Finance Bill

House of Commons

Session 2008 - 09
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Finance Bill

Finance Bill
Schedule 61 — Alternative finance investment bonds
Part 3 — Transactions relating to underlying assets consisting of land
440

      (9)
Condition E is that the total of the payments of capital made to Q before the
termination of the bond is not less than 60% of the value of the interest in the
land at the time of the first transaction.
     (10)
Condition F is that Q holds the interest in the land as a bond asset until the
termination of the bond.
5
     (11)
Condition G is that—
(a)
before the end of the period of 30 days beginning with the date on
which the interest in the land ceases to be held as a bond asset, that
interest is transferred by Q to P (“the second transaction”), and
(b)
the second transaction is effected not more than 10 years after the
10
first transaction.
     (12)
The Treasury may by regulations amend sub-paragraph      (11)(b) by
substituting for the period mentioned there such other period as may be
specified.
Stamp duty land tax
15
Relief from stamp duty land tax: first transaction
6     (1)
This paragraph applies if—
(a)
the first transaction relates to an interest in land in the United
Kingdom, and
(b)
each of conditions A to C is met before the end of the period of 30
20
days beginning with the effective date of that transaction.
      (2)
Where this paragraph applies the first transaction is exempt from charge to
stamp duty land tax.
      (3)
Where the interest in the land is replaced as the bond asset by an interest in
other land, this paragraph is subject to paragraph 18.
25
      (4)
This paragraph is also subject to paragraph 20.
7     (1)
This paragraph applies if—
(a)
the interest in the land is transferred by Q to P without conditions E
and F having been met,
(b)
the period mentioned in paragraph 5(11)(b) expires without each of
30
those conditions having been met, or
(c)
at any time it becomes apparent for any other reason that any of
conditions E to G cannot or will not be met.
      (2)
This paragraph also applies if condition D is not met.
      (3)
The relief provided by paragraph 6(2) is withdrawn and stamp duty land tax
35
is chargeable on the first transaction in accordance with this paragraph.
      (4)
The amount chargeable is the tax that would have been chargeable in respect
of the first transaction (but for relief under paragraph 6(2)) if the chargeable
consideration for that transaction had been the market value of the interest
at the time of that transaction.
40
      (5)
Interest is due and payable on the amount of that tax as from the end of the
period of 30 days after the effective date of that transaction until the tax is
paid.

Finance Bill
Schedule 61 — Alternative finance investment bonds
Part 3 — Transactions relating to underlying assets consisting of land
441

      (6)
Q must deliver a further land transaction return before the end of the period
of 30 days after the date on which this paragraph first applies.
      (7)
The return must include a self-assessment of the amount of tax chargeable.
      (8)
Tax payable must be paid not later than the filing date for the further return.
      (9)
Schedule 10 to FA 2003 (returns, assessments and other matters) applies to a
5
return under this paragraph as it applies to a return under section 76 of that
Act (general requirement to deliver land transaction return), with the
following modifications—
(a)
references to the transaction to which the return relates are to the
event by virtue of which this paragraph applies, and
10
(b)
references to the effective date of the transaction are to the date on
which that event occurs.
Relief from stamp duty land tax: second transaction
8     (1)
The second transaction is exempt from charge to stamp duty land tax if—
(a)
each of conditions A to G is met, and
15
(b)
the provisions of Part 4 of FA 2003 relating to the first transaction are
complied with.
      (2)
Where the interest in the land is replaced as the bond asset by an interest in
other land, this paragraph is subject to paragraph 18.
      (3)
This paragraph is also subject to paragraph 20.
20
Discharge of charge when conditions for relief met
9
If, after the effective date of the second transaction, Q provides HMRC with
the prescribed evidence that each of conditions A to C and E to G has been
met, the land ceases to be subject to the charge or security registered in
pursuance of condition D.
25
Taxation of capital gains
Relief from taxation of capital gains: first transaction
10    (1)
This paragraph applies if each of conditions A to C is met before the end of
the period of 30 days beginning with the effective date of the first
transaction.
30
      (2)
That transaction is not to be regarded for the purposes of TCGA 1992 as an
acquisition by Q or a disposal by P.
      (3)
If condition C is met by virtue of Q and P having entered into a leaseback
agreement, the granting of the lease or sub-lease is not to be regarded for the
purposes of TCGA 1992 as an acquisition by P or a disposal by Q.
35
      (4)
Sub-paragraphs (2) and (3) are subject to paragraph 11 (treatment of
transactions where any of conditions D to G is not met).
      (5)
Where the interest in the land is replaced as the bond asset by an interest in
other land, this paragraph is subject to paragraph 18.
      (6)
This paragraph is also subject to paragraph 20.
40

