Finance (No.2) Bill

House of Commons

Session 2005 - 06
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Other Bills before Parliament

Finance (No.2) Bill

Finance (No.2) Bill
Schedule 23 — Pension schemes etc: miscellaneous
452

      (5)
Section 839 of ICTA (connected persons) applies for the purposes
of this paragraph.”
36
In paragraph 14 (enhanced protection: relevant contributions), after sub-
paragraph (2) insert—
    “(3)
A contribution is not a relevant contribution for the purposes of
5
paragraph 13(a) if—
(a)
it may only be applied for or towards the payment of
premiums under a policy of insurance on the life of the
individual,
(b)
the policy is issued, or issued in respect of insurances
10
made, before 6th April 2006,
(c)
there is no right to surrender any rights under the policy,
(d)
the terms of the policy are not varied significantly during
the period beginning with 6th April 2006 and ending with
the individual’s actual death so as to increase the benefits
15
payable under the policy or extend the period during
which benefits are so payable, and
(e)
no benefits are paid, or other payments made, under (or on
the surrender of rights under) the policy except by reason
of the individual’s death;
20

and any exercise of rights conferred by the policy is to be regarded
for this purpose as a variation.
      (4)
A contribution is not a relevant contribution for the purposes of
paragraph 13(a) if it is paid—
(a)
by a sponsoring employer,
25
(b)
under a relevant hybrid arrangement, and
(c)
solely in respect of the provision in respect of the
individual of lump sum death benefits which are defined
benefits or cash balance benefits.
      (5)
A “relevant hybrid arrangement” is a hybrid arrangement under
30
an occupational pension scheme—
(a)
which subsequently becomes a money purchase
arrangement that is not a cash balance arrangement, and
(b)
under which lump sum death benefits would have been
payable in respect of the individual if the individual had
35
died on 5th April 2006.”
37    (1)
Paragraph 15 (enhanced protection: “the relevant crystallised amount”) is
amended as follows.
      (2)
In sub-paragraph (3), for “paragraph 16” substitute “paragraphs 15A and
16”.
40
      (3)
In sub-paragraph (4), for “is the greater” substitute “is (subject to paragraph
15A) the greater”.
      (4)
In sub-paragraph (5), after “(4)(a)” insert “and paragraph 15A(2)(a)”.
      (5)
In sub-paragraph (6), after “(4)(b)” insert “and paragraph 15A(2)(b)”.
38
After that paragraph insert—
45
“15A  (1)
This paragraph applies where—

Finance (No.2) Bill
Schedule 23 — Pension schemes etc: miscellaneous
453

(a)
a person is paid a defined benefits lump sum death benefit
or an uncrystallised funds lump sum death benefit in
respect of the individual under the arrangement, and
(b)
notice of intention to rely on this paragraph is given to an
officer of Revenue and Customs by that person in
5
accordance with regulations made by the Commissioners
for Her Majesty’s Revenue and Customs.
      (2)
For the purposes of paragraph 13(b), if the amount yielded by sub-
paragraph (3) is greater than what would otherwise be the
appropriate limit in relation to a relevant event which consists
10
of—
(a)
the payment of the lump sum death benefit, or
(b)
the payment of any other lump sum death benefit in
respect of the individual under the arrangement or another
cash balance arrangement or defined benefits arrangement
15
related to the arrangement,

that greater amount is the appropriate limit in relation to such a
relevant event.
      (3)
The amount yielded by this sub-paragraph is the greater of—
(a)
the value of the individual’s pre-commencement rights to
20
death benefits, as increased by the relevant indexation
percentage (see sub-paragraph (5) of paragraph 15), or
(b)
what would be the value of the individual’s pre-
commencement rights to death benefits on the
assumptions specified in sub-paragraph (6) of that
25
paragraph (but subject to the modifications in sub-
paragraph (7) of this paragraph).
      (4)
The value of the individual’s pre-commencement rights to death
benefits is the aggregate of the maximum amounts that could have
been paid in respect of the individual as uncrystallised rights
30
lump sum death benefits under—
(a)
the arrangement, or
(b)
any other cash balance arrangement or defined benefits
arrangement related to the arrangement,

