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Finance Bill
Schedule 17 — Real Estate Investment Trusts

216

 

(a)   

after the commencement of the regulations, or

(b)   

in the calendar year during which the regulations are

made.”

8          

In section 117 (cancellation of tax advantage), insert at the end—

“(8)   

On an appeal under subsection (7) the Special Commissioners may—

5

(a)   

quash the notice,

(b)   

affirm the notice, or

(c)   

vary the notice.”

9          

In section 120 (calculation of profits)—

(a)   

in paragraph (a) of subsection (4), for “an asset,” substitute “an asset

10

by the exploitation of which tax-exempt business is conducted,”

(b)   

after that paragraph insert—

“(aa)   

a derivative contract is hedging in relation to a

company if or in so far as it is acquired as a hedge of

risk in relation to a liability incurred in connection

15

with tax-exempt business,” and

(c)   

after that subsection insert—

“(4A)   

In subsection (4)(a) the reference to an asset includes a

reference to—

(a)   

the value of an asset, and

20

(b)   

profits attributable to it.”

10         

In section 123(a) (attribution of distributions), for “Condition 4” substitute

“Condition 3”.

11         

After section 126 (movement of assets into ring fence) insert—

“126A   

Demergers

25

(1)   

This section applies if—

(a)   

C (tax-exempt) disposes of an asset to a 75% subsidiary (“S”)

of C (residual),

(b)   

C (residual) disposes of its interest in S to another company

(“P”),

30

(c)   

on the date when it acquires the interest in S, P gives a notice

under section 109 (as modified by paragraph 8 of Schedule

17) which specifies an accounting period which begins within

the period of six months beginning with the date of the

disposal of the asset, and

35

(d)   

this Part begins to apply to the group of which S is a member

from the beginning of the specified accounting period.

(2)   

P may give a notice under section 109 (as modified by paragraph 8 of

Schedule 17) in accordance with subsection (1)(c) even if it does not

expect to satisfy Conditions 3 to 6 of section 106 throughout the

40

accounting period specified in the notice.

(3)   

Where this section applies—

(a)   

sections 111 and 112 shall not apply to the group of which S

is a member in relation to the asset disposed of by C (tax-

exempt) or in relation to business conducted by the

45

exploitation of that asset, and

 

 

Finance Bill
Schedule 17 — Real Estate Investment Trusts

217

 

(b)   

section 125 shall not apply to the disposal of the asset by C

(tax-exempt).

(4)   

But if, at the end of the period of six months mentioned in subsection

(1)(c), Conditions 3 to 6 of section 106 are not satisfied in relation to

P, subsection (3) shall be treated as not having had effect.”

5

12         

In section 127 (interpretation), for “126” substitute “126A”.

13         

In section 133 (early exit), insert at the end—

“(6)   

On an appeal under subsection (5) the Special Commissioners may—

(a)   

quash the direction,

(b)   

affirm the direction, or

10

(c)   

vary the direction.”

14         

In section 138 (joint ventures), after subsection (3) insert—

“(4)   

Regulations may make provision having retrospective effect in

respect of the calendar year in which they are made.”

15         

In paragraph 3 of Schedule 16 (excluded income: owner-occupied property),

15

after sub-paragraph (3) insert—

   “(3A)  

For the purpose of Condition 2, no account shall be taken of the

fact that a property may fall to be described as owner-occupied by

reason only of the provision by the company of services to an

occupant who—

20

(a)   

is in exclusive occupation of the property, and

(b)   

is not connected with a member of the group (within the

meaning given by section 839 of ICTA).”

16    (1)  

Schedule 17 (modifications for groups) is amended as follows.

      (2)  

In paragraph 2(b), for “Conditions 1 to 3” substitute “Conditions 1 and 2”.

25

      (3)  

Omit paragraph 6(2) and (3).

      (4)  

In paragraph 6(4) and (5), for “Condition 4” substitute “Condition 3”.

      (5)  

In paragraph 14, in the substituted subsection (2)—

(a)   

in the formula in the opening words, omit “+ Financing Costs (all)”,

(b)   

in paragraph (a), after “allowances” insert “, of losses from a previous

30

accounting period and of amounts taken into account under section

120(3)”, and

(c)   

omit paragraph (b).

