection (5), at the end
insert , or

(h) the pension scheme is an occupational pension scheme, and
a sponsoring employer in relation to the scheme is a body
corporate that has been dormant during a continuous period
25of one month that falls within the period of one year ending
with the day on which the decision is made, or

(i) the pension scheme is an unauthorised Master Trust
scheme.”

(4) In section 158 (grounds for de-registration) in subsection (1), at the end insert
30“, or

(g) that the pension scheme is an occupational pension scheme,
and a sponsoring employer in relation to the scheme is a body
corporate that has been dormant during a continuous period
of one month that falls within the period of one year ending
35with the day on which the decision to withdraw registration
is made, or

(h) that the scheme is an unauthorised Master Trust scheme.”

(5) At the beginning of Chapter 8 (supplementary) insert—

“National Employment Savings Trust and Master Trust schemes

274B 40 National Employment Savings Trust and Master Trust schemes

(1) This Part applies in relation to a pension scheme that—

Finance (No. 2) BillPage 66

(a) is established under section 67 of the Pensions Act 2008, and

(b) is not an occupational pension scheme,

as it applies in relation to an occupational pension scheme.

(2) This Part applies in relation to a pension scheme that—

(a) 5is a Master Trust scheme, and

(b) is not an occupational pension scheme,

as it applies in relation to an occupational pension scheme.”

(6) In section 279 (other definitions), after subsection (1A) insert—

(1B) In this Part “Master Trust scheme” means a pension scheme—

(a) 10that is a Master Trust scheme within the meaning of the
Pension Schemes Act 2017 (see sections 1 and 2 of that Act) or
corresponding provision in force in Northern Ireland, and

(b) whose operation would be unlawful under Part 1 of that Act
(Master Trusts), or corresponding provision in force in
15Northern Ireland, were the scheme not authorised under that
Part or that corresponding provision.

(1C) For the purposes of determining whether the condition in subsection
(1B)(b) is met, the following are to be ignored—

(a) any regulations under section 40 of the Pension Schemes Act
202017 (regulations modifying application of Part 1 of that Act);

(b) any provision in force in Northern Ireland corresponding to
regulations that could be made under that section.

(1D) For the purposes of this Part a Master Trust scheme is
“unauthorised” if—

(a) 25it is not authorised under Part 1 of the Pension Schemes Act
2017 or corresponding provision in force in Northern Ireland,
and

(b) its operation would be unlawful under that Part or that
corresponding provision without such authorisation.

(1E) 30Section 1169 of the Companies Act 2006 (dormant companies)
applies for the purposes of this Part.”

(7) In section 280(2) (general index), in the table, insert at the appropriate
places—

“dormant (in relation to a
body corporate)
section 279(1E)”;
35
“Master Trust scheme section 279(1B) and (1C)”;
“unauthorised (in relation
to a Master Trust scheme)
section 279(1D)”.

(8) In Schedule 36 (pension schemes etc: transitional provisions and savings), in
40paragraph 1 (deemed registration of existing schemes), after sub-paragraph
(4) insert—

(4A) This Part of this Act applies in relation to a pension scheme that—

Finance (No. 2) BillPage 67

(a) is a registered pension scheme by virtue of sub-paragraph
(1), and

(b) is neither a public service pension scheme nor an
occupational pension scheme,

5as it applies in relation to an occupational pension scheme.”

(9) In consequence of the amendment made by sub-paragraph (5), in section 30
of F(No.3)A 2010 (pension scheme under section 67 of Pensions Act 2008),
omit subsection (1).

Commencement

2 (1) 10The following provisions of paragraph 1 come into force on the day on
which section 3 of the Pension Schemes Act 2017 (prohibition on operating
Master Trust scheme unless authorised) comes into force or, if later, the day
on which this Act is passed—

(a) sub-paragraph (3) so far as it inserts section 153(5)(i) of FA 2004 and
15the “or” at the end of section 153(5)(h);

(b) sub-paragraph (4) so far as it inserts section 158(1)(h) of that Act and
the “or” at the end of section 158(1)(g);

(c) sub-paragraph (6) so far as it inserts section 279(1D) of that Act
(definition of “unauthorised Master Trust scheme”);

(d) 20sub-paragraph (7) so far as it inserts an index entry relating to that
definition.

(2) The following provisions of paragraph 1 come into force on 6 April 2018—

(a) sub-paragraph (3) so far as it inserts section 153(5)(h) of FA 2004 and
the “or” at the end of section 153(5)(g);

(b) 25sub-paragraph (4) so far as it inserts section 158(1)(g) of that Act and
the “or” at the end of section 158(1)(f);

(c) sub-paragraph (6) so far as it inserts section 279(1E) of that Act
(definition of “dormant”);

(d) sub-paragraph (7) so far as it inserts an index entry relating to that
30definition.