Finance Bill
Schedule 61 — Alternative finance investment bonds
Part 3 — Transactions relating to underlying assets consisting of land
442

11    (1)
This paragraph applies if—
(a)
the interest in the land is transferred by Q to P without conditions E
and F having been met,
(b)
the period mentioned in paragraph 5(11)(b) expires without each of
those conditions having been met, or
5
(c)
at any time it becomes apparent for any other reason that any of
conditions E to G cannot or will not be met.
      (2)
This paragraph also applies where (in the case of an interest in land in the
United Kingdom) condition D is not met.
      (3)
Where this paragraph applies, paragraph 10(2) and (3) (disregard of
10
transactions for purposes of TCGA 1992) do not apply.
      (4)
Where, by virtue of sub-paragraph (3), any chargeable gain or loss is treated
as accruing to a person, that gain or loss is to be treated as accruing—
(a)
in the case mentioned in sub-paragraph (1)(a), immediately before
the transfer from Q to P;
15
(b)
in any case mentioned in paragraph (b) or (c) of sub-paragraph (1), at
the time mentioned in that paragraph;
(c)
in the case mentioned in sub-paragraph (2), at the end of the period
mentioned in paragraph 5(6).
Relief from taxation of capital gains: second transaction
20
12    (1)
The second transaction is not to be regarded for the purposes of TCGA 1992
as an acquisition by P or a disposal by Q if—
(a)
each of conditions A to C and E to G is met, and
(b)
in the case of an interest in land in the United Kingdom, condition D
is met.
25
      (2)
Where the interest in the land is replaced as the bond asset by an interest in
other land, this paragraph is subject to paragraph 18.
      (3)
This paragraph is also subject to paragraph 20.
Capital allowances
Introductory
30
13    (1)
Paragraphs 14 to 17 make provision about the treatment, for the purposes of
CAA 2001, of transactions relating to land in connection with an alternative
finance investment bond.
      (2)
Any expression which is used in any of paragraphs 14 to 17 and in CAA 2001
has the meaning which it has in that Act.
35
Treatment for purposes of capital allowances
14    (1)
This paragraph applies to an asset if—
(a)
each of conditions A to C is met before the end of the period of 30
days beginning with the effective date of the first transaction, and
(b)
the asset falls within sub-paragraph (2).
40
      (2)
An asset falls within this sub-paragraph if it is part of the subject matter of
the first transaction and constitutes—

Finance Bill
Schedule 61 — Alternative finance investment bonds
Part 3 — Transactions relating to underlying assets consisting of land
443