      (6)  

after paragraph 33 insert—

“Demergers

35

34    (1)  

This paragraph applies in relation to a company if—

(a)   

the company ceases to be a member of a group (“Group 1”)

to which Part 4 applies,

(b)   

at the time immediately after it ceases to be a member of

Group 1, either—

40

(i)   

it satisfies Conditions 1 and 2 of section 106 and the

conditions specified in sections 107 and 108, or

 

 

Finance Bill
Schedule 17 — Real Estate Investment Trusts

218

 

(ii)   

it is a member of another group (“Group 2”) which

satisfies those conditions as modified by the

provisions of paragraphs 5 to 7 above,

(c)   

the company (or the principal company of Group 2) gives

a notice under section 109 (or that section as modified by

5

paragraph 8 above) no later than the date on which it

ceases to be a member of Group 1, and

(d)   

the notice specifies an accounting period which begins on

the day on which the company ceases to be a member of

Group 1.

10

      (2)  

A company may give a notice under section 109 (or that section as

modified by paragraph 8 above) in accordance with sub-

paragraph (1)(c) even if it does not expect to satisfy Conditions 3

to 6 of section 106 throughout the accounting period specified in

the notice.

15

      (3)  

Where this paragraph applies, the company shall be treated as a

company to which Part 4 applies (or as a member of a group to

which Part 4 applies) during the period of six months beginning

with the time when it ceases to be a member of Group 1.

      (4)  

Where this paragraph applies, the following provisions of Part 4

20

shall not have effect—

(a)   

section 111 (or that section as modified by paragraphs 9

and 10 above),

(b)   

section 112 (or that section as modified by paragraph 11

above), and

25

(c)   

section 131 (as modified by paragraphs 25 and 26 above).”

      (5)  

But if, at the end of the period of six months mentioned in sub-

paragraph (3), Conditions 3 to 6 of section 106 are not satisfied in

relation to the company, this paragraph shall not have effect and

the company shall be treated as having ceased to be a company to

30

which Part 4 applies (or a member of a group to which Part 4

applies) on the date on which it ceased to be a member of Group

1.”

17         

In section 505(1) of ICTA (charities: exemptions), after paragraph (a) insert—

“(aa)   

exemption from tax under Schedules A and D, or under Parts

35

2 and 3 of ITTOIA 2005, in respect of distributions to which

section 121 of the Finance Act 2006 (Real Estate Investment

Trusts: distributions) applies to the extent that the

distributions—

(i)   

arise in respect of shares vested in a person for

40

charitable purposes; and

(ii)   

are applied to charitable purposes only;”.

18         

In section 531 of ITA 2007 (charities: exemptions)—

(a)   

after subsection (2) insert—

“(2A)   

Distributions to which section 121 of FA 2006 (Real Estate

45

Investment Trusts: distributions) applies and which are

chargeable to income tax under Part 2 or Part 3 of ITTOIA

2005 are not taken into account in calculating total income so

 

 

Finance Bill
Schedule 18 — Pensions schemes: abolition of relief for life assurance premium contributions etc

219

 

far as they arise in respect of shares vested in a person in trust

for a charitable trust or for charitable purposes.”, and

(b)   

in subsection (3), for “and (2)” substitute “to (2A)”.

Schedule 18

Section 67

 

Pensions schemes: abolition of relief for life assurance premium contributions

5

etc

Introduction

1          

Part 4 of FA 2004 (pension schemes etc) is amended as follows.

Life assurance premium contributions not to be relievable pension contributions

2          

In section 188(3) (relief for members’ contributions: contributions which are

10

not relievable pension contributions), after paragraph (a) insert—

“(aa)   

any contributions which are life assurance premium

contributions (see section 195A),”.

Life assurance premium contributions

3          

After section 195 insert—

15

“195A   

 Life assurance premium contributions

(1)   

Contributions paid by or on behalf of an individual under a

registered pension scheme are life assurance premium contributions

for the purposes of section 188(3)(aa) if—

(a)   

rights under a non-group life policy (see subsection (2)) are

20

(or later become) held for the purposes of the pension

scheme, and

(b)   

the contributions are treated by this section as paid in respect

of premiums under the non-group life policy (see subsections

(3) to (5)).

