Finance (No.2) Bill

House of Commons

Session 2005 - 06
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Finance (No.2) Bill

Finance (No.2) Bill
Schedule 21 — Taxable property held by investment-regulated pension schemes
419

13
After Schedule 29 insert—
“Schedule 29A
Section 174A

Taxable property held by investment-regulated pension schemes
Part 1
Investment-regulated pension schemes
5
Schemes other than occupational pension schemes
1     (1)
For the purposes of the taxable property provisions a registered
pension scheme which is not an occupational pension scheme is an
investment-regulated pension scheme if one or more of its
members meets the condition in sub-paragraph (2).
10
      (2)
The condition is that either—
(a)
the member, or
(b)
a person related to the member,

is or has been able (directly or indirectly) to direct, influence or
advise on the manner of investment of any of the sums and assets
15
held for the purposes of an arrangement under the pension
scheme relating to the member.
      (3)
In this Part “the taxable property provisions” means—
(a)
section 173(7A) (exception from benefit charge where
taxable property held by investment-regulated pension
20
scheme),
(b)
section 174A and this Schedule,
(c)
sections 185A to 185I (income and gains from taxable
property),
(d)
section 273ZA (member liability for scheme sanction
25
charge where pension scheme non-UK resident), and
(e)
paragraphs 37A to 37I of Schedule 36 (transitional
provisions).
Occupational pension schemes
2     (1)
For the purposes of the taxable property provisions a registered
30
pension scheme which is an occupational pension scheme is an
investment-regulated pension scheme if—
(a)
there are 50 or fewer members of the pension scheme, and
one or more of those members meets the condition in sub-
paragraph (2), or
35
(b)
at least 10% of the members of the pension scheme meet
that condition.
      (2)
The condition is that either—
(a)
the member, or
(b)
a person related to the member,
40

is or has been able (directly or indirectly) to direct, influence or
advise on the manner of investment of any of the sums and assets
held for the purposes of the pension scheme.

Finance (No.2) Bill
Schedule 21 — Taxable property held by investment-regulated pension schemes
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Separate self-controlled section
3     (1)
This paragraph applies in the case of an arrangement under a
registered pension scheme if—
(a)
the pension scheme is an occupational pension scheme,
(b)
the pension scheme is not an investment-regulated
5
pension scheme by virtue of paragraph 2, and
(c)
one or more members of the pension scheme meet the
condition in sub-paragraph (2).
      (2)
The condition is that either—
(a)
the member, or
10
(b)
a person related to the member,

is or has been able (directly or indirectly) to direct, influence or
advise on the manner of investment of any sums or assets which
are linked to an arrangement relating to the member.
      (3)
For the purposes of sub-paragraph (2) sums or assets are linked to
15
an arrangement relating to a member if—
(a)
they are held for the purposes of an arrangement under the
pension scheme relating to the member, but
(b)
they are not held for the purposes of the arrangement
merely by virtue of a just and reasonable apportionment of
20
the sums and assets held for the purposes of the pension
scheme.
      (4)
Where this paragraph applies the arrangement is to be treated for
the purposes of this Part as if it were an investment-regulated
pension scheme.
25
      (5)
The Treasury may by regulations—
(a)
amend sub-paragraph (3), and
(b)
provide for any of the provisions of this Part to apply to the
arrangement with modifications.
Related persons
30
4     (1)
For the purposes of this Part of this Schedule a person is related to
a member of a pension scheme if—
(a)
the person and the member are connected persons, or
(b)
the person acts on behalf of the member or a person
connected with the member.
35
      (2)
Section 839 of ICTA (connected persons) applies for the purposes
of sub-paragraph (1).
Arrangements
5
Where sums or assets held for the purposes of an investment-
regulated pension scheme—
40
(a)
are held otherwise than for the purposes of the
administration or management of the pension scheme, and

Finance (No.2) Bill
Schedule 21 — Taxable property held by investment-regulated pension schemes
421