(3) So far as not brought into force by sub-paragraph (1) or (2), and subject to
sub-paragraph (4), paragraph 1 comes into force on the day on which this
Act is passed.

(4) Paragraph 1(8) is treated as always having had effect.

(5) 35For the purposes of section 153(5)(h) and (i) of FA 2004 (as inserted by
paragraph 1(3)) it is immaterial when the application in question was made.

Meaning of “Master Trust scheme”: transitional provision

3 Before the coming into force of section 3 of the Pension Schemes Act 2017
(prohibition on operating Master Trust scheme unless authorised), section
40279 of FA 2004 has effect as if subsections (1B)(b) and (1C) (as inserted by
paragraph 1(6)) were omitted.

Master Trust schemes registered before the passing of this Act

4 (1) Sub-paragraph (2) applies to a pension scheme that—

(a) is a Master Trust scheme,

Finance (No. 2) BillPage 68

(b) is not an occupational pension scheme, and

(c) was registered under Chapter 2 of Part 4 of FA 2004 before the
passing of this Act.

(2) Section 274B(2) of FA 2004 (as inserted by paragraph 1(5)) is treated as
5always having had effect in relation to the pension scheme.

(3) In this paragraph, “Master Trust scheme” and “occupational pension
scheme” have the same meaning as in Part 4 of FA 2004.

Section 16

SCHEDULE 4 EIS and VCT reliefs: knowledge-intensive companies

10Amount of EIS relief

1 (1) Section 158 of ITA 2007 (form and amount of EIS relief) is amended as
follows.

(2) In subsection (2)(a), after “EIS relief” insert “(qualifying shares)”.

(3) In subsection (2)(b), for “£1 million” substitute “the allowable amount”.

(4) 15After subsection (2) insert—

(2ZA) The allowable amount is—

(a) if the qualifying shares do not include any KIC shares:
£1 million;

(b) if the amount, or the sum of the amounts, subscribed for
20qualifying shares that are KIC shares is £1 million or more:
£2 million;

(c) if neither paragraph (a) nor paragraph (b) applies: £1 million
plus the amount, or the sum of the amounts, subscribed for
qualifying shares that are KIC shares.

(2ZB) 25In subsection (2ZA) “KIC shares” means shares in a company which,
or in companies each of which, is a knowledge-intensive company at
the time the shares are issued (see section 252A and subsection (6)).”

(5) In subsection (4), for “subsections (1) and (2)” substitute “subsections (1) to
(2ZB)”.

(6) 30At the end insert—

(6) If the issuing company began to carry on a trade less than three years
before the date the relevant shares are issued, section 252A as it
applies for the purposes of this section has effect with the
substitution of the following subsections for subsections (2) to (4A)—

(2) 35The first operating costs condition is that in at least one of the
relevant three succeeding years at least 15% of the relevant
operating costs constitute expenditure on research and
development or innovation.

Finance (No. 2) BillPage 69

(3) The second operating costs condition is that in each of the
relevant three succeeding years at least 10% of the relevant
operating costs constitute such expenditure.

(4) In subsections (2) and (3)—

  • 5“relevant operating costs” means—

    (a)

    if the issuing company is a single company at the
    time the relevant shares are issued, the operating
    costs of that company, and

    (b)

    if the issuing company is a parent company at
    10the time the relevant shares are issued, the sum
    of—

    (i)

    the operating costs of the issuing
    company, and

    (ii)

    the operating costs of each company
    15which is a qualifying subsidiary of the
    issuing company at that time, excluding
    a company’s operating costs for any of
    the relevant three succeeding years
    during any part of which the company is
    20not a qualifying subsidiary of the issuing
    company;

  • “the relevant three succeeding years” means the three
    consecutive years the first of which begins with the date
    the relevant shares are issued.”

(7) 25In subsection (6) “trade” includes—

(a) any business or profession,

(b) so far as not within paragraph (a), the carrying on of research
and development activities from which it is intended a trade
will be derived or will benefit,

(c) 30preparing to carry on a trade.”

Maximum amount raised annually by knowledge-intensive company

2 (1) Section 173A of ITA 2007 (the maximum amount raised annually through
risk finance investments requirement for EIS relief) is amended as follows.

(2) In subsection (1), for “must not exceed £5 million” substitute “must not
35exceed—

(a) if the company is a knowledge-intensive company at that
date (see section 252A and subsection (5A)), £10 million, and

(b) in any other case, £5 million.”

(3) After subsection (5) insert—

(5A) 40If the issuing company began to carry on a trade less than three years
before the date the relevant shares are issued, section 252A as it
applies for the purposes of this section has effect with the
substitution of the following subsections for subsections (2) to (4A)—

(2) The first operating costs condition is that in at least one of the
45relevant three succeeding years at least 15% of the relevant
operating costs constitute expenditure on research and
development or innovation.