25

(2)   

For the purposes of this section a “non-group life policy” is a policy

of insurance under which the only benefits which may become

payable are benefits payable in consequence, or in anticipation, of—

(a)   

the death of the individual or one of a group of individuals

which includes the individual, or

30

(b)   

the deaths of more than one of a group of individuals—

(i)   

which includes the individual, and

(ii)   

the other members of which are connected with the

individual.

(3)   

Contributions paid by or on behalf of the individual under the

35

pension scheme are treated as paid in respect of premiums under the

non-group life policy if—

(a)   

the payment of the contributions constitutes the payment of

premiums under the policy, or

 

 

Finance Bill
Schedule 18 — Pensions schemes: abolition of relief for life assurance premium contributions etc

220

 

(b)   

the person by whom the contributions are paid intends the

contributions (or an amount equivalent to them) to be

applied towards paying premiums under the policy.

(4)   

Where the amount of the premiums under the policy in a tax year

exceeds the amount of any contributions treated as paid in respect of

5

the premiums by subsection (3), other contributions paid by or on

behalf of the individual under the pension scheme in the tax year are

treated as paid in respect of premiums under the policy to the extent

that their amount does not exceed the difference between the amount

of the premiums and the amount of any contributions treated as paid

10

in respect of the premiums by subsection (3).

(5)   

But where—

(a)   

the benefits under the policy relate to the death of one or

more of a group of individuals, and

(b)   

contributions are also paid under the pension scheme in the

15

tax year by or on behalf of another member or other members

of the group,

   

the amount of the contributions paid by or on behalf of the

individual which are treated as paid in respect of premiums under

the policy by subsection (4) does not exceed what is just and

20

reasonable having regard to the operation of section 188(3)(aa) in

relation to the contributions paid by or on behalf of another member

or other members of the group.

(6)   

The Commissioners for Her Majesty’s Revenue and Customs may by

regulations amend subsections (2) to (5).

25

(7)   

Regulations under subsection (6) which limit—

(a)   

the policies of insurance which are non-group life assurance

policies for the purposes of this section, or

(b)   

the contributions which are treated by this section as paid in

respect of premiums under such policies,

30

   

may be made so as to have effect in relation to times before they are

made.

(8)   

For the purposes of this section an individual (“A”) is connected with

another individual (“B”) if—

(a)   

A is B’s spouse or civil partner,

35

(b)   

A is a relative of B,

(c)   

A is the spouse or civil partner of a relative of B,

(d)   

A is a relative of B’s spouse or civil partner, or

(e)   

A is the spouse or civil partner of a relative of B’s spouse or

civil partner;

40

   

and for the purposes of this subsection “relative” means brother,

sister, ancestor or lineal descendant.”

Commencement: schemes other than occupational pension schemes

4     (1)  

In relation to contributions under any pension scheme that is not an

occupational pension scheme, the amendments made by this Schedule have

45

effect in relation to contributions paid on or after 6th April 2007.

 

 

Finance Bill
Schedule 18 — Pensions schemes: abolition of relief for life assurance premium contributions etc

221

 

      (2)  

But they do not have effect in relation to such contributions paid at any time

if the contributions are treated as paid in respect of premiums under a policy

of insurance which at that time is a protected policy (see paragraph 5).

5     (1)  

This paragraph specifies when a policy of insurance is a protected policy in

a case where the rights under it are held for the purposes of a pension

5

scheme that is not an occupational pension scheme.

      (2)  

A policy of insurance within sub-paragraph (3) or (4) is a protected policy

but only until a relevant event occurs (see sub-paragraphs (5) and (6)).

      (3)  

A policy of insurance is within this sub-paragraph if—

(a)   

it is issued in respect of insurances made before 6th December 2006,

10

(b)   

the pension scheme became a registered pension scheme before that

date, and

(c)   

rights under the policy became held for the purposes of the pension

scheme before that date.