(b)
would not, apart from this paragraph, be treated as held
for the purposes of any arrangement relating to a member
under the pension scheme,

for the purposes of the taxable property provisions the sums or
assets are to be treated as held for the purposes of the
5
arrangements under the pension scheme by reference to the
respective rights under the scheme of the members to which the
arrangements relate.
Part 2
Taxable property
10
Taxable property
6
For the purposes of the taxable property provisions property is
taxable property if—
(a)
it is residential property (see paragraphs 7 to 10), or
(b)
it is tangible moveable property (but subject to paragraph
15
11).
Residential property
7     (1)
Subject as follows, for the purposes of the taxable property
provisions “residential property” means—
(a)
a building that is used or suitable for use as a dwelling,
20
(b)
any land consisting of, or forming part of, the garden or
grounds of such a building (including a building on any
such land) which is used or intended for use for a purpose
connected with the enjoyment of the building,
(c)
hotel or similar accommodation (but see paragraph 14(2)),
25
or
(d)
a beach hut,

in the United Kingdom or elsewhere.
      (2)
For the purposes of the taxable property provisions “building”
includes—
30
(a)
a structure, and
(b)
part of a building or structure.
8     (1)
For the purposes of the taxable property provisions a building
used for any of the following purposes is not residential
property—
35
(a)
a home or other institution providing residential
accommodation for children;
(b)
a hall of residence for students;
(c)
a home or other institution providing residential
accommodation with personal care for persons in need of
40
personal care by reason of old age, disability, past or
present dependence on alcohol or drugs or past or present
mental disorder;
(d)
a hospital or hospice;
(e)
a prison or similar establishment.
45

Finance (No.2) Bill
Schedule 21 — Taxable property held by investment-regulated pension schemes
422

      (2)
Where—
(a)
a building is used for a purpose specified in sub-paragraph
(1),
(b)
a building which is not in use was, immediately before it
ceased to be in use, used for such a purpose, or
5
(c)
a building which has never been in use is more suitable for
use for such a purpose than for use for any other purpose,

no account is to be taken for the purposes of the taxable property
provisions of its suitability for use as a dwelling.
9     (1)
The Treasury may by order amend this Part of this Schedule to
10
specify descriptions of buildings which are, or are not, to be
treated as residential property.
      (2)
An order under this paragraph which amends this Part of this
Schedule in a way that results in buildings becoming treated as not
being residential property may provide that the amendment has
15
effect from a date earlier than that on which the order was made.
10    (1)
Residential property is not taxable property in relation to a
pension scheme if Condition A or B is met.
      (2)
Condition A is met if the property is (or, if unoccupied, is to be)
occupied by an employee who—
20
(a)
is neither a member of the pension scheme nor connected
with such a member,
(b)
is not connected with the employer, and
(c)
is required as a condition of employment to occupy the
property.
25
      (3)
Condition B is met if the property is (or, if unoccupied, is to be)—
(a)
occupied by a person who is neither a member of the
pension scheme nor connected with such a member, and
(b)
used in connection with business premises held as an
investment of the pension scheme.
30
      (4)
Section 839 of ICTA (connected persons) applies for the purposes
of this paragraph.
Tangible moveable property
11    (1)
The Treasury may by order provide that, for the purposes of the
taxable property provisions, any specified description of tangible
35
moveable property is treated as not being taxable property.
      (2)
An order under this paragraph may include provision having
effect in relation to times before it is made.

Finance (No.2) Bill
Schedule 21 — Taxable property held by investment-regulated pension schemes
423

Part 3
Acquisition and holding of taxable property
Acquisition
12    (1)
For the purposes of the taxable property provisions an
investment-regulated pension scheme acquires an interest in
5
property if it comes to hold the interest.
      (2)
Sub-paragraph (1) applies however the pension scheme comes to
hold the interest, whether that is—
(a)
by act of the parties to a transaction,
(b)
by order of a court or other authority,
10
(c)
by or under any statutory provision, or
(d)
by operation of law.
      (3)
For instances of deemed acquisition, see paragraphs 27 to 29.
Holding
13    (1)
For the purposes of the taxable property provisions an
15
investment-regulated pension scheme holds an interest in
property if the scheme holds the interest directly or indirectly.
      (2)
In the taxable property provisions references to a person holding
an interest in property include, in the case of—
(a)
an investment-regulated pension scheme,
20
(b)
an arrangement under a pension scheme, or
(c)
a trust which is not a pension scheme,

references to the interest in the property being held for the
purposes of the pension scheme, the arrangement or the trust.
Direct holding
25
14    (1)
For the purposes of the taxable property provisions a person holds
an interest in property directly if the person (whether jointly, in
common or alone)—
(a)
holds the property or any estate, interest, right or power in
or over the property,
30
(b)
has the right to use, or participate in arrangements relating
to the use of, that property or a description of property to
which that property belongs, or
(c)
has the benefit of any obligation, restriction or condition
affecting the value of any estate, interest, right or power in
35
or over the property,

under the law of any country or territory.
      (2)
But a person does not hold an interest in residential property
consisting of hotel accommodation directly unless—
(a)
the person holds part only of the hotel accommodation or
40
any estate, interest, right or power in or over such a part
and, as a result, any person has a right to use or occupy that
or any other part of the hotel accommodation, or

