Finance Bill

House of Commons

Session 2003 - 04
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Finance Bill

Finance Bill
Part 7 — Disclosure of tax avoidance schemes
244

(4)
A person is not liable to a penalty under—
(a)
section 95 of the Taxes Management Act 1970 (c. 9) (incorrect return or
accounts for income tax or capital gains tax),
(b)
paragraph 8 of Schedule 2 to the Oil Taxation Act 1975 (c. 22) (incorrect
returns and accounts for purposes of petroleum revenue tax),
5
(c)
section 247 of the Inheritance Tax Act 1984 (c. 51) (provision of incorrect
information for purposes of inheritance tax),
(d)
any provision relating to incorrect or uncorrected returns made under
section 98 of the Finance Act 1986 (c. 41) (administration of stamp duty
reserve tax),
10
(e)
paragraph 20 of Schedule 18 to the Finance Act 1998 (c. 36) (incorrect or
uncorrected return for corporation tax),
(f)
paragraph 8 of Schedule 10 to the Finance Act 2003 (incorrect or
uncorrected return for purposes of stamp duty land tax), or
(g)
any other prescribed provision,
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by reason of any failure to include in any return or account any reference
number or other information required by virtue of subsection (3)(a) (but see
section 98C of the Taxes Management Act 1970 for the penalty for failure to
comply with this section).
298
Legal professional privilege
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(1)
Nothing in this Part requires any person to disclose to the Board any privileged
information.
(2)
In this Part “privileged information” means information with respect to which
a claim to legal professional privilege, or, in Scotland, to confidentiality of
communications, could be maintained in legal proceedings.
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299
Penalties
(1)
After section 98B of the Taxes Management Act 1970 insert—
“98C
Notification under Part 7 of Finance Act 2004
(1)
A person who fails to comply with any of the provisions of Part 7 of the
Finance Act 2004 (disclosure of tax avoidance schemes) mentioned in
30
subsection (2) below shall be liable—
(a)
to a penalty not exceeding £5,000, and
(b)
if the failure continues after a penalty is imposed under
paragraph (a) above, to a further penalty or penalties not
exceeding £600 for each day on which the failure continues after
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the day on which the penalty under paragraph (a) was imposed
(but excluding any day for which a penalty under this
paragraph has already been imposed).
(2)
Those provisions are—
(a)
section 292(1) and (3) (duty of promoter in relation to notifiable
40
proposals and notifiable arrangements),
(b)
section 293(1) (duty of person dealing with promoter outside
United Kingdom),
(c)
section 294 (duty of parties to notifiable arrangements not
involving promoter), or
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Finance Bill
Part 7 — Disclosure of tax avoidance schemes
245

(d)
section 296(1) (duty of promoter to notify client of reference
number).
(3)
A person who fails to comply with section 297(1) of the Finance Act
2004 (duties of parties to notifiable arrangements to notify Board of
reference number, etc.) shall be liable to a penalty of the relevant sum.
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(4)
In subsection (3) above “the relevant sum” means—
(a)
in relation to a person not falling within paragraph (b) or (c)
below, £100 in respect of each scheme to which the failure
relates,
(b)
in relation to a person who has previously failed to comply with
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section 297(1) on one (and only one) occasion during the period
of 36 months ending with the date on which the current failure
to comply with that provision began, £500 in respect of each
scheme to which the current failure relates (whether or not the
same as the scheme to which the previous failure relates), or
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(c)
in relation to a person who has previously failed to comply with
section 297(1) on two or more occasions during the period of 36
months ending with the date on which the current failure to
comply with that provision began, £1,000 in respect of each
scheme to which the current failure relates (whether or not the
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same as the schemes to which any of the previous failures
relates).
(5)
In subsection (4) above “scheme” means any notifiable arrangements
within the meaning of Part 7 of the Finance Act 2004.”
(2)
In section 100 of that Act (determination of penalties by officer of Board) at the
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end of subsection (2) (penalties to which subsection (1) of the section does not
apply) insert “, or
(f)
section 98C(1)(a) above.”
(3)
In section 100C of that Act (penalty proceedings before Commissioners) after
subsection (1) insert—
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“(1A)
In its application to a penalty under section 98C(1)(a) above, subsection
(1) above has effect with the omission of the words “General or”.”
300
Regulations under Part 7
(1)
Any power of the Treasury or the Board to make regulations under this Part is
exercisable by statutory instrument.
35
(2)
Regulations made by the Treasury or the Board under this Part may contain
transitional provisions and savings.
(3)
A statutory instrument containing regulations made by the Treasury or the
Board under any provision of this Part is subject to annulment in pursuance of
a resolution of the House of Commons.
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301
Interpretation of Part 7
(1)
In this Part—

