Finance Bill

House of Lords

Session 2013 - 14
Internet Publications
Other Bills before Parliament

Finance Bill

Finance Bill
Schedule 35 — Annual tax on enveloped dwellings: miscellaneous amendments and transitory provision
Part 2 — Transitory provision: the first chargeable period
433

Schedule 35
Section 168

Annual tax on enveloped dwellings: miscellaneous amendments and
transitory provision
Part 1
Miscellaneous amendments
5
Provisional collection of taxes
1
In section 1(1) of the Provisional Collection of Taxes Act 1968 (temporary
statutory effect of House of Commons resolutions), after “stamp duty land
tax,” insert “annual tax on enveloped dwellings,”.
Disclosure of tax avoidance schemes
10
2
In section 318(1) of FA 2004 (disclosure of tax avoidance schemes:
interpretation), in the definition of “tax”—
(a)
omit the “or” after paragraph (f), and
(b)
after paragraph (g) insert “, or
(h)
annual tax on enveloped dwellings.”
15
Definitions relating to charities
3
In paragraph 7 of Schedule 6 to FA 2010 (definition of “charity”, “charitable
company” and “charitable trust”)—
(a)
omit the “and” after paragraph (g), and
(b)
after paragraph (h) insert “, and
20
(i)
annual tax on enveloped dwellings.”
Part 2
Transitory provision: the first chargeable period
4
In relation to the chargeable period beginning on 1 April 2013, section 159
(annual tax on enveloped dwellings return) has effect as if subsections (2)
25
and (3) of that section provided as follows—
“(2)
A return under subsection (1) must be delivered by the end of 1
October 2013 if the days on which the person is within the charge
with respect to the interest include 1 April 2013.
(3)
If the days on which the person is within the charge with respect to
30
the interest do not include 1 April 2013, the return must be
delivered—
(a)
by the end of 1 October 2013, or
(b)
by the end of the period of 30 days beginning with the first
day in the chargeable period on which the person is within
35
the charge with respect to the interest,

whichever is the later.”
5
In relation to the chargeable period beginning on 1 April 2013, section 163
(payment of tax) has effect as if subsection (1) of that section provided as

Finance Bill
Schedule 36 — Treatment of liabilities for inheritance tax purposes
434

follows—
“(1)
Tax charged on a person under section 99 with respect to a single-
dwelling interest must be paid—
(a)
by the end of 31 October 2013, or
(b)
if later, by the end of the filing date for the return.”
5
Schedule 36
Section 176

Treatment of liabilities for inheritance tax purposes
IHTA 1984
1
IHTA 1984 is amended as follows.
2     (1)
Section 162 (liabilities) is amended as follows.
10
      (2)
In subsection (4), after “possible” insert “and to the extent that it is not taken
to reduce value in accordance with section 162B”.
      (3)
In subsection (5), after “possible” insert “and to the extent that it is not taken
to reduce value in accordance with section 162B”.
3
After section 162 insert—
15
“162A
Liabilities attributable to financing excluded property
(1)
To the extent that a liability is attributable to financing (directly or
indirectly)—
(a)
the acquisition of any excluded property, or
(b)
the maintenance, or an enhancement, of the value of any such
20
property,

it may only be taken into account so far as permitted by subsections
(2) to (4).
(2)
Where the property mentioned in subsection (1) has been disposed
of, in whole or in part, for full consideration in money or money’s
25
worth, the liability may be taken into account up to an amount equal
to so much of that consideration as—
(a)
is not excluded property, and
(b)
has not been used—
(i)
to finance (directly or indirectly) the acquisition of
30
excluded property or the maintenance, or an
enhancement, of the value of such property, or
(ii)
to discharge (directly or indirectly) any other liability
that, by virtue of this section, would not be taken into
account.
35
(3)
The liability may be taken into account up to an amount equal to the
value of such of the property mentioned in subsection (1) as—
(a)
has not been disposed of, and
(b)
is no longer excluded property.
(4)
To the extent that any remaining liability is greater than the value of
40
such of the property mentioned in subsection (1) as—

Finance Bill
Schedule 36 — Treatment of liabilities for inheritance tax purposes
435

