Finance Bill

House of Lords

Session 2013 - 14
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Finance Bill

Finance Bill
Part 3 — Annual tax on enveloped dwellings
87

145
Occupation by certain employees or partners
(1)
A day in a chargeable period is a relievable if matters stand as follows on that
day—
(a)
a person (“P”) is entitled to a single-dwelling interest,
(b)
P, or a relevant group member, carries on a qualifying trade,
5
(c)
the interest is held for the purpose of making the dwelling available to
one or more qualifying employees or qualifying partners for use as
living accommodation, and
(d)
the dwelling is, or is to be, made available as mentioned in paragraph
(c) for purposes that are solely or mainly purposes of the trade.
10
(2)
“Qualifying trade” means a trade that is carried on on a commercial basis and
with a view to profit.
(3)
In this section references to making a dwelling available to a qualifying
employee or qualifying partner include making it available to persons who are
to share the accommodation with such an individual as their family.
15
(4)
Where P is a company, “a relevant group member” means a company which is
a member of the same group as P for the purposes mentioned in paragraph 1(2)
of Schedule 7 to FA 2003 (stamp duty land tax: group relief).
146
Meaning of “qualifying employee” and “qualifying partner” in section 145
(1)
In a case where the person carrying on the trade mentioned in section 145(1)(b)
20
carries it on in partnership with one or more other persons, “qualifying
partner” means any individual who is a member of the partnership, except one
who is entitled to a 10% or greater share—
(a)
in the income profits of the partnership, or
(b)
in any company that is entitled to the single-dwelling interest
25
mentioned in section 145(1)(a), or
(c)
in the partnership’s assets.
(2)
“Qualifying employee” means any individual employed for the purposes of
the qualifying trade, except one who—
(a)
is entitled to a 10% or greater share—
30
(i)
in the income profits of the trade, or
(ii)
in any company that is entitled to the single-dwelling interest
mentioned in section 145(1)(a), or
(iii)
in that single-dwelling interest, or
(b)
provides excluded domestic services.
35
(3)
The reference in subsection (2)(b) to an individual who provides excluded
domestic services is to an individual the duties of whose employment include
the provision of services in connection with the (actual or intended)
occupation, by a non-qualifying individual, of the dwelling mentioned in
section 145(1)(c) (“the relevant dwelling”), or a linked dwelling.
40
(4)
In subsection (3) “non-qualifying individual” means an individual connected
with a person who is entitled to the single-dwelling interest.
(5)
The following are “linked” dwellings for the purposes of subsection (3)—
(a)
if the conditions in section 116(2) are met in relation to the relevant
dwelling and another dwelling, that other dwelling;
45

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(b)
a dwelling that is linked to the relevant dwelling, as described in
section 117(1).
(6)
In this section references to employment include the holding of an office.
(7)
For the purposes of subsections (1)(c) and (2)(a)(iii) persons who are entitled to
a chargeable interest as beneficial joint tenants (or, in Scotland, as joint owners)
5
are taken to be entitled to the chargeable interest as beneficial tenants in
common (or, in Scotland, as owners in common) in equal shares.
147
Meaning of “10% or greater share in a company”
(1)
This section applies for the purposes of section 146.
(2)
An individual (“P”) is taken to be entitled to a 10% or greater share in a
10
company (“C”) if P possesses (directly or indirectly) or is entitled to acquire—
(a)
10% or more of the share capital of C,
(b)
10% or more of the issued share capital of C,
(c)
10% or more of the voting power in C,
(d)
so much of the issued share capital of C as would, on the assumption
15
that the whole of the income of C were distributed among the
participators, entitle P to receive 10% or more of the amount so
distributed, or
(e)
such rights as would entitle P, in the event of the winding up of C or in
any other circumstances, to receive 10% or more of the assets of C
20
which would then be available for distribution among the
participators.
(3)
Any rights that P or any other person has as a loan creditor are to be
disregarded for the purposes of the assumption in subsection (2)(d).
(4)
For the purposes of subsection (2) a person is treated as entitled to acquire
25
anything which the person—
(a)
is entitled to acquire at a future date, or
(b)
will at a future date be entitled to acquire.
(5)
If a person—
(a)
possesses any rights or powers on behalf of another person (“A”), or
30
(b)
may be required to exercise any rights or powers on A’s direction or
behalf,