if the individual had died on 5th April 2006.
35
      (5)
Lump sum death benefits are “uncrystallised rights lump sum
death benefits” if they are attributable to rights in respect of which
the individual had not, on 5th April 2006, become entitled to the
present payment of benefits.
      (6)
Paragraphs 11C and 11D apply in arriving at the aggregate
40
mentioned in sub-paragraph (4) as in arriving at that mentioned in
paragraph 11B(2) but as if—
(a)
each of the references to paragraph 11B(2) were to sub-
paragraph (4) of this paragraph, and
(b)
in paragraph 11D(1), for the words after “purposes of”
45
there were substituted a reference to any arrangement
within sub-paragraph (4) of this paragraph.
      (7)
In their operation for the purposes of this paragraph sub-
paragraphs (6) to (11) of paragraph 15 have effect as if—

Finance (No.2) Bill
Schedule 23 — Pension schemes etc: miscellaneous
454

(a)
for the references in sub-paragraphs (6)(a) and (7)(a) and
(10) to the time of the first relevant event there were
substituted a reference to the time immediately before the
individual’s death, and
(b)
the words in parentheses in sub-paragraph (6)(a) were
5
omitted.”
Transitional protection: right to take benefits before normal pension age
39    (1)
Paragraph 22 of Schedule 36 (right to take benefits before normal minimum
pension age: schemes within paragraph 1(1)(a) to (e) of Schedule 36) is
amended as follows.
10
      (2)
In sub-paragraph (7), for paragraph (b) substitute—
“(b)
in a case where on 5th April 2006 the member had an actual
or prospective right under the pension scheme to any
benefit from an age of less than 50, Condition 1 is met or,
in any other case, Condition 2 or 3 is met.”
15
      (3)
After that sub-paragraph insert—
    (7A)
Condition 1 is met if—
(a)
the member is not, after becoming entitled to the benefits
mentioned in sub-paragraph (7)(a), employed by a person
who is a sponsoring employer in relation to the pension
20
scheme and with whom the member is connected, and
(b)
the member’s becoming entitled to those benefits is not
part of an arrangement the main purpose (or one of the
main purposes) of which is the avoidance of tax or national
insurance contributions.
25
     (7B)
Condition 2 is met if—
(a)
the member is not, after becoming entitled to the benefits
mentioned in sub-paragraph (7)(a), employed by a person
specified in sub-paragraph (7C), and
(b)
the member’s becoming entitled to those benefits is not
30
part of an arrangement the main purpose (or one of the
main purposes) of which is the avoidance of tax or national
insurance contributions.
     (7C)
The persons referred to in sub-paragraph (7B)(a) are—
(a)
any person who was a sponsoring employer in relation to
35
the pension scheme at any time during the period of six
months ending with the day on which the member became
entitled to the benefits mentioned in sub-paragraph (7)(a)
and by whom the member was employed at any time
during that period,
40
(b)
any person who is connected with any such person, or
(c)
any person who is a sponsoring employer in relation to the
pension scheme and with whom the member is connected.
     (7D)
If the member has become entitled to the benefits payable under
arrangements under the pension scheme by reason of service in
45
the armed forces of the Crown, any employment on compulsory
recall is to be disregarded for the purposes of paragraph (7B)(a).

Finance (No.2) Bill
Schedule 23 — Pension schemes etc: miscellaneous
455

     (7E)
Condition 3 is met if —
(a)
paragraph (a) of sub-paragraph (7B) is not satisfied but one
of the re-employment conditions is met, and
(b)
paragraph (b) of that sub-paragraph is satisfied.
     (7F)
The re-employment conditions are—
5
(a)
that the member is not employed as mentioned in sub-
paragraph (7B)(a) during the period of six months
beginning with the day on which the member becomes
entitled to the benefits mentioned in sub-paragraph (7)(a),
and
10
(b)
that the member is not employed as mentioned in sub-
paragraph (7B)(a) during the period of one month
beginning with that day, but is so employed during the
period of five months beginning at the end of that period,
and either the pension abatement condition or the
15
materially different employment condition is met.
     (7G)
The pension abatement condition is met if—
(a)
the pension scheme is a public service pension scheme,
and
(b)
the member’s benefits under the scheme consist of or
20
include a scheme pension which is liable to reduction by
abatement while the member is employed as mentioned in
sub-paragraph (7B)(a) and is under the age of 55.
     (7H)
The materially different employment condition is met—
(a)
in a case where the member is employed as mentioned in
25
sub-paragraph (7B)(a) in more than one employment
during the period of five months mentioned in sub-
paragraph (7F)(b), if each of those employments, and
(b)
otherwise, if the employment in which the member is so
employed during that period,
30