(a)
has not been disposed of, and
(b)
is still excluded property,

it may be taken into account, but only so far as the remaining liability
is not greater than that value for any of the reasons mentioned in
subsection (7).
5
(5)
Subsection (6) applies where—
(a)
a liability or any part of a liability is attributable to financing
(directly or indirectly)—
(i)
the acquisition of property that was not excluded
property, or
10
(ii)
the maintenance, or an enhancement, of the value of
such property, and
(b)
the property or part of the property—
(i)
has not been disposed of, and
(ii)
has become excluded property.
15
(6)
The liability or (as the case may be) the part may only be taken into
account to the extent that it exceeds the value of the property, or the
part of the property, that has become excluded property, but only so
far as it does not exceed that value for any of the reasons mentioned
in subsection (7).
20
(7)
The reasons are—
(a)
arrangements the main purpose, or one of the main purposes,
of which is to secure a tax advantage,
(b)
an increase in the amount of the liability (whether due to the
accrual of interest or otherwise), or
25
(c)
a disposal, in whole or in part, of the property.
(8)
In this section—
“arrangements” includes any scheme, transaction or series of
transactions, agreement or understanding, whether or not
legally enforceable, and any associated operations;
30
“remaining liability” means the liability mentioned in
subsection (1) so far as subsections (2) and (3) do not permit
it to be taken into account;
“tax advantage” means—
(a)
the avoidance or reduction of a charge to tax, or
35
(b)
the avoidance of a possible determination in respect
of tax.
162B
Liabilities attributable to financing certain relievable property
(1)
Subsection (2) applies if—
(a)
the whole or part of any value transferred by a transfer of
40
value is to be treated as reduced, under section 104, by virtue
of it being attributable to the value of relevant business
property, and
(b)
the transferor has a liability which is attributable, in whole or
in part, to financing (directly or indirectly)—
45
(i)
the acquisition of that property, or
(ii)
the maintenance, or an enhancement, of its value.

Finance Bill
Schedule 36 — Treatment of liabilities for inheritance tax purposes
436

(2)
The liability is, so far as possible, to be taken to reduce the value
attributable to the value of the relevant business property, before it is
treated as reduced under section 104, but only to the extent that the
liability—
(a)
is attributable as mentioned in subsection (1)(b), and
5
(b)
does not reduce the value of the relevant business property
by virtue of section 110(b).
(3)
Subsection (4) applies if—
(a)
the whole or part of any value transferred by a transfer of
value is to be treated as reduced, under section 116, by virtue
10
of it being attributable to the agricultural value of agricultural
property, and
(b)
the transferor has a liability which is attributable, in whole or
in part, to financing (directly or indirectly)—
(i)
the acquisition of that property, or
15
(ii)
the maintenance, or an enhancement, of its
agricultural value.
(4)
To the extent that the liability is attributable as mentioned in
subsection (3)(b), it is, so far as possible, to be taken to reduce the
value attributable to the agricultural value of the agricultural
20
property, before it is treated as reduced under section 116.
(5)
Subsection (6) applies if—
(a)
part of the value of a person’s estate immediately before
death is attributable to the value of land on which trees or
underwood are growing,
25
(b)
the value of the trees or underwood is to be left out of
account, under section 125(2)(a), in determining the value
transferred by the chargeable transfer made on the person’s
death, and
(c)
the person has a liability which is attributable, in whole or in
30
part, to financing (directly or indirectly)—
(i)
the acquisition of the land or trees or underwood,
(ii)
planting the trees or underwood, or
(iii)
the maintenance, or an enhancement, of the value of
the trees or underwood.
35
(6)
To the extent that the liability is attributable as mentioned in
subsection (5)(c), it is, so far as possible, to be taken to reduce the
value of the trees or underwood, before their value is left out of
account.
(7)
Subject to subsection (8), to the extent that a liability is, in accordance
40
with this section, taken to reduce value in determining the value
transferred by a chargeable transfer, that liability is not then to be
taken into account in determining the value transferred by any
subsequent transfer of value by the same transferor.
(8)
Subsection (7) does not prevent a liability from being taken into
45
account by reason only that the liability has previously been taken
into account in determining the amount on which tax is chargeable
under section 64.

Finance Bill
Schedule 36 — Treatment of liabilities for inheritance tax purposes
437

(9)
For the purposes of subsections (1) to (4) and (7), references to a
transfer of value or chargeable transfer include references to an
occasion on which tax is chargeable under Chapter 3 of Part 3 (apart
from section 79) and—
(a)
references to the value transferred by a transfer of value or
5
chargeable transfer include references to the amount on
which tax is then chargeable, and
(b)
references to the transferor include references to the trustees
of the settlement concerned.
(10)
In this section—
10
“agricultural property” and “agricultural value” have the same
meaning as in Chapter 2 of Part 5;
“relevant business property” has the same meaning as in
Chapter 1 of Part 5.
162C
Sections 162A and 162B: supplementary provision
15
(1)
This section applies for the purposes of determining the extent to
which a liability is attributable as mentioned in section 162A(1) or (5)
or 162B(1)(b), (3)(b) or (5)(c).
(2)
Where a liability was discharged in part before the time in relation to
which the question as to whether or how to take it into account
20
arises—
(a)
any part of the liability that, at the time of discharge, was not
attributable as mentioned in subsection (1) is, so far as
possible, to be taken to have been discharged first,
(b)
any part of the liability that, at the time of discharge, was
25
attributable as mentioned in section 162B(1)(b), (3)(b) or (5)(c)
is, so far as possible, only to be taken to have been discharged
after any part of the liability within paragraph (a) was
discharged, and
(c)
any part of the liability that, at the time of discharge, was
30
attributable as mentioned in section 162A(1) or (5) is, so far as
possible, only to be taken to have been discharged after any
parts of the liability within paragraph (a) or (b) were
discharged.”
4
After section 175 (estate on death: liability to make future payments etc)
35
insert—
“175A
Discharge of liabilities after death
(1)
In determining the value of a person’s estate immediately before
death, a liability may be taken into account to the extent that—
(a)
it is discharged on or after death, out of the estate or from
40
excluded property owned by the person immediately before
death, in money or money’s worth, and
(b)
it is not otherwise prevented, under any provision of this Act,
from being taken into account.
(2)
Where the whole or any part of a liability is not discharged in
45
accordance with paragraph (a) of subsection (1), the liability or (as
the case may be) the part may only be taken into account for the
purpose mentioned in that subsection to the extent that—