those rights or powers are to be attributed to A.
(6)
The following are also to be attributed to a person—
(a)
the rights and powers of any company of which the person has, or the
35
person and associates of the person have, control;
(b)
the rights and powers of any two or more companies within paragraph
(a);
(c)
the rights and powers of any associate of the person (or of any two or
more associates of the person).
40
(7)
The rights and powers which are to be attributed under subsection (6)—
(a)
include those attributed to a company or associate under subsection (5),
but
(b)
do not include those attributed to an associate under subsection (6).

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(8)
A person who does not meet the conditions in subsection (2) is nevertheless
treated as having a 10% or greater share in a company if the person exercises,
is able to exercise or is entitled to acquire, direct or indirect control over the
company’s affairs.
(9)
In this section—
5
“associate” has the same meaning as in Part 10 of CTA 2010 (see section
448 of that Act); but for this purpose section 448 is to be read as if the
words “or partner” were omitted in subsection (1)(a);
“control” has the same meaning as in that Part (see section 450 of that Act);
“loan creditor” has the same meaning as in that Part (see section 453 of
10
that Act);
“participator” has the same meaning as in that Part (see section 454 of that
Act).
148
Farmhouses
(1)
This section applies where on a day in a chargeable period—
15
(a)
a dwelling (“the farmhouse”) forms part of land occupied for the
purposes of a qualifying trade of farming, and
(b)
a person carrying on the trade is entitled to, or connected with a person
who is entitled to, a single-dwelling interest in the farmhouse.
(2)
That day is relievable in relation to the single-dwelling interest if on that day
20
the farmhouse is occupied—
(a)
by a farm worker who occupies it for the purposes of the trade, or
(b)
by a former long-serving farm worker, or the surviving spouse or civil
partner of a former farm worker.
(3)
A trade of farming is a “qualifying trade of farming” only if it is carried on—
25
(a)
on a commercial basis, and
(b)
with a view to profit.
(4)
In this section—
“farming” has the same meaning as in the Corporation Tax Acts (see
section 1125 of CTA 2010), except that in this section “farming” includes
30
market gardening;
“market gardening” has the same meaning as in the Corporation Tax Acts
(see section 1125(5) of CTA 2010).
149
“Farm worker” and “former long-serving farm worker”
(1)
An individual is a “farm worker” in relation to the qualifying trade of farming
35
mentioned in section 148(1) at any time when the individual has a substantial
involvement in—
(a)
the day-to-day work of the trade, or
(b)
the direction and control of the conduct of the trade.
(2)
Where section 148 applies, an individual occupying the farmhouse on the day
40
mentioned in section 148(1) is a “former long-serving farm worker” if the
individual had, before that day, been a farm worker in relation to the
qualifying trade of farming for—
(a)
a qualifying period of 3 or more years, or