(a)
plant or machinery, or
(b)
an industrial building (or part of an industrial building).
      (3)
For the purposes of CAA 2001—
(a)
expenditure incurred by Q in acquiring the asset by virtue of the first
transaction is not to be regarded as capital expenditure;
5
(b)
Q is not to be regarded as becoming, and P is not to be regarded as
ceasing to be, the owner of the asset by virtue of that transaction.
      (4)
Sub-paragraph (3) applies in relation to the transactions mentioned in sub-
paragraph (5) as it applies in relation to the first transaction (but reading the
references to Q as references to P and the reference to P as a reference to Q).
10
      (5)
The transactions are—
(a)
any leaseback agreement entered into by Q and P in order that
condition C is met, and
(b)
the second transaction.
      (6)
This paragraph is subject to paragraphs 15 to 17.
15
Loss or destruction of asset
15    (1)
This paragraph applies to an asset if the first and second conditions are met.
      (2)
The first condition is that the asset—
(a)
is part of the subject matter of the first transaction, and
(b)
constitutes plant or machinery.
20
      (3)
The second condition is that, at any time when the asset is held as a bond
asset, one of the following events occurs—
(a)
the person with possession of the asset loses possession of it in
circumstances where it is reasonable to assume that the loss is
permanent, or
25
(b)
the asset ceases to exist as such (as a result of destruction,
dismantling or otherwise).
      (4)
That event is to be treated as a disposal event (in relation to P) occurring in
the chargeable period in which that event occurs.
      (5)
For the purposes of sub-paragraph (4), the disposal value that P is required
30
to bring into account is—
(a)
where the case falls within item 3 or 4 of the Table in section 61(2) of
CAA 2001 and the amount received by P as mentioned in that item is
other than zero, that amount;
(b)
in any other case, the market value of the asset at the time of the
35
event.
Q retaining asset when no longer held for purposes of bond
16    (1)
This paragraph applies to an asset if the first and second conditions are met.
      (2)
The first condition is that the asset is part of the subject matter of the first
transaction and constitutes—
40
(a)
plant or machinery, or
(b)
an industrial building (or part of an industrial building).

Finance Bill
Schedule 61 — Alternative finance investment bonds
Part 3 — Transactions relating to underlying assets consisting of land
444

      (3)
The second condition is that Q—
(a)
ceases to hold the asset as a bond asset (whether at the end of the
bond term or at any other time), but
(b)
does not transfer the asset to P or any other person.
      (4)
At the time that Q ceases to hold the asset as a bond asset, Q is to be treated
5
as becoming, and P is to be treated as ceasing to be, the owner of the asset.
      (5)
Accordingly, Q’s ceasing to hold the asset as a bond asset is to be treated—
(a)
as regards plant or machinery, as a disposal event (in relation to P)
occurring in the chargeable period in which the cessation takes place,
and
10
(b)
as regards an industrial building or part of an industrial building, as
a balancing event (in relation to P) occurring in the chargeable period
in which the cessation takes place.
      (6)
For the purposes of sub-paragraph (5)—
(a)
in the case falling within paragraph (a), the disposal value that P is
15
required to bring into account is the market value of the asset at the
time of the transfer, and
(b)
in the case falling within paragraph (b), P is to be treated as receiving,
as the proceeds of the balancing event, the market value of the asset
at the time of the transfer.
20
Q transferring asset to third person
17    (1)
This paragraph applies to an asset if the first and second conditions are met.
      (2)
The first condition is that the asset is part of the subject matter of the first
transaction and constitutes—
(a)
plant or machinery, or
25
(b)
an industrial building (or part of an industrial building).
      (3)
The second condition is that Q transfers the asset to any person other than P.
      (4)
At the time that Q transfers the asset, that other person is to be treated as
becoming, and P is to be treated as ceasing to be, the owner of the asset.
      (5)
Accordingly, the transfer is to be treated—
30
(a)
as regards plant or machinery, as a disposal event (in relation to P)
occurring in the chargeable period in which the transfer takes place,
and
(b)
as regards an industrial building or part of an industrial building, as
a balancing event (in relation to P) occurring in the chargeable period
35
in which the transfer takes place.
      (6)
For the purposes of sub-paragraph (5)—
(a)
in the case falling within paragraph (a), the disposal value that P is
required to bring into account is the market value of the asset at the
time of the transfer;
40
(b)
in the case falling within paragraph (b), P is to be treated as receiving,
as the proceeds of the balancing event, the market value of the asset
at the time of the transfer.

Finance Bill
Schedule 61 — Alternative finance investment bonds
Part 3 — Transactions relating to underlying assets consisting of land
445

