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Finance (No.2) Bill


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

440

 

      (3)  

Condition A is that the pension scheme directly holds the interest

in the taxable property which gives rise to the unauthorised

payment.

      (4)  

Condition B is that—

(a)   

the pension scheme holds the interest in the property

5

indirectly through one vehicle, and

(b)   

that vehicle is wholly owned by the pension scheme.

      (5)  

Condition C is that—

(a)   

the pension scheme holds the interest in the property

indirectly through more than one vehicle (a “chain” of

10

vehicles), and

(b)   

each vehicle in the chain is wholly owned by another

vehicle in the chain or by the pension scheme.

      (6)  

Where—

(a)   

the pension scheme holds the interest in the property

15

indirectly through one vehicle, and

(b)   

the vehicle is not wholly owned by the pension scheme,

           

the amount of the unauthorised payment is a proportion of the

total taxable amount determined by reference to the extent of the

pension scheme’s interest in the vehicle.

20

      (7)  

Where—

(a)   

the pension scheme holds the interest in the property

indirectly through one or more chains of vehicles, and

(b)   

one or more vehicles in such a chain is not wholly owned

by another vehicle in the chain or by the pension scheme,

25

           

the amount of the unauthorised payment is the amount or the total

of all the amounts found under sub-paragraph (8) for each chain

through which the pension scheme owns the interest in the

property.

      (8)  

The amount is a proportion of the total taxable amount

30

determined by reference to the extent of the interest held directly

by the pension scheme or another vehicle in the chain in each

vehicle in the chain—

(a)   

starting with the vehicle which holds the interest in the

property directly, and

35

(b)   

ending with the vehicle in which the pension scheme

directly holds an interest.

      (9)  

For the purposes of this paragraph a vehicle is wholly owned by a

person if no other person directly holds an interest in the vehicle.

     (10)  

This paragraph is subject to paragraph 44.

40

42    (1)  

References in this Schedule to the extent of an interest held directly

by a person in a vehicle are references to the proportion of the

interests of everyone who directly holds an interest in the vehicle

which on a just and reasonable apportionment is represented by

that interest.

45

      (2)  

Sub-paragraph (1) is subject to paragraph 43, which explains how

to determine the extent of a person’s interest in a vehicle for the

 

 

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

441

 

purposes of the taxable property provisions where the vehicle is a

company.

      (3)  

The Treasury may by regulations—

(a)   

amend paragraph 43, or

(b)   

amend this Part of this Schedule for the purposes of

5

explaining how to determine the extent of a person’s

interest in a vehicle in other cases.

      (4)  

Regulations under sub-paragraph (3) may include provision

having effect in relation to times before they are made.

43    (1)  

For the purposes of this Schedule, and except in a case to which

10

sub-paragraph (3) applies, the extent of a person’s interest in a

company is determined by reference to whichever of the following

gives the person the greatest interest in the company—

(a)   

the percentage of the share capital or issued share capital

of the company owned by the person;

15

(b)   

the percentage of the voting rights in the company owned

by the person;

(c)   

the percentage of all the income of the company to which

the person has a right;

(d)   

the percentage of the amounts distributed on a distribution

20

in relation to the company to which the person has a right;

(e)   

the percentage of the assets of the company to which the

person has a right on a winding-up or in any other

circumstances;

(f)   

where the person has a right to a percentage of a particular

25

asset or description of assets of the company, or of the

income or gains from such an asset or description (either

generally or in particular circumstances), that percentage

or the highest of all the percentages found under this

paragraph.

30

      (2)  

For the purposes of sub-paragraph (1) a person is treated as

owning or having a right to anything which the person will only

acquire—

(a)   

at some future date,

(b)   

if the person exercises a right to acquire it, or

35

(c)   

if some other uncertain future event occurs or does not

occur.

      (3)  

Where—

(a)   

a person has an interest in a company as a result of lending

the company money to fund the acquisition of an interest

40

in taxable property, and

(b)   

this sub-paragraph gives the person a greater interest in

the company than any interest given by sub-paragraph (1),

           

for the purposes of this Schedule the extent of the person’s interest

in the company is determined by the proportion that the value of

45

the loan bears to the total value of the assets held directly by the

company.

      (4)  

For the purposes of sub-paragraph (3)—

 

 

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

442

 

(a)   

assets must be valued in accordance with generally

accepted accounting practice,

(b)   

no account is to be taken of liabilities secured against or

otherwise relating to assets (whether generally or

specifically), and

5

(c)   

where generally accepted accounting practice offers a

choice of valuation between cost basis and fair value, fair

value must be used.

Deemed acquisition: adjustment

44    (1)  

This paragraph applies where an investment-regulated pension

10

scheme is treated as acquiring an interest in taxable property by

virtue of paragraph 28 (increase in extent of interest in vehicle).