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(b)
qualifying periods together amounting to 3 or more years within a 5
year period.
(3)
In subsection (2) “qualifying period” means a period throughout which—
(a)
the individual occupied the farmhouse for the purposes of the trade,
(b)
the land of which the farmhouse forms part was occupied for the
5
purposes of the trade,
(c)
the trade was carried on by—
(i)
a person who is entitled to the single-dwelling interest in the
farmhouse on the day mentioned in section 148(1), or
(ii)
a person connected with such a person, and
10
(d)
a person who is entitled to the single-dwelling interest in the farmhouse
on the day mentioned in section 148(1) was entitled to that interest.
(4)
A person occupying part of a dwelling is regarded as occupying the dwelling
for the purposes of this section and section 148.
150
Providers of social housing
15
(1)
A day in a chargeable period is relievable in relation to a single-dwelling
interest if on that day—
(a)
a profit-making registered provider of social housing (P) is entitled to
the interest, and
(b)
P’s acquisition of the interest (or of any part of the interest) was funded
20
with the assistance of public subsidy.
(2)
A day in a chargeable period is relievable in relation to a single-dwelling
interest if on that day—
(a)
a relevant housing provider (that is, a non-profit registered provider of
social housing or a registered social landlord) is entitled to the interest,
25
and
(b)
the condition in subsection (3) is met.
(3)
The condition mentioned in subsection (2) is that—
(a)
the relevant housing provider is controlled by its tenants,
(b)
the person from whom the relevant housing provider acquired the
30
interest (or any part of the interest) is a qualifying body, or
(c)
the relevant housing provider’s acquisition of the interest (or of any
part of the interest) was funded with the assistance of a public subsidy.
(4)
In this section—
(a)
the reference to a relevant housing provider “controlled by its tenants”
35
is to be read in accordance with subsection (2) of section 71 of FA 2003;
(b)
“qualifying body” has the meaning given by subsection (3) of that
section;
(c)
“public subsidy” has the same meaning as in that section.
Exemptions
40
151
Charitable companies
(1)
A charitable company that is entitled to a single-dwelling interest is regarded
as not meeting the ownership condition with respect to the interest on any day

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on which the interest is held by the company for qualifying charitable
purposes, other than an excluded day.
(2)
The interest is “held for qualifying charitable purposes” if it is held—
(a)
for use in furtherance of the charitable purposes of the charitable
company or of another charity, or
5
(b)
as an investment from which the profits are (or are to be) applied to the
charitable purposes of the charitable company.
(3)
A day is an “excluded day” if the following conditions are met—
(a)
a person (“the donor”) has on or before that day made, or agreed to
make, a gift to the charitable company or to a charity that is connected
10
with it,
(b)
there exist on that day arrangements under which or as a result of
which a linked individual is permitted, or is to be or may in the future
be permitted, to occupy the dwelling, and
(c)
it is reasonable to assume from either or both of—
15
(i)
the likely effects of the gift and the arrangements, or
(ii)
the circumstances in which the gift was made and the
circumstances in which the arrangements were entered into,

that the gift would not have been made and the arrangements would
not have been entered into independently of one another;
20

but see the exception in subsection (5).
(4)
In subsection (3)(b) “linked individual” means an individual who—
(a)
is the donor, or
(b)
was, when the arrangements were entered into, an associate of the
donor.
25
(5)
A day is not an “excluded day” if the first, second or third condition is met on
that day.


The first condition is that the activities undertaken for carrying out the primary
purposes of the charitable company include, or normally include, opening the
30
dwelling to the public.


The second condition is that the dwelling is being exploited through
commercial activities that involve, or normally involve, opening the dwelling
to the public.
35