is materially different in nature from the employment in which the
member was employed immediately before becoming entitled to
the benefits mentioned in sub-paragraph (7)(a).
     (7I)
For the purposes of sub-paragraph (7D) “employment on
compulsory recall” means permanent service—
35
(a)
under Part 4 of the Reserve Forces Act 1996,
(b)
under Part 5 of that Act,
(c)
under a call-out or recall order made under that Act,
(d)
having been called out or recalled under the Reserve
Forces Act 1980, or
40
(e)
because of any other call-out or recall obligation of an
officer.
     (7J)
Section 839 of ICTA (connected persons) applies for the purposes
of this paragraph.”
Transitional provisions: minor corrections
45
40
Schedule 36 (transitional provisions) is amended as follows.

Finance (No.2) Bill
Schedule 24 — Stamp duty land tax: amendments of Schedule 15 to FA 2003
456

41
In paragraphs 9(4)(a) and 26(3)(a) (primary protection: maximum permitted
pension and maximum permitted lump sum), for “611(1)(a)” substitute
“611A(1)(a)”.
42
In paragraph 54(1)(b) (benefits taxable under Chapter 2 of Part 6 of ITEPA
2003 where contributions taxed pre-commencement: old schemes), for “1st
5
September 1993” substitute “1st December 1993”.
Schedule 24
Section 164

Stamp duty land tax: amendments of Schedule 15 to FA 2003
Introduction
1
Schedule 15 to FA 2003 (stamp duty land tax: partnerships) is amended as
10
follows.
Transfer of chargeable interest to a partnership
2     (1)
In paragraph 10 (transfer of chargeable interest to a partnership: general), for
sub-paragraphs (2) to (4) substitute—
    “(2)
The chargeable consideration for the transaction shall (subject to
15
paragraph 13) be taken to be equal to—

where—
MV is the market value of the interest transferred, and
SLP is the sum of the lower proportions.”
      (2)
In subsection (6) of that paragraph, omit “(instead of sub-paragraphs (2) to
20
(5))”.
3
In paragraph 11 (transfer of chargeable interest to a partnership: chargeable
consideration including rent), for sub-paragraphs (2) to (7) substitute—
    “(2)
Schedule 5 (amount of tax chargeable: rent) has effect with the
modifications set out in sub-paragraphs (2A) to (2C).
25
     (2A)
In paragraph 2—
(a)
for “the net present value of the rent payable over the term
of the lease” substitute “the relevant chargeable proportion
of the net present value of the rent payable over the term
of the lease”, and
30
(b)
for “the net present values of the rent payable over the
terms of all the leases” substitute “the relevant chargeable
proportions of the net present values of the rent payable
over the terms of all the leases”.
     (2B)
In paragraph 9(2A)—
35
(a)
for “the annual rent” substitute “the relevant chargeable
proportion of the annual rent”, and

Finance (No.2) Bill
Schedule 24 — Stamp duty land tax: amendments of Schedule 15 to FA 2003
457

