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94 | PAYE: retrospective notional payments |
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(1) | ITEPA 2003 is amended as follows. |
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(2) | In section 222 (payments by employer on account of tax where deduction not |
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(a) | in subsection (1)(c), for “date on which the employer is treated as |
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making the notional payment” substitute “relevant date”, |
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(b) | in subsection (2), for “date mentioned in subsection (1)(c)” substitute |
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(c) | after subsection (3) insert— |
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“(4) | In this section “the relevant date” means— |
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(a) | if the employer is treated by virtue of any Act as making |
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the notional payment before the date on which the Act |
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is passed, that date, and |
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(b) | in any other case, the date on which the employer is |
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treated as making the notional payment.” |
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(3) | In section 684(2) (PAYE regulations), in item 1— |
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(a) | for “time of the payment” substitute “relevant time”, and |
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(b) | after paragraph (b) insert— |
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(a) | if the payment is a notional payment for the |
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purposes of section 710 and the person is treated |
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by virtue of any Act as making it at a time before |
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the date on which the Act is passed, that date, |
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(b) | in any other case, the time when the payment is |
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(4) | In section 710 (notional payments: accounting for tax)— |
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(a) | in subsection (7), after “means” insert “(subject to subsection (7A))”, |
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(b) | after that subsection insert— |
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“(7A) | In a case where the notional payment is treated by virtue of any |
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Act as made before the date on which the Act is passed— |
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(a) | the reference in sub-paragraph (i) of paragraph (a) of |
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subsection (7) to the time when the notional payment is |
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made is to the date on which the Act is passed, |
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(b) | the reference in sub-paragraph (ii) of that paragraph to |
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any occasion falling within the same income tax period |
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were to any occasion falling before the end of the income |
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tax period next after that in which that date falls, and |
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(c) | the reference in paragraph (b) of that subsection to the |
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income tax period in which the notional payment was |
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made is to the income tax period next after that in which |
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(5) | The provisions of ITEPA 2003 amended by this section have effect in relation |
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to notional payments treated by virtue of this Act as made before the date on |
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which this Act is passed as if for the references to the date on which the Act is |
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(b) | paragraph (a) of the definition of “the relevant time” in section 684(2), |
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(c) | section 710(7A)(a), (b) and (c), |
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| there were substituted references to such date as the Commissioners for Her |
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Majesty’s Revenue and Customs may by order made by statutory instrument |
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Alternative finance arrangements |
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(1) | In section 46(1) of FA 2005 (alternative finance arrangements: definition) for “or |
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49.” substitute “, 49 or 49A.” |
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(2) | In section 49 of FA 2005 (profit share return)— |
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(a) | for subsection (2) substitute— |
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“(2) | Amounts paid or credited as mentioned in subsection (1)(c) by |
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a financial institution under arrangements falling within this |
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section are profit share return for the purposes of this Chapter.”, |
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(b) | in the heading for “profit share return” substitute “deposit”. |
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(3) | After section 49 of FA 2005 insert— |
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“49A | Alternative finance arrangements: profit share agency |
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(1) | Subject to section 52, arrangements fall within this section if they are |
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arrangements under which— |
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(a) | a person (“the principal”) appoints a financial institution as his |
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(b) | the agent uses money provided by the principal with a view to |
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(c) | the principal is entitled, to a specified extent, to profits resulting |
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from the use of the money, |
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(d) | the agent is entitled to any additional profits resulting from the |
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use of the money (and may also be entitled to a fee to be paid by |
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(e) | payments in pursuance of the entitlement specified in |
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paragraph (c) equate, in substance, to the return on an |
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investment of the money at interest. |
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(2) | Amounts paid or credited by a financial institution in accordance with |
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an entitlement of the kind specified in subsection (1)(c) are profit share |
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return for the purposes of this Chapter. |
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(3) | The principal shall not be treated for the purposes of the Tax Acts as |
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entitled to profits to which the agent is entitled in accordance with |
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(4) | After section 50(2) of FA 2005 (treatment of alternative finance arrangements: |
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“(2A) | Where a company is a party to arrangements falling within section 49A, |
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Chapter 2 of Part 4 of FA 1996 (loan relationships) has effect in relation |
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to the arrangements as if— |
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(a) | the arrangements were a loan relationship to which the |
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(b) | the amount provided under the arrangements were— |
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(i) | in relation to a company which is the principal under the |