Finance Bill
Schedule 36 — Treatment of liabilities for inheritance tax purposes
438

(a)
there is a real commercial reason for the liability or the part
not being discharged,
(b)
securing a tax advantage is not the main purpose, or one of
the main purposes, of leaving the liability or part
undischarged, and
5
(c)
the liability or the part is not otherwise prevented, under any
provision of this Act, from being taken into account.
(3)
For the purposes of subsection (2)(a) there is a real commercial
reason for a liability, or part of a liability, not being discharged where
it is shown that—
10
(a)
the liability is to a person dealing at arm’s length, or
(b)
if the liability were to a person dealing at arm’s length, that
person would not require the liability to be discharged.
(4)
Where, by virtue of this section, a liability is not taken into account
in determining the value of a person’s estate immediately before
15
death, the liability is also not to be taken into account in determining
the extent to which the estate of any spouse or civil partner of the
person is increased for the purposes of section 18.
(5)
In subsection (2)(b) “tax advantage” means—
(a)
a relief from tax or increased relief from tax,
20
(b)
a repayment of tax or increased repayment of tax,
(c)
the avoidance, reduction or delay of a charge to tax or
an assessment to tax, or
(d)
the avoidance of a possible assessment to tax or
determination in respect of tax.
25
(6)
In subsection (5) “tax” includes income tax and capital gains tax.
(7)
Where the liability is discharged as mentioned in subsection (1)(a)
only in part—
(a)
any part of the liability that is attributable as mentioned in
section 162A(1) or (5) is, so far possible, taken to be
30
discharged first,
(b)
any part of the liability that is attributable as mentioned in
section 162B(1)(b), (3)(b) or (5)(c) is, so far as possible, taken
to be discharged only after any part of the liability within
paragraph (a) is discharged, and
35
(c)
the liability so far as it is not attributable as mentioned in
paragraph (a) or (b) is, so far as possible, taken to be
discharged only after any parts of the liability within either of
those paragraphs are discharged.”
Commencement
40
5     (1)
Subject to sub-paragraph (2), the amendments made by this Schedule have
effect in relation to transfers of value made, or treated as made, on or after
the day on which this Act is passed.
      (2)
Section 162B of IHTA 1984 (inserted by paragraph 3) only has effect in
relation to liabilities incurred on or after 6 April 2013.
45
      (3)
For the purposes of sub-paragraph (2), where a liability is incurred under an
agreement—

Finance Bill
Schedule 37 — Vehicle licences for disabled people
439

(a)
if the agreement was varied so that the liability could be incurred
under it, the liability is to be treated as having been incurred on the
date of the variation, and
(b)
in any other case, the liability is to be treated as having been incurred
on the date the agreement was made.
5
Schedule 37
Section 190

Vehicle licences for disabled people
1
VERA 1994 is amended as follows.
2     (1)
Section 19 (rebates) is amended as follows.
      (2)
In subsection (3), after paragraph (c) insert—
10
“(ca)
a qualifying application for a vehicle licence for the vehicle is
made,”.
      (3)
After that subsection insert—
“(3ZA)
An application for a vehicle licence is a qualifying application for the
purposes of subsection (3)(ca) if—
15
(a)
paragraph 1ZA of Schedule 1 applies to the vehicle when the
application is made, but
(b)
that paragraph did not apply to the vehicle when the licence
which is unexpired when the application is made was taken
out.”
20
3     (1)
Section 22ZA (nil licences for vehicles for disabled persons: information) is
amended as follows.
      (2)
In subsection (1)(b), at the beginning insert “falls within subsection (1A) or”.
      (3)
After subsection (1) insert—
“(1A)
Information falls within this subsection if it is—
25
(a)
the name, date of birth or national insurance number of a
person who is in receipt of a relevant payment, or would be
in receipt of such a payment but for—
(i)
regulations under section 86(1) of the Welfare Reform
Act 2012 (treatment as in-patient in hospital or similar
30
institution), or
(ii)
corresponding provision having effect in relation to
personal independence payment in Northern Ireland;
(b)
in the case of a person who is or would be in receipt of
personal independence payment attributable to entitlement
35
to the mobility component, the rate of the payment to which
the person is or would be entitled;
(c)
in the case of a person who has ceased or will cease to receive
a relevant payment, the date on which the person ceased or
will cease to receive it and the reason for the person ceasing
40
to receive it.
(1B)
In subsection (1A) “relevant payment” means—