Supplementary
Substitution of asset
18    (1)
This paragraph applies if—
(a)
conditions A to C and G are met in relation to an interest in land (“the
original land”),
5
(b)
Q ceases to hold the original land as a bond asset (and, accordingly,
transfers it to P) before the termination of the alternative finance
investment bond,
(c)
P and Q enter into further arrangements falling within paragraph
5(2) relating to an interest in other land (“the replacement land”), and
10
(d)
the value of the interest in the replacement land at the time that it is
transferred from P to Q is greater than or equal to the value of the
interest in the original land at the time of the first transaction.
      (2)
Paragraphs 6 to 17 apply—
(a)
in relation to the original land with the modification set out in sub-
15
paragraph (3), and
(b)
in relation to the replacement land with the modifications set out in
sub-paragraph (4).
      (3)
Condition F does not need to be met in relation to the original land if
conditions A, B, C, F and G (as modified by sub-paragraph (4)) are met in
20
relation to the replacement land.
      (4)
In relation to the replacement land—
(a)
condition E applies as if the reference to the interest in the land were
a reference to the interest in the original land, and
(b)
condition G applies as if the reference in paragraph 5(11)(b) to the
25
first transaction were a reference to the first transaction relating to
the original land.
      (5)
If the replacement land is in the United Kingdom, the original land ceases to
be subject to the charge or security registered in pursuance of condition D
when—
30
(a)
Q provides HMRC with the prescribed evidence that condition G is
met in relation to the original land, and
(b)
condition D is met in relation to the replacement land.
      (6)
If the replacement land is not in the United Kingdom, the original land
ceases to be subject to the charge or security registered in pursuance of
35
condition D when Q provides HMRC with the prescribed evidence that—
(a)
condition G is met in relation to the original land, and
(b)
each of conditions A to C is met in relation to the replacement land.
      (7)
This paragraph also applies where the replacement land is replaced by
further replacement land; and in that event—
40
(a)
the references to the original land (except those in sub-paragraph (4))
are to be read as references to the replacement land, and
(b)
the references to the replacement land are to be read as references to
the further replacement land.

Finance Bill
Schedule 61 — Alternative finance investment bonds
Part 3 — Transactions relating to underlying assets consisting of land
446

HMRC to notify Registrar of discharge of charge
19    (1)
Where a charge or security is discharged in accordance with paragraph 9 or
18(5) or (6), HMRC must—
(a)
in the case of a charge on land in England and Wales, notify the Chief
Land Register of the discharge in accordance with land registration
5
rules (within the meaning of the Land Registration Act 2002),
(b)
in the case of a security granted over land in Scotland, register the
discharge in the Land Register of Scotland, and
(c)
in the case of a charge on land in Northern Ireland, notify the
Registrar of Titles of the discharge.
10
      (2)
HMRC must do so within the period of 30 days beginning with the date on
which Q provides the evidence in question.
Relief not available where bond-holder acquires control of underlying asset
20    (1)
The reliefs provided by paragraphs 6 to 12 (and paragraph 18 so far as it
relates to those paragraphs) are not available if control of the underlying
15
asset is acquired by—
(a)
a bond-holder, or
(b)
a group of connected bond-holders.
      (2)
A bond-holder (“BH”), or a group of connected bond-holders, acquires
control of the underlying asset if—
20
(a)
the rights of bond-holders under an alternative finance investment
bond include the right of management and control of the bond
assets, and
(b)
BH, or the group, acquires sufficient rights to enable BH, or the
members of the group acting jointly, to exercise the right of
25
management and control of the bond assets to the exclusion of any
other bond-holders.
      (3)
In accordance with sub-paragraph (1), in the case of the reliefs provided by
paragraphs 6 and 10—
(a)
if BH, or the group, acquires control of the underlying asset before
30
the end of the period of 30 days beginning with the effective date of
the first transaction, paragraphs 6 and 10 do not apply, and
(b)
if BH, or the group, acquires control of the underlying asset after the
end of that period and conditions A to C have been met, paragraphs
7 and 11 apply.
35
21    (1)
But paragraph 20 does not prevent the reliefs being available in either of the
following cases.
      (2)
The first case is where—
(a)
at the time that the rights were acquired BH (or all of the connected
bond-holders) did not know and had no reason to suspect that the
40
acquisition enabled the exercise of the right of management and
control of the bond assets to the exclusion of other bond-holders, and
(b)
as soon as reasonably practicable after BH (or any of the bond-
holders) becomes aware that the acquisition enables that exercise,
BH transfers (or some or all of the bond-holders transfer) sufficient
45
rights for that no longer to be possible.