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arrangements, the amount of a loan made by the |
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company to the agent, and |
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(ii) | in relation to a company which is the agent under the |
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arrangements, the amount of a loan made to it by the |
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(c) | profit share return payable to or by the company under the |
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arrangements were interest payable under that loan |
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(5) | In section 52 of FA 2005 (provision not at arm’s length)— |
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(a) | in subsection (1)(a) for “or section 49,” substitute “, 49 or 49A,” |
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(b) | in subsection (3) for “or section 49.” substitute “, 49 or 49A.”, and |
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(c) | in subsection (5) for “49,” substitute “49 or 49A,”. |
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(6) | In the heading to section 54 of FA 2005 “Section 49” becomes “Sections 49 and |
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(7) | In the definition of “profit share return” in section 57 of FA 2005 for “section |
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49(2)” substitute “sections 49(2) and 49A(2)”. |
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(8) | In paragraph 1(b) of Schedule 2 to FA 2005 after “49” insert “or 49A”. |
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(9) | In section 148 of FA 2003 (meaning of “permanent establishment”) after |
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“(5B) | Where profit share return is paid, in accordance with arrangements to |
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which section 49A of FA 2005 applies (alternative finance |
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arrangements: profit share agency), to a company that is not resident in |
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the United Kingdom, the company is not regarded as having a |
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permanent establishment in the United Kingdom merely by virtue of |
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anything done for the purposes of the arrangements by the other party |
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to the arrangements or by any other person acting for the company in |
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relation to the arrangements.” |
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(10) | In section 127(1) of FA 1995 (persons not treated as UK representatives) |
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renumber paragraph (cc) as paragraph (ca) and insert after it— |
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“(cb) | where the income consists of profit share return in accordance with |
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arrangements to which section 49A of FA 2005 applies (alternative |
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finance arrangements: profit share agency), the other party to the |
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arrangements or any other person acting for the non-resident in |
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relation to the arrangements;”. |
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(11) | Section 56 of FA 2005 (commencement and transitional) shall have effect in |
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relation to the commencement of this section— |
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(a) | as if references to Chapter 5 of Part 2 of that Act were references to this |
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(b) | as if references to 6th April 2005 were references to— |
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(i) | 1st April 2006 in relation to corporation tax, and |
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(ii) | 6th April 2006 in relation to income tax, and |
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(c) | as if references to section 49 were references to section 49A. |
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96 | Diminishing shared ownership |
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(1) | In section 46(1) of FA 2005 (alternative finance arrangements: definition) after |
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(2) | In section 47 of FA 2005 (alternative finance return)— |
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(b) | in subsections (6) and (7) after “is to be taken” insert “for the purposes |
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(c) | in the heading for “alternative finance return” substitute “purchase and |
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(3) | After section 47 of FA 2005 insert— |
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“47A | Alternative finance arrangements: diminishing shared ownership |
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(1) | Subject to section 52, arrangements fall within this section if under |
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(a) | a financial institution acquires a beneficial interest in an asset, |
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(b) | another person (“the eventual owner”)— |
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(i) | also acquires a beneficial interest in the asset, |
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(ii) | is to make payments to the financial institution |
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amounting in aggregate to the consideration paid for the |
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acquisition of its beneficial interest, |
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(iii) | is to acquire the financial institution’s beneficial interest |
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(whether or not in stages) as a result of those payments, |
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(iv) | is to make other payments to the financial institution |
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(whether in pursuance of a lease forming part of the |
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arrangements, or otherwise), |
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(v) | has the exclusive right to occupy or otherwise use the |
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(vi) | is exclusively entitled to any income, profit or gain |
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arising from or attributable to the asset (including, in |
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particular, any increase in the asset’s value). |
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(2) | For the purposes of subsection (1)(a) it is immaterial— |
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(a) | whether or not the financial institution acquires its beneficial |
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interest from the eventual owner, |
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(b) | whether the eventual owner or another person other than the |
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financial institution also has a beneficial interest in the asset, |
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(c) | whether or not the financial institution also has a legal interest |
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(3) | Subsection (1)(b)(v) does not prevent the eventual owner from granting |
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an interest or right in relation to the asset to someone other than— |
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(a) | the financial institution, |
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(b) | a person controlled by the financial institution within the |
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meaning of section 840 of ICTA, and |
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(c) | a person controlled by a person who also controls the financial |
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institution, in each case within the meaning of section 840 of |
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| provided that the grant is not required by the financial institution or by |
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arrangements to which the financial institution is party. |