      (2)  

The amount of the unauthorised payment treated as made by the

pension scheme is—equation: plus[times[char[U],char[P]],minus[times[char[U],char[P],char[B]]]]

           

where—

15

UP is the amount that would have been the amount of the

unauthorised payment apart from this paragraph; and

UPB is the amount that would have been the amount of any

unauthorised payment treated as made by the pension

scheme if it had acquired the interest in the property

20

immediately before the increase in the extent of the interest

in the vehicle (assuming the total taxable amount in

relation to the unauthorised payment to be that given

under paragraph 32(5)).

Apportionment to member

25

45    (1)  

This paragraph has effect for determining—

(a)   

whether the whole of an unauthorised payment treated as

made by a pension scheme is to be treated as made to a

member of the scheme, and

(b)   

if not, how much of the unauthorised payment is to be

30

treated as made to the member.

      (2)  

If the interest in the taxable property which gives rise to the

unauthorised payment is held by the pension scheme for the

purposes of—

(a)   

the arrangement under the pension scheme relating to the

35

member, and

(b)   

at least one other arrangement under the pension scheme,

           

the unauthorised payment is to be apportioned on a just and

reasonable basis between all of the arrangements for the purposes

of which the interest in the property is held.

40

      (3)  

Otherwise, the whole of the unauthorised payment is to be treated

as made to the member.”

14    (1)  

Schedule 34 (non-UK schemes: application of certain charges) is amended as

follows.

      (2)  

In paragraph 1 (member payment charges)—

45

 

 

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

443

 

(a)   

in sub-paragraph (3)(a), after “charge” insert “(except as imposed by

virtue of section 174A (taxable property held by investment-

regulated pension schemes))”, and

(b)   

in sub-paragraph (4), after “Part” insert “(apart from the taxable

property provisions)”.

5

      (3)  

After paragraph 7 insert—

“Unauthorised payment charge: taxable property

7A    (1)  

The Commissioners for Her Majesty’s Revenue and Customs may

by regulations make provision for a transfer member of a relevant

non-UK scheme to be liable to the unauthorised payment charge

10

in the same or similar circumstances to those in which—

(a)   

a member of a registered pension scheme is liable to that

charge by virtue of section 174A and Schedule 29A (taxable

property held by investment-regulated pension scheme),

(b)   

the scheme administrator of such a scheme is liable to the

15

scheme sanction charge by virtue of section 185A (income

from taxable property) or 185F (gains from taxable

property), or

(c)   

a member of such a scheme is liable to the scheme sanction

charge by virtue of those provisions in consequence of

20

provision made by regulations under section 273ZA.

      (2)  

The regulations may—

(a)   

make provision for the application of any or all of the

taxable property provisions in relation to a transfer

member of a relevant non-UK scheme subject to any

25

omissions, additions and other modifications contained in

the regulations,

(b)   

include provision having effect in relation to times before

they are made,

(c)   

contain transitional provisions and savings, and

30

(d)   

make different provision for different cases.”

15         

In Schedule 36 (transitional provisions and savings), after paragraph 37

insert—

“Pre-commencement holdings of taxable property

37A   (1)  

This paragraph applies in relation to an investment-regulated

35

pension scheme if—

(a)   

on 6th April 2006 the pension scheme holds an interest in

taxable property which it acquired before that date, and

(b)   

immediately before that date the pension scheme was not

prohibited from holding the interest in the property,

40

           

and, in a case where immediately before that date the interest in

the property was held directly by a person other than the pension

scheme, if the pension scheme was not prohibited from holding

the interest it held in that person at that time.

      (2)  

This paragraph also applies in relation to an investment-regulated

45

pension scheme if—

 

 

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

444

 

(a)   

before 6th April 2006 a contract to acquire an interest in

property was entered into by the pension scheme or a

person in whom the pension scheme directly or indirectly

held an interest when the contract was entered into,

(b)   

the pension scheme does not acquire the interest in the

5

property before that date,

(c)   

the property is taxable property on that date, and

(d)   

immediately before that date the pension scheme would

not have been prohibited from holding the interest in the

property,

10

           

and, in a case where the contract to acquire the interest in the

property was entered into by a person in whom the pension

scheme directly or indirectly held an interest, if the pension

scheme was not prohibited from holding the interest it held in that

person immediately before that date.

15

      (3)  

The taxable property provisions (apart from this paragraph and

paragraphs 37B to 37E) do not apply in relation to the pension

scheme and the interest in the property.

      (4)  

For the purposes of this Schedule a pension scheme is to be treated

as having been prohibited from holding an interest in property, or

20

in a person, immediately before 6th April 2006 if approval could

have been withdrawn under section 591B, 620(7) or 650 of ICTA on

the basis of the holding of the interest at that time.

      (5)  

This paragraph is subject to paragraphs 37B to 37E.

37B   (1)  

Paragraph 37A ceases to apply to an investment-regulated

25

pension scheme and an interest in taxable property on the relevant

date if Condition A, B or C is met.

      (2)  

Condition A is that there is a change in the occupation or use of the

property such that, if the change had occurred immediately before

6th April 2006, the pension scheme would have been prohibited

30

from holding the interest in the property at that time.

