Finance Bill

House of Commons

Session 2009 - 10
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Finance Bill

Finance Bill
Schedule 11 — Penalties: offshore income etc
114

(d)
anything having effect as if it were income, assets or
activities of a kind described above.
      (5)
A failure “involves a domestic matter” if it results in a potential
loss of revenue that is charged on or by reference to anything not
mentioned in sub-paragraph (4)(a) to (d).
5
      (6)
If a single failure is in more than one category (each referred to as
a “relevant category”)—
(a)
it is to be treated for the purposes of this Schedule as if it
were separate failures, one in each relevant category
according to the matters that it involves, and
10
(b)
the potential lost revenue in respect of each separate
failure is taken to be such share of the potential lost
revenue in respect of the single failure (see paragraphs 7
and 11) as is just and reasonable.
      (7)
For the purposes of this Schedule—
15
(a)
paragraph 21A of Schedule 24 to FA 2007 (classification of
territories) has effect, but
(b)
an order under that paragraph does not apply to relevant
obligations that are to be complied with by a date before
the date on which the order comes into force.
20
      (8)
Regulations under paragraph 21B of Schedule 24 to FA 2007
(location of assets etc) apply for the purposes of paragraph 6A of
this Schedule as they apply for the purposes of paragraph 4A of
that Schedule.
      (9)
In this paragraph—
25
“assets” has the meaning given in section 21(1) of TCGA 1992,
but also includes sterling;
“UK” means the United Kingdom, including the territorial
sea of the United Kingdom.
6B
The penalty payable under any of paragraphs 2, 3(1) and 4 is—
30
(a)
for a deliberate and concealed act or failure, 100% of the
potential lost revenue,
(b)
for a deliberate but not concealed act or failure, 70% of the
potential lost revenue, and
(c)
for any other case, 30% of the potential lost revenue.
35
6C
The penalty payable under paragraph 3(2) is 100% of the potential
lost revenue.
6D
Paragraphs 7 to 11 define “potential lost revenue”.”
9
For paragraph 13 substitute—
“13   (1)
If a person who would otherwise be liable to a penalty of a
40
percentage shown in column 1 of the Table (a “standard
percentage”) has made a disclosure, HMRC must reduce the
standard percentage to one that reflects the quality of the
disclosure.
      (2)
But the standard percentage may not be reduced to a percentage
45
that is below the minimum shown for it—

Finance Bill
Schedule 11 — Penalties: offshore income etc
115

(a)
for a prompted disclosure, in column 2 of the Table, and
(b)
for an unprompted disclosure, in column 3 of the Table.
      (3)
Where the Table shows a different minimum for case A and case
B—
(a)
the case A minimum applies if—
5
(i)
the penalty is one under paragraph 1, and
(ii)
HMRC become aware of the failure less than 12
months after the time when the tax first becomes
unpaid by reason of the failure, and
(b)
otherwise, the case B minimum applies.
10

Standard %
Minimum % for
Minimum % for

prompted
unprompted

disclosure
disclosure

30%
case A: 10%
case A: 0%

case B: 20%
case B: 10%

15

45%
case A: 15%
case A: 0%

case B: 30%
case B: 15%

60%
case A: 20%
case A: 0%

case B: 40%
case B: 20%

70%
35%
20%

20

105%
52.5%
30%

140%
70%
40%

100%
50%
30%

150%
75%
45%

200%
100%
60%”.

25
Schedule 55 to FA 2009
10
Schedule 55 to FA 2009 (penalties for failure to make returns etc) is amended
as follows.
11    (1)
Paragraph 6 (amount of penalty if failure continues more than 12 months) is
amended as follows.
30
      (2)
In sub-paragraph (3)(a), for “100%” substitute “the relevant percentage”.
      (3)
After sub-paragraph (3) insert—
   “(3A)
For the purposes of sub-paragraph (3)(a), the relevant percentage
is—
(a)
for the withholding of category 1 information, 100%,
35
(b)
for the withholding of category 2 information, 150%, and
(c)
for the withholding of category 3 information, 200%.”
      (4)
In sub-paragraph (4)(a), for “70%” substitute “the relevant percentage”.

Finance Bill
Schedule 11 — Penalties: offshore income etc
116

      (5)
After sub-paragraph (4) insert—
   “(4A)
For the purposes of sub-paragraph (4)(a), the relevant percentage
is—
(a)
for the withholding of category 1 information, 70%,
(b)
for the withholding of category 2 information, 105%, and
5
(c)
for the withholding of category 3 information, 140%.”
      (6)
After sub-paragraph (5) insert—
    “(6)
Paragraph 6A explains the 3 categories of information.”
12
After paragraph 6 insert—
“6A   (1)
Information is category 1 information if—
10
(a)
it involves a domestic matter, or
(b)
it involves an offshore matter and—
(i)
the territory in question is a category 1 territory, or
(ii)
it is information which would enable or assist
HMRC to assess P’s liability to a tax other than
15
income tax or capital gains tax.
      (2)
Information is category 2 information if—
(a)
it involves an offshore matter,
(b)
the territory in question is a category 2 territory, and
(c)
it is information which would enable or assist HMRC to
20
assess P’s liability to income tax or capital gains tax.
      (3)
Information is category 3 information if—
(a)
it involves an offshore matter,
(b)
the territory in question is a category 3 territory, and
(c)
it is information which would enable or assist HMRC to
25
assess P’s liability to income tax or capital gains tax.
      (4)
Information “involves an offshore matter” if the liability to tax
which would have been shown in the return includes a liability to
tax charged on or by reference to—
(a)
income arising from a source in a territory outside the UK,
30
(b)
assets situated or held in a territory outside the UK,
(c)
activities carried on wholly or mainly in a territory outside
the UK, or
(d)
anything having effect as if it were income, assets or
activities of a kind described above.
35
      (5)
Information “involves a domestic matter” if the liability to tax
which would have been shown in the return includes a liability to
tax charged on or by reference to anything not mentioned in sub-
paragraph (4)(a) to (d).
      (6)
If the information which P withholds falls into more than one
40
category—
(a)
P’s failure to make the return is to be treated for the
purposes of this Schedule as if it were separate failures,
one for each category of information according to the
matters which the information involves, and
45