Finance (No.2) Bill
Schedule 21 — Taxable property held by investment-regulated pension schemes
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(b)
the person has a right to use, or participate in
arrangements relating to the use of, part only of the hotel
accommodation or a description of property to which that
part belongs.
      (3)
For the purposes of the taxable property provisions a person holds
5
an interest in property directly if the person is entitled (whether
jointly, in common or alone) to receive payments determined by
reference to the value of or the income from the property.
      (4)
Sub-paragraph (3) is subject to paragraph 15.
Exception to direct holding
10
15    (1)
A person does not hold an interest in taxable property directly by
virtue of paragraph 14(3) where Conditions A to C are met.
      (2)
Condition A is that—
(a)
the person is entitled to receive the payments by virtue of
a policy of life insurance, a contract for a life annuity or a
15
capital redemption policy, and
(b)
the policy or contract is issued by an insurance company.
      (3)
Condition B is that the property—
(a)
does not constitute a linked asset, or
(b)
has been appropriated by the insurance company to an
20
internal linked fund.
      (4)
Condition C is that—
(a)
where the person is an occupational pension scheme, the
policy or contract, either by itself or taken together with
one or more associated policies, does not entitle the
25
pension scheme, either alone or together with one or more
associated persons, to receive payments representing 10%
or more of the market value of or the income from the
property,
(b)
where the person is a pension scheme other than an
30
occupational pension scheme, the policy or contract, either
by itself or taken together with one or more associated
policies, does not entitle an arrangement under the
pension scheme, either alone or together with one or more
associated persons, to receive such payments, or
35
(c)
otherwise, the policy or contract does not entitle the person
to receive such payments.
      (5)
But for the purposes of applying paragraph 14(3) for determining
whether a pension scheme holds an interest in taxable property
directly or indirectly, this paragraph does not apply if the purpose
40
or one of the purposes for which the person holds rights under the
policy or contract is to enable a member of the pension scheme or
a person connected with such a member to occupy or use the
property.
      (6)
For the purposes of sub-paragraph (4) “associated policy” means
45
a policy or contract which entitles an associated person to receive

Finance (No.2) Bill
Schedule 21 — Taxable property held by investment-regulated pension schemes
425

payments determined by reference to the value of or the income
from the property.
      (7)
For the definition of “associated person” see paragraph 30.
      (8)
For the purposes of this paragraph—
“capital redemption policy” means a contract made in the
5
course of a capital redemption business, as defined in
section 458(3) of ICTA;
“internal linked fund” has the meaning given by—
(a)
the Interim Prudential Sourcebook for Insurers made
by the Financial Services Authority under FISMA
10
2000, or
(b)
rules made by the Authority under that Act and
having effect for the time being in place of the
Sourcebook; and
“linked asset” means an asset of the insurance company
15
which is identified in its records as an asset by reference to
the value of which benefits provided for under a policy or
contract are to be determined.
      (9)
For the purposes of this paragraph an annuity is a life annuity if it
is—
20
(a)
granted for consideration in money or money’s worth in
the ordinary course of a business of granting annuities on
human life, and
(b)
payable for a term ending at a time ascertainable only by
reference to the end of a human life,
25

and for this purpose it does not matter that the annuity may in
some circumstances end before or after the life.
Indirect holding
16    (1)
For the purposes of the taxable property provisions a person holds
an interest in property indirectly if the person does not hold the
30
interest directly but (whether jointly, in common or alone)—
(a)
holds an interest in a person who holds the interest in the
property directly, or
(b)
holds an interest in a person who holds the interest in the
property indirectly by virtue of paragraph (a) or this
35
paragraph.
      (2)
For the purposes of the taxable property provisions a person holds
an interest in another person if—
(a)
the person holds an interest, right or power in or over that
other person, or
40
(b)
the person lends money to that other person to fund the
acquisition by that other person of an interest in taxable
property.
      (3)
But sub-paragraph (2)(b) does not apply where—
(a)
the loan is an authorised employer loan made by a pension
45
scheme to or in respect of a sponsoring employer (see
section 179),