(b)
for “the total of the annual rents” substitute “the relevant
chargeable proportion of the total of the annual rents”.
     (2C)
For paragraph 9(4) substitute—
     “(4)
Tax chargeable under this Schedule is in addition to any
tax chargeable under section 55 as it has effect by virtue
5
of paragraph 10 of Schedule 15.”.
     (2D)
For the purposes of sub-paragraphs (2A) and (2B) the relevant
chargeable proportion is—

where SLP is the sum of the lower proportions.”
4     (1)
In paragraph 13 (transfer of chargeable interest to a partnership consisting
10
wholly of bodies corporate), in sub-paragraph (3), for “sub-paragraphs (2) to
(5)” substitute “sub-paragraphs (2) and (5)”.
      (2)
For sub-paragraphs (4) to (7) of that paragraph substitute—
   “(4A)
In paragraph 11(2), for “sub-paragraphs (2) to (2C)” substitute
“sub-paragraph (2C)”.
15
      (5)
In paragraph 11, omit sub-paragraphs (2A), (2B), (2D) and (8).”
Transfer of chargeable interest from a partnership
5     (1)
In paragraph 18 (transfer of chargeable interest from a partnership: general),
for sub-paragraphs (2) to (4) substitute—
    “(2)
The chargeable consideration for the transaction shall (subject to
20
paragraph 24) be taken to be equal to—

where—
MV is the market value of the interest transferred, and
SLP is the sum of the lower proportions.”
      (2)
In paragraph (6) of that paragraph, omit “(instead of sub-paragraphs (2) to
25
(5))”.
6
In paragraph 19 (transfer of chargeable interest from a partnership:
chargeable consideration including rent), for sub-paragraphs (2) to (7)
substitute—
    “(2)
Schedule 5 (amount of tax chargeable: rent) has effect with the
30
modifications set out in sub-paragraphs (2A) to (2C).
     (2A)
In paragraph 2—
(a)
for “the net present value of the rent payable over the term
of the lease” substitute “the relevant chargeable proportion
of the net present value of the rent payable over the term
35
of the lease”, and
(b)
for “the net present values of the rent payable over the
terms of all the leases” substitute “the relevant chargeable

Finance (No.2) Bill
Schedule 24 — Stamp duty land tax: amendments of Schedule 15 to FA 2003
458

proportions of the net present values of the rent payable
over the terms of all the leases”.
     (2B)
In paragraph 9(2A)—
(a)
for “the annual rent” substitute “the relevant chargeable
proportion of the annual rent”, and
5
(b)
for “the total of the annual rents” substitute “the relevant
chargeable proportion of the total of the annual rents”.
     (2C)
For paragraph 9(4) substitute—
     “(4)
Tax chargeable under this Schedule is in addition to any
tax chargeable under section 55 as it has effect by virtue
10
of paragraph 18 of Schedule 15.”.
     (2D)
For the purposes of sub-paragraphs (2A) and (2B) the relevant
chargeable proportion is—

where SLP is the sum of the lower proportions.”
7     (1)
In paragraph 24 (transfer of chargeable interest from a partnership
15
consisting wholly of bodies corporate), in sub-paragraph (3), for “sub-
paragraphs (2) to (5)” substitute “sub-paragraphs (2) and (5)”.
      (2)
For sub-paragraphs (4) to (8) of that paragraph substitute—
   “(4A)
In paragraph 19(2), for “sub-paragraphs (2) to (2C)” substitute
“sub-paragraph (2C)”.
20
      (5)
In paragraph 19, omit sub-paragraphs (2A), (2B), (2D) and (8).”
Transfer of chargeable interest from a partnership to a partnership
8
In paragraph 23 (transfer of chargeable interest from a partnership to a
partnership), for sub-paragraphs (2) and (3) substitute—
    “(2)
Paragraphs 10(2) and 18(2) do not apply.
25
     (2A)
The chargeable consideration for the transaction shall be taken to
be what it would have been if paragraph 10(2) had applied or, if
greater, what it would have been if paragraph 18(2) had applied.
      (3)
Where the whole or part of the chargeable consideration for the
transaction is rent—
30
(a)
paragraphs 11 and 19 do not apply;
(b)
the tax chargeable in respect of so much of the chargeable
consideration as consists of rent shall be taken to be what
it would have been if paragraph 11 had applied or, if
greater, what it would have been if paragraph 19 had
35
applied;
(c)
the disapplication of the 0% band provided for by
paragraph 9(2) of Schedule 5 has effect if—
(i)
it would have had effect if paragraph 11(2B) of this
Schedule had applied, or
40