“advantage”, in relation to any tax, means—

Finance Bill
Part 7 — Disclosure of tax avoidance schemes
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(a)
relief or increased relief from, or repayment or increased
repayment of, that tax, or the avoidance or reduction of a charge
to that tax or an assessment to that tax or the avoidance of a
possible assessment to that tax,
(b)
the deferral of any payment of tax or the advancement of any
5
repayment of tax, or
(c)
the avoidance of any obligation to deduct or account for any tax;

“arrangements” includes any scheme, transaction or series of transactions;

“corporation tax” includes any amount which, by virtue of any of the
provisions mentioned in paragraph 1 of Schedule 18 to the Finance Act
10
1998 (c. 36) (company tax returns, assessments and related matters) is
assessable and chargeable as if it were corporation tax;

“notifiable arrangements” has the meaning given by section 290(1);

“notifiable proposal” has the meaning given by section 290(2);

“prescribed”, except in section 290, means prescribed by regulations made
15
by the Board;

“promoter”, in relation to notifiable arrangements or a notifiable
proposal, has the meaning given by section 291;

“reference number”, in relation to notifiable arrangements, has the
meaning given by section 295(2);
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“tax” means—
(a)
income tax,
(b)
capital gains tax,
(c)
corporation tax,
(d)
petroleum revenue tax,
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(e)
inheritance tax,
(f)
stamp duty land tax, or
(g)
stamp duty reserve tax.
(2)
Subject to subsection (1), expressions which are defined in the Taxes Act 1988
for the purposes of the Tax Acts, as defined in section 831(2) of that Act, have
30
the same meaning in this Part.
302
Part 7: commencement and savings
(1)
The following provisions of this Part come into force on the passing of this
Act—

sections 290 to 299, so far as is necessary for enabling the making of any
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regulations for which they provide, and

sections 300 and 301 and this section.
(2)
Except as provided by subsection (1), the provisions of this Part come into force
on 1st August 2004.
(3)
Section 292 does not apply to a promoter in the case of—
40
(a)
any notifiable proposal as respects which the relevant date, as defined
by subsection (2) of that section, fell before 18th March 2004,
(b)
any notifiable arrangements which implement such a proposal, or
(c)
any notifiable arrangements which include any transaction entered into
before 18th March 2004.
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(4)
Sections 293 and 294 do not apply in relation to notifiable arrangements which
include any transaction entered into before 23rd April 2004.

Finance Bill
Part 8 — Miscellaneous matters
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(5)
Section 297 does not apply in relation to any notifiable arrangements in respect
of which, by virtue of subsection (3) or (4), none of the duties imposed by
sections 292 to 294 arises.
Part 8
Miscellaneous matters
5
303
Exclusion of extended limitation period in England, Wales and Northern
Ireland
(1)
Section 32(1)(c) of the Limitation Act 1980 (c. 58) or, in Northern Ireland,
Article 71(1)(c) of the Limitation (Northern Ireland) Order 1989 (S.I. 1989/1339
(N.I. 11)) (extended period for bringing an action in case of mistake) does not
10
apply in relation to a mistake of law relating to a taxation matter under the care
and management of the Commissioners of Inland Revenue.