      (4)  

A policy of insurance is within this sub-paragraph if—

15

(a)   

it is issued in respect of insurances made before 1st August 2007,

(b)   

the pension scheme became a registered pension scheme before that

date,

(c)   

rights under the policy became held for the purposes of the pension

scheme before that date,

20

(d)   

the policy was issued in pursuance of a proposal made in writing (by

whatever means) and received by or on behalf of the insurer before

the appropriate date,

(e)   

the amount of the benefits payable under the policy (at the latest of

the time when the insurances were made, the pension scheme was

25

registered or rights under the policy became held for the purposes of

the pension scheme) is no more than the amount applied for in the

proposal,

(f)   

the period for which benefits are so payable (at the latest of those

times) is no longer than the period specified in the proposal, and

30

(g)   

the policy is not a protected policy by virtue of sub-paragraph (3).

      (5)  

In sub-paragraph (4)(d) “the appropriate date” means—

(a)   

13th April 2007, in any case where, on the day of the making of the

insurances in respect of which the policy of insurance was issued, the

rights of the individual under the pension scheme included an actual

35

or prospective entitlement to a pension, and

(b)   

14th December 2006, in any other case.

      (6)  

For the purposes of sub-paragraph (2) a “relevant event” occurs if, after the

relevant time, the terms of the policy are varied so as to—

(a)   

increase the benefits payable under the policy, or

40

(b)   

extend the period during which benefits are so payable.

      (7)  

But where, on the day of the variation, the rights of the individual under the

pension scheme included an actual or prospective entitlement to a pension,

a relevant event does not occur by virtue of the variation if it was made in

pursuance of a proposal made in writing (by whatever means) and received

45

by or on behalf of the insurer before 13th April 2007.

      (8)  

“The relevant time”—

 

 

Finance Bill
Schedule 18 — Pensions schemes: abolition of relief for life assurance premium contributions etc

222

 

(a)   

in the case of a policy of insurance within sub-paragraph (3) which is

issued in respect of insurances made before 6th April 2006, is 20th

March 2007,

(b)   

in the case of any other policy of insurance within sub-paragraph (3),

is 5th December 2006, and

5

(c)   

in the case of a policy of insurance within sub-paragraph (4), is the

time when it became a protected policy.

Commencement: occupational pension schemes

6     (1)  

In relation to contributions under any occupational pension scheme, the

amendments made by this Schedule have effect in relation to contributions

10

paid on or after 1st August 2007.

      (2)  

But they do not have effect in relation to such contributions paid at any time

if the contributions are treated as paid in respect of premiums under a policy

of insurance which at that time is a protected policy (see paragraph 7).

7     (1)  

This paragraph specifies when a policy of insurance is a protected policy in

15

a case where the rights under it are held for the purposes of an occupational

pension scheme.

      (2)  

A policy of insurance within sub-paragraph (3) or (4) is a protected policy

but only until a relevant event occurs (see sub-paragraphs (5) to (7)).

      (3)  

A policy of insurance is within this sub-paragraph if—

20

(a)   

it is issued in respect of insurances made before 21st March 2007,

(b)   

the pension scheme became a registered pension scheme before that

date, and

(c)   

rights under the policy became held for the purposes of the pension

scheme before that date.

25

      (4)  

A policy of insurance is within this sub-paragraph if—

(a)   

it is issued in respect of insurances made before 1st August 2007,

(b)   

the pension scheme became a registered pension scheme before that

date,

(c)   

rights under the policy became held for the purposes of the pension

30

scheme before that date,

(d)   

the policy was issued in pursuance of a proposal made in writing (by

whatever means) and received by or on behalf of the insurer before

29th March 2007,

(e)   

the amount of the benefits payable under the policy (at the latest of

35

the time when the insurances were made, the pension scheme was

registered or rights under the policy became held for the purposes of

the pension scheme) is no more than the amount applied for in the

proposal,

(f)   

the period for which benefits are so payable (at the latest of those

40

times) is no longer than the period specified in the proposal, and

(g)   

the policy is not a protected policy by virtue of sub-paragraph (3).

      (5)  

For the purposes of sub-paragraph (2) a “relevant event” occurs if, after the

relevant time, the terms of the policy are varied so as to—

(a)   

increase the benefits payable under the policy, or

45

(b)   

extend the period during which benefits are so payable.

 

 

 
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