Finance (No. 2) Bill (151)

(4) After section 855 insert—

“855A Notional business: indirect partners

(1) This section applies in relation to the notional business of a partner
in a firm if—

(a) 5the firm consists of a partnership which is a partner or
indirect partner in another partnership (“the underlying
partnership”),

(b) the members of the underlying partnership carry on a trade
(“the underlying trade”),

(c) 10the firm’s untaxed income or relievable losses referred to in
section 854(1)(b) arise by virtue of untaxed income or
relievable losses (“the underlying profits or losses”) arising to
members of the underlying partnership—

(i) from sources other than the carrying on of a trade,
15and

(ii) otherwise than by virtue of the underlying
partnership’s membership of a partnership.

(2) Section 854 (carrying on by partner of notional business) has effect as
if—

(a) 20for subsection (2) there were substituted—

“(2) The partner starts to carry on the notional business at the later
of—

(a) when the partner becomes an indirect partner in the
underlying partnership, and

(b) 25when the underlying partnership starts to carry on
the underlying trade.”;”

(b) for subsection (4) there were substituted—

“(4) The partner permanently ceases to carry on the notional
business at the earlier of—

(a) 30when the partner ceases to be an indirect partner in
the underlying partnership, and

(b) when the underlying partnership permanently ceases
to carry on the underlying trade.””

(3) Section 855 has effect as if for subsections (2) and (3) there were
35substituted—

“(2) If the partner carries on the actual trade (whether alone or in
partnership) before the firm starts to carry it on, the partner
starts to carry on the notional business when the firm starts to
carry on the actual trade.

(3) 40If the partner carries on the actual trade (whether alone or in
partnership) after the firm permanently ceases to carry it on,
the partner permanently ceases to carry on the notional
business when the firm permanently ceases to carry on the
actual trade.””

(4) 45In this section “untaxed income” has the same meaning as in section
854.””

(5) The amendments made by this paragraph have effect in relation to the tax
year 2018-19 and subsequent tax years.

Part 3 Returns: information to be included

6 (1) 5TMA 1970 is amended as follows.

(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
10partner 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) 15any 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
20reporting 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
25of 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
30consideration,

(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
35paid 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
40reporting 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
45part 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
5partnership 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) 10that it is a UK resident individual;

(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) 15the 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
20individual, 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
25the 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
30mentioned 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
35person 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
40company 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
  45be 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
50year.

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) 5Where 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.”

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

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

Part 4 15Returns: overseas partners in investment partnerships etc

8 (1) TMA 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) 20After section 12AB (partnership return to include partnership statement)
insert—

“12ABZA Partnership returns: overseas partners in investment partnerships
etc

(1) There is no requirement for a partnership return to include a
25declaration of the tax reference of a person (see section 12AA(6)(a))
if—

(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) 30the partnership does not carry on a trade or profession or a
UK 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
35person in one or more relevant returns, and

(d) the 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) 40If, in reliance on this section, the partnership return does not include
a 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) The notice must be given within the period of 12 months beginning
5with 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).

(6) A statutory instrument containing regulations under subsection (5)
10is 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
12ABA.””

(4) In section 98 (special returns, etc), in column 2 of the Table, at the
15appropriate 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) whether 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
20etc), after paragraph 10A (as inserted by this Schedule) insert—

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

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

(b) 25in subsections (1), (3), and (4), before every “partnership
return” insert “section 12AA”.””

Part 5 Returns conclusive as to shares of profits and losses

10 (1) TMA 1970 is amended as follows.

(2) 30After 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) whether a person does or does not have a share in the profits
or losses of the partnership for any period, and

(b) 35what 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) If there is a dispute between the person mentioned in subsection
(1)(a) or (b) and any one or more partners in the partnership about
40whether 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) That 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
5period of 12 months beginning with the day after—

(a) the 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.

(6) 10Where 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) the reporting partner, and

(b) 15the 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.

But notice need not be given under this subsection to anyone who
20referred 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) the tribunal must determine what the return should have
25given, 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
in the partnership amend—

(a) 30their 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) Where at any time after a referral is made under subsection (3) but
35before 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) is correct without variation, or

(b) 40requires 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
agreement.

(10) 45Subsection (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
resile 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
5to the reporting partner of its objection to the agreement.

(11) A partnership return which has been the subject of a referral under
subsection (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
10of the partnership return under section 12ABA (amendment
of partnership return by taxpayer), and

(b) is the first referral following the amendment.

(12) In this section—

• “reporting partner” means the partner who made and delivered
  15the partnership return or that partner’s successor;

• references 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
20“partnership return” insert “(including anything included in the return by
virtue 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) 25if a dispute in relation to the return is referred to a
tribunal 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) 30in subsection (3), at the end insert “or in consequence of the referral
of 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) 35after subsection (5) insert—

“(5A) If 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) 40after a final closure notice has been issued in relation
to 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,

45the enquiry into the return is limited to the matters to which
the 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) after “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
5dispute”;

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

(6) In 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
10to tribunal))”.

(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
15tribunal))”.

(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) 20after 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) 25If 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) 30the 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
35notice 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
40correction 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
45this 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
partners), 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
5partners), in subsection (1), after “1264A” insert “and section 12ABZB of
TMA 1970 (partnership return is conclusive)”.

13 (1) FA 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
10referred 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) Where an amendment to an accelerated payment notice made under
15section 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) any other enactment imposing a penalty or surcharge for
20non-payment or late payment of tax.””

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

(a) after subsection (7) insert—

“(7A) Where—

(a) 25an 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
tribunal determination),

30HMRC 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) after subsection (13) insert—

“(13A) 35If, 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
day on which notice of the amendment is given, or

(b) 40if 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
which has been referred to a tribunal under section 12ABZB(3) of
45TMA 1970 but not yet determined)”;

(b) in paragraph 7—

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

(ii) after paragraph (b) insert—

“(ba) the reference in section 226(8) to an
amendment to an accelerated payment
notice made under section 227(7A) were to
5an amendment to a partner payment notice
made under that section as applied by
paragraph 8 of this Schedule, and”;”

(c) in paragraph 8(2)—

(i) after paragraph (a) insert—

“(aa) 10section 227(7A) has effect as if the reference
to a partnership return to which the
accelerated payment notice relates were a
reference to the partnership return in
relation to which the partner payment
15notice is given;”;”

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

(iii) after paragraph (c) insert “and

(d) section 227(13A) has effect as if the
reference to section 223(2) were to
20paragraph 6(2) of this Schedule and the
reference to section 223(5) were to
paragraph 6(5) of this Schedule.””

14 The 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) 25Schedule 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 In section 12ABZB (partnership return conclusive as to
partnership shares)—

(a) 30in the heading, before “Partnership return” insert “Section
12AA”;

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

(3) After paragraph 43 insert—

“43A 35In 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) In paragraph 8(2)(aa) (withdrawal etc of partner payment notices),
before “partnership return”, in both places, insert “section
4012AA”.””