This subsection has effect in relation to actions brought on or after 8th
September 2003.
(2)
For the purposes of—
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(a)
section 35(5)(a) of the Limitation Act 1980 or, in Northern Ireland,
Article 73(4)(a) of the Limitation (Northern Ireland) Order 1989
(circumstances in which time-barred claim may be brought in course of
existing action), and
(b)
rules of court or county court rules having effect for the purposes of
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those provisions,

as they apply to claims in respect of mistakes of the kind mentioned in
subsection (1), a new claim shall not be regarded as arising out of the same
facts, or substantially the same facts, if it is brought in respect of a different
payment, transaction, period or other matter.
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This subsection has effect in relation to claims made on or after 20th November
2003.
(3)
If before the passing of this Act—
(a)
an action is brought in relation to which a defence of limitation would
have been available if subsection (1) had been in force, or
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(b)
a claim is made on or after 20th November 2003 that by virtue of section
35(1)(b) of the Limitation Act 1980 or, in Northern Ireland, Article
73(1)(b) of the Limitation (Northern Ireland) Order 1989 is treated as an
action brought before 8th September 2003 and that claim would not
have been allowed if subsections (1) and (2) above had been in force,
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the action (or so much of it as relates to a cause of action in respect of which a
defence of limitation would have been available or, as the case may be, a claim
would not have been allowed) shall be deemed to be discontinued on the
passing of this Act and any payment made by the Commissioners in or
towards meeting their liability in the action (or so much of the action as so
40
relates) may be recovered by them (with interest from the date of the payment).
(4)
Nothing in this section affects a claim made before 20th November 2003 that by
virtue of section 35(1)(b) of the Limitation Act 1980 (c. 58) or, in Northern
Ireland, Article 73(1)(b) of the Limitation (Northern Ireland) Order 1989 is
treated as an action brought before 8th September 2003.
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(5)
For the purposes of this section a claim is treated as made before 20th
November 2003 if—

Finance Bill
Part 8 — Miscellaneous matters
248

(a)
the Commissioners have before that date consented in writing to the
making of the claim; or
(b)
immediately before that date—
(i)
the consent of the Commissioners has been sought and has not
been refused, or
5
(ii)
an application to the court for permission to make the claim has
been made and has not been refused.
(6)
The provisions of this section apply to any action or claim for relief from the
consequences of a mistake of law, whether expressed to be brought on the
ground of mistake or on some other ground (such as unlawful demand or ultra
10
vires act).
(7)
This section shall be construed as one with the Limitation Act 1980 or, in
Northern Ireland, the Limitation (Northern Ireland) Order 1989.
304
Exclusion of extended prescriptive period in Scotland
(1)
Section 6(4)(a)(ii) of the Prescription and Limitation (Scotland) Act 1973 (c. 52)
15
(extinction of obligations by prescriptive period: exclusion of period during
which creditor induced by error to refrain from making claim) does not apply
in relation to an obligation based on redress of unjustified enrichment arising
from an error of law relating to a taxation matter under the care and
management of the Commissioners of Inland Revenue.
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(2)
Subsection (1) has effect in relation to an obligation in respect of which no
relevant claim has been made before 8th September 2003.
(3)
In the case of a relevant claim made on or after that date and before the passing
of this Act relating to an obligation that would have been extinguished if
subsections (1) and (2) had been in force—
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(a)
proceedings on the claim (or so much of the proceedings as relates to
such an obligation) shall be deemed to be discontinued on the passing
of this Act, and
(b)
any payment made by the Commissioners in or towards meeting their
liability on the claim (or so much of it as so relates) may be recovered
30
by them (with interest from the date of the payment).
(4)
The provisions of this section apply in relation to any relevant claim for redress
of unjustified enrichment arising from an error of law, whether expressed to be
made on the ground of error or on some other ground.
(5)
In this section “relevant claim” has the same meaning as in section 6 of the
35
Prescription and Limitation (Scotland) Act 1973.
305
Mutual assistance: customs union with the Principality of Andorra
(1)
The UK mutual assistance provisions have effect for the purposes of giving
effect to the EC-Andorra Mutual Assistance Recovery Decision as they have
effect for the purposes of giving effect to the Mutual Assistance Recovery
40
Directive.
(2)
In this section—