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(4) | Subsection (1)(b)(vi) does not prevent the financial institution from |
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having responsibility for, or a share in any loss arising out of, any |
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reduction in the asset’s value (and subsection (1)(b)(ii) is subject to this |
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(5) | Payments by the eventual owner under arrangements to which this |
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section applies are alternative finance return for the purposes of this |
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Chapter except in so far as they amount to— |
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(a) | payments of the kind described in subsection (1)(b)(ii), or |
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(b) | payments in respect of any arrangement fee or legal or other |
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costs or expenses which the eventual owner is required under |
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(6) | Arrangements to which this section applies shall not be treated as a |
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partnership for the purposes of the Taxes Acts (within the meaning of |
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the Taxes Management Act 1970 (c. 9).” |
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(4) | In section 50 of FA 2005 (treatment of alternative finance arrangements: |
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(a) | in subsection (1) after “section 47” insert “or 47A”, |
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(b) | at the beginning of subsection (1)(b) add “in the case of arrangements |
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(c) | after subsection (1)(b) insert— |
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“(ba) | in the case of arrangements within section 47A, the |
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consideration paid by the financial institution for the |
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acquisition of its beneficial interest were the amount of |
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a loan made (as the case requires) to the company by, or |
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by the company to, the other party to the |
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(5) | In section 52 of FA 2005 (provision not at arm’s length)— |
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(a) | in subsection (1)(a) after “47” insert “, 47A”, |
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(b) | in subsection (3) after “47” insert “, 47A”, and |
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(c) | in subsection (4) for “47,” substitute “47 or 47A,”. |
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(6) | In section 53 of FA 2005 (sale and purchase of asset)— |
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(a) | in subsection (1) after “47” insert “or 47A”, |
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(b) | after subsection (2) add— |
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“(3) | In the application of this section to section 47A a reference to the |
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effective return is a reference to the alternative finance return.”, |
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(c) | in the heading after “47” insert “or 47A”. |
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(7) | In the definition of “alternative finance return” in section 57 of FA 2005 for |
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“section 47(5)” substitute “sections 47(6) and (7) and 47A(5)”. |
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(8) | This section shall have effect in relation to alternative finance arrangements |
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entered into on or after— |
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(a) | 1st April 2006 in relation to corporation tax, and |
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(b) | 6th April 2006 in relation to income tax. |
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97 | Beneficial loans to employees |
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(1) | For the purposes of Chapter 7 of Part 3 of ITEPA 2003 (taxable benefits: loans) |
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a reference to a loan includes a reference to an arrangement which— |
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(a) | is an alternative finance arrangement to which section 47 or 47A FA |
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(b) | would be an alternative finance arrangement to which one of those |
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sections applied if one of the parties were a financial institution. |
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(2) | In the application of that Chapter by virtue of subsection (1)— |
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(a) | a reference to interest shall be treated as including a reference to |
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alternative finance return, and |
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(b) | a reference to the amount outstanding shall be taken to be— |
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(i) | in the case of arrangements to which section 47 applies, a |
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reference to the purchase price minus such part of the aggregate |
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payments made as does not represent alternative finance |
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(ii) | in the case of arrangements to which section 47A applies, a |
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reference to the amount of the financial institution’s original |
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beneficial interest minus such part of the aggregate payments |
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made as does not represent alternative finance return. |
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(3) | This section shall have effect in relation to arrangements entered into on or |
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(1) | The Treasury may by order amend Chapter 5 of Part 2 to FA 2005 (alternative |
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finance arrangements) so as to introduce provision relating to arrangements |
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which in the Treasury’s opinion— |
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(a) | equate in substance to a loan, deposit or other transaction of a kind that |
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generally involves the payment of interest, but |
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(b) | achieve a similar effect without including provision for the payment of |
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(2) | An order under subsection (1) may, in particular— |
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(a) | include provision of a kind similar to provision already made by |
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(b) | make other provision about the treatment for the purposes of the Tax |
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Acts of arrangements to which the order applies; |
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(c) | make provision generally or only in relation to specified cases or |
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(d) | make different provision for different cases or circumstances; |
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(e) | include consequential provision (which may include provision |
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amending a provision of the Tax Acts); |
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(f) | include incidental or transitional provision. |
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(3) | An order under subsection (1)— |
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(a) | shall be made by statutory instrument, and |
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(b) | shall not be made unless a draft has been laid before and approved by |
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resolution of the House of Commons. |
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