      (3)  

Condition B is that—

(a)   

the taxable property is residential property on 6th April

2006, and

(b)   

improvement works on the property are begun on or after

35

that date.

      (4)  

Condition C is that there is a change in the pension scheme’s

interest in—

(a)   

any person who holds the interest in the property directly,

or

40

(b)   

any person who has entered into a contract to acquire the

interest in the property,

           

such that, if the change had occurred immediately before 6th April

2006, the pension scheme would have been prohibited from

holding the interest in the person at that time.

45

      (5)  

For the purposes of this paragraph the relevant date is—

(a)   

where Condition A is met, the date on which the change in

the occupation or use of the taxable property takes place,

 

 

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

445

 

(b)   

where Condition B is met, the date on which the

improvement works are substantially completed, or

(c)   

where Condition C is met, the date on which the change in

the pension scheme’s interest in the person takes place,

           

but where the pension scheme has not acquired the interest in the

5

property by what would otherwise be the relevant date, the

relevant date is the date on which it acquires the interest.

      (6)  

Where Condition A, B or C is met the pension scheme is to be

treated for the purposes of the taxable property provisions as

acquiring the interest in the property on the relevant date.

10

      (7)  

For the purposes of Schedule 29A the total taxable amount in

relation to any unauthorised payment which the pension scheme

is treated as having made by reason of the acquisition is—

(a)   

the market value on the relevant date of the interest in the

property held by the person who holds it directly, or

15

(b)   

if the interest in the property is a lease at a rent, the amount

of consideration that would be treated as given by the

person for the lease by virtue of paragraph 34 of Schedule

29A if it were assigned to the person on that date.

      (8)  

Where—

20

(a)   

the pension scheme holds the interest in the property

directly, and

(b)   

the interest is not a lease at a rent,

           

for the purposes of section 185G (gains from taxable property:

disposal by person holding directly) the pension scheme is to be

25

treated as having acquired the interest for a consideration equal to

its market value on 6th April 2006.

      (9)  

For the purposes of sub-paragraph (3)(b) improvement works are

to be taken to have been begun before 6th April 2006 only if—

(a)   

a binding contract for the works was entered into before

30

that date, or

(b)   

a substantial amount of the works has been carried out

before that date.

     (10)  

For the purposes of this Schedule “improvement works” means, in

relation to a property, works which—

35

(a)   

materially improve the property, and

(b)   

are not carried out wholly for the purposes of complying

with a statutory requirement or a requirement imposed by

a government department, a statutory body or a person

holding a statutory office.

40

     (11)  

For the purposes of sub-paragraph (10)(a) a property is materially

improved by works only if—

(a)   

its market value on the date the works are substantially

completed (“MVW”) exceeds what would have been its

market value on that date if the works had not been carried

45

out (“MV”), and

(b)   

the amount by which MVW exceeds MV is greater than

20% of MV.

 

 

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

446

 

     (12)  

For the purposes of sub-paragraph (10)(b)—

“statutory body” means a body set up by or under an

enactment (including an enactment comprised in, or an

instrument made under, an Act of the Scottish Parliament);

“statutory office” means a body set up by or under such an

5

enactment; and

“statutory requirement” means a requirement imposed by

provision made by or under such an enactment.

     (13)  

This paragraph is subject to paragraph 37D.

37C   (1)  

This paragraph applies where—

10

(a)   

on 6th April 2006 an investment-regulated pension scheme

holds an interest in taxable property which it acquired

before that date, and

(b)   

immediately before that date the pension scheme was

prohibited from holding the interest.

15

      (2)  

This paragraph also applies where—

(a)   

on 6th April 2006 an investment-regulated pension scheme

holds an interest in taxable property indirectly which it

acquired before that date, and

(b)   

immediately before that date the pension scheme was

20

prohibited from holding the interest it held in the person

that held the interest in the property directly at that time.

      (3)  

The pension scheme is to be treated for the purposes of the taxable

property provisions as acquiring the interest in the property on

6th April 2006.

25

      (4)  

For the purposes of Schedule 29A the total taxable amount in

relation to any unauthorised payment which the pension scheme

is treated as having made by reason of the acquisition is—

(a)   

the market value on 6th April 2006 of the interest in the

property held by the person who holds it directly, or

30

(b)   

if the interest in the property is a lease at a rent, the amount

of consideration that would be treated as given by the

person for the lease by virtue of paragraph 34 of Schedule

29A if it were assigned to the person on that date.

      (5)  

Where—

35

(a)   

the pension scheme holds the interest in the property

directly, and

(b)   

the interest is not a lease at a rent,

           

for the purposes of section 185G (gains from taxable property:

disposal by person holding directly) the pension scheme is to be

40

treated as having acquired the interest for a consideration equal to

its market value on 6th April 2006.

37D   (1)  

This paragraph applies where—

(a)   

sub-paragraph (1) or (2) of paragraph 37A applies in

relation to a pension scheme and an interest in property,

45

(b)   

immediately before 6th April 2006 the pension scheme was

a self-invested personal pension scheme or a small self-

administered scheme,

 

 

 
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