“the EC-Andorra Mutual Assistance Recovery Decision” means Chapter
2 of Title 1 of, and Annex 1 to, Decision No 1/2003 of the EC-Andorra
Joint Committee of 3 September 2003 (on the laws, regulations and
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Finance Bill
Part 8 — Miscellaneous matters
249

administrative provisions necessary for the proper functioning of the
Customs Union between the European Community and the
Principality of Andorra);

“the Mutual Assistance Recovery Directive” has the same meaning as in
the UK mutual assistance provisions;
5

“the UK mutual assistance provisions” means the provisions of section
134 of the Finance Act 2002 (c. 23) (recovery of taxes etc due in other
member States) and Schedule 39 to that Act.
(3)
In the UK mutual assistance provisions as they have effect in accordance with
subsection (1)—
10
(a)
references (except those in section 134(2) and paragraph 1(2)(a) of
Schedule 39) to the Mutual Assistance Recovery Directive shall be read
as references to the EC-Andorra Mutual Assistance Recovery Decision,
(b)
references to another member State shall be read as references to the
Principality of Andorra,
15
(c)
references to the competent authority of another member State shall be
read as references to the competent authority of the Principality of
Andorra,
(d)
references to a tax authority in the United Kingdom, or to the relevant
UK authority, shall be read as references to the Commissioners of
20
Customs and Excise,
(e)
the following provisions shall be treated as omitted—
(i)
in section 134, subsections (3)(a), (4) and (5), and
(ii)
in Schedule 39, paragraphs 2(2) and 3(3).
(4)
The powers in section 134(6) of the Finance Act 2002 and paragraph 3 of
25
Schedule 39 to that Act may be exercised so as to make provision for the
purposes of giving effect to the EC-Andorra Mutual Assistance Recovery
Decision (or amendments of the Decision) which is different to that made for
the purposes of giving effect to the Mutual Assistance Recovery Directive (or
amendments of the Directive).
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306
Ending of shipbuilders’ relief
(1)
Relief under section 2 of the Finance Act 1966 (c. 18) (relief for shipbuilders in
respect of certain taxes and duties) is not available, and shall be regarded as
never having been available, in any case where the contract mentioned in
subsection (2) of that section is—
35
(a)
a contract made on or after 1st January 2001 relating to a self-propelled
sea-going commercial vessel, within the meaning of the 1998
Regulation, or
(b)
in a case not falling within paragraph (a), a contract made on or after
13th January 2004.
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(2)
In this section “the 1998 Regulation” means Council Regulation (EC) No 1540/
98 of 29 June 1998 establishing new rules on aid to shipbuilding (under which
operating aid for shipbuilding ended on 31st December 2000).
307
Government borrowing: preparations for possible adoption of Euro
(1)
The Treasury may incur expenditure with a view to securing that they would
45
be able to exercise their functions under sections 12 to 20A of (and Schedule 5A
to) the National Loans Act 1968 (c. 13) (national debt and government

Finance Bill
Part 9 — Supplementary provisions
250

accounting) if the United Kingdom were to adopt the single currency in
accordance with the Treaty establishing the European Communities.
(2)
The Director of Savings may incur expenditure with a view to securing that he
would be able to exercise his functions if the United Kingdom were to adopt
the single currency in accordance with the Treaty establishing the European
5
Communities.
Part 9
Supplementary provisions
308
Repeals
(1)
The enactments mentioned in Schedule 40 to this Act (which include
10
provisions that are spent or of no practical utility) are repealed to the extent
specified.
(2)
The repeals specified in that Schedule have effect subject to the commencement
provisions and savings contained or referred to in the notes set out in that
Schedule.
15
309
Interpretation
In this Act “the Taxes Act 1988” means the Income and Corporation Taxes Act
1988 (c. 1).
310
Short title
This Act may be cited as the Finance Act 2004.
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