The third condition is that steps are being taken—
(a)
to secure that the first or second condition will be met without undue
delay, or
(b)
to secure that the single-dwelling interest will be sold without undue
40
delay.
(6)
In subsection (5)—
(a)
“opening the dwelling to the public” means offering the public the
opportunity to make use of, stay in or otherwise enjoy, on at least 28
days in any year, areas that constitute a significant part of the interior
45
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(b)
“without undue delay” means without delay, except so far as delay is
justified by commercial considerations or for the sake of a primary
purpose of the charitable company.
(7)
For the purposes of subsection (6)(a), the size (relative to the size of the whole
dwelling or of the whole garden or grounds), nature, and function of the areas
5
concerned are to be taken into account in determining whether they form a
significant part of the interior of the dwelling or (as the case may be) of the
garden or grounds.
(8)
For the purposes of subsection (3)(a)—
(a)
“connected” means connected in a matter relating to the structure,
10
administration or control of the charitable company, and
(b)
section 172 does not apply.
152
Section 151: supplementary
(1)
In section 151 “associate”, in relation to the donor, means any of the
following—
15
(a)
an individual (“a connected person”) who is connected with the donor,
(b)
an individual who is the settlor in relation to a settlement of which a
trustee is (in the capacity of trustee) connected with the donor,
(c)
the spouse or civil partner of a connected person or of a relevant settlor,
(d)
a relative of a connected person or of a relevant settlor, or the spouse or
20
civil partner of a relative of a connected person or of a relevant settlor,
(e)
a relative of the spouse or civil partner of a connected person or of a
relevant settlor, or
(f)
the spouse or civil partner of a person falling within paragraph (e).
(2)
In subsection (1)—
25
“relative” means brother, sister, ancestor or lineal descendant;
“settlement” and “settlor” have the same meaning as in Chapter 5 of Part
5 of ITTOIA 2005 (see section 620 of that Act).
(3)
In subsection (1)(b) “trustee” is to be read in accordance with section 1123(3) of
CTA 2010 (“connected persons”: supplementary).
30
(4)
For the purposes of section 151 occupation of any part of a dwelling is regarded
as occupation of the dwelling.
(5)
For the purposes of section 151(3)—
(a)
the making of a gift is disregarded if it is made before the day on which
this Act is passed, and
35
(b)
an agreement to make a gift is disregarded if the agreement is made
before that day.
(6)
Arrangements entered into before the day on which this Act is passed are
disregarded for the purposes of section 151(3) unless a material alteration has
been made to them on or after that date.
40

“Material alteration” means an alteration affecting anything in the
arrangements that relates to the individual’s having (at any time), or
potentially having, permission to occupy the dwelling.

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(7)
References in section 151 and this section to a gift include the disposal of an
asset for consideration of an amount or value which is less than the market
value of the asset.
(8)
In section 151 and this section “arrangements” includes any scheme,
arrangement or understanding of any kind, whether or not legally enforceable,
5
involving a single transaction or two or more transactions.
153
Public bodies
(1)
A public body is not regarded as a company for the purposes of this Part.
(2)
In this section—
(a)
“public body” means any body corporate that is a public body for the
10
purposes of section 66 of FA 2003, and
(b)
references to a public body accordingly include a company such as is
mentioned in subsection (5) of that section (companies wholly owned
by the listed bodies).
(3)
The power of the Treasury to prescribe persons by an order under section 66(4)
15
of FA 2003 may be exercised so as to make different provision for purposes
relating to annual tax on enveloped dwellings and stamp duty land tax.
(4)
In paragraph (b) of subsection (2) “company” means a company as defined by
section 1 of the Companies Act 2006 (and subsection (1) is to be ignored in
interpreting that paragraph).
20
154
Bodies established for national purposes
(1)
A body listed in subsection (2) is not regarded as a company for the purposes
of this Part.
(2)
The bodies are—
the Historic Buildings and Monuments Commission for England;
25
the Trustees of the British Museum;
the Trustees of the National Heritage Memorial Fund;
the Trustees of the Natural History Museum.
155
Dwelling conditionally exempt from inheritance tax
(1)
Subsection (2) applies to a single-dwelling interest if—
30
(a)
the whole or part of the dwelling has been designated under section 31
of IHTA 1984 (buildings of outstanding historic or architectural interest
etc),
(b)
an undertaking has been made with respect to the dwelling under
section 30 of that Act (conditionally exempt transfers), and
35
(c)
a transfer of value is exempt from inheritance tax by virtue of that
designation and that undertaking.
(2)
The taxable value of the single-dwelling interest on any day is taken to be zero
if no chargeable event has occurred with respect to the dwelling in the time
between the transfer of value and the beginning of that day.
40
(3)
Subsection (4) applies to a single-dwelling interest if—