Finance Bill
Schedule 11 — Penalties: offshore income etc
117

(b)
for each separate failure, the liability to tax which would
have been shown in the return in question is taken to be
such share of the liability to tax which would have been
shown in the return mentioned in paragraph (a) as is just
and reasonable.
5
      (7)
For the purposes of this Schedule—
(a)
paragraph 21A of Schedule 24 to FA 2007 (classification of
territories) has effect, but
(b)
an order under that paragraph does not apply to a failure
if the filing date is before the date on which the order
10
comes into force.
      (8)
Regulations under paragraph 21B of Schedule 24 to FA 2007
(location of assets etc) apply for the purposes of paragraph 6A of
this Schedule as they apply for the purposes of paragraph 4A of
that Schedule.
15
      (9)
In this paragraph—
“assets” has the meaning given in section 21(1) of TCGA 1992,
but also includes sterling;
“UK” means the United Kingdom, including the territorial
sea of the United Kingdom.”
20
13    (1)
Paragraph 15 (reductions for disclosure) is amended as follows.
      (2)
For sub-paragraphs (1) and (2) substitute—
    “(1)
If a person who would otherwise be liable to a penalty of a
percentage shown in column 1 of the Table (a “standard
percentage”) has made a disclosure, HMRC must reduce the
25
standard percentage to one that reflects the quality of the
disclosure.
      (2)
But the standard percentage may not be reduced to a percentage
that is below the minimum shown for it—
(a)
in the case of a prompted disclosure, in column 2 of the
30
Table, and
(b)
in the case of an unprompted disclosure, in column 3 of the
Table.

Standard %
Minimum % for
Minimum % for

prompted
unprompted

35

disclosure
disclosure

70%
35%
20%

105%
52.5%
30%

140%
70%
40%

100%
50%
30%

40

150%
75%
45%

200%
100%
60%”.

Finance Bill
Schedule 12 — Reliefs and reductions for foreign tax
118

      (3)
Omit sub-paragraphs (3) and (4).
14
In paragraph 17 (interaction with other penalties)—
(a)
in sub-paragraph (3), for “100%” substitute “the relevant
percentage”, and
(b)
after that sub-paragraph insert—
5
    “(4)
The relevant percentage is—
(a)
if one of the penalties is a penalty under paragraph
6(3) or (4) and the information withheld is category
3 information, 200%,
(b)
if one of the penalties is a penalty under paragraph
10
6(3) or (4) and the information withheld is category
2 information, 150%, and
(c)
in all other cases, 100%.”
Schedule 12
Section 37

Reliefs and reductions for foreign tax
15
Effect of foreign tax becoming payable
1     (1)
Paragraph 3 of Schedule 28AB to ICTA (schemes about effect of paying
foreign tax) is amended as follows.
      (2)
In sub-paragraph (2)—
(a)
in paragraph (a), after “paid” insert “or payable”, and
20
(b)
in paragraph (b), for “of the payment of that amount of foreign tax on
the foreign tax total” substitute “on the foreign tax total of that
amount being so paid or payable”.
      (3)
In sub-paragraph (3)(b), for “the payment by the claimant of that amount of
foreign tax” substitute “that amount of foreign tax being paid or payable by
25
the claimant”.
2     (1)
Section 85 of TIOPA 2010 (schemes about effect of paying foreign tax) is
amended as follows.
      (2)
In subsection (2)—
(a)
for paragraph (a) substitute—
30
“(a)
an amount of foreign tax (“the FT amount”) is paid or
payable by C, and”, and
(b)
in paragraph (b), for “of the payment of the FT amount on the
foreign-tax total” substitute “on the foreign-tax total of the FT
amount being so paid or payable”.
35
      (3)
In subsection (3), in paragraph (b) of the definition of “the foreign-tax total”,
for “the payment by C of the FT amount” substitute “the FT amount being
paid or payable by C”.
3     (1)
The amendments made by paragraphs 1 and 2 have effect in relation to
amounts of foreign tax payable on or after 21 October 2009.
40

Finance Bill
Schedule 12 — Reliefs and reductions for foreign tax
119

      (2)
But see paragraph 5 for amounts of foreign tax payable on or after 1 April
2010 (as regards corporation tax) or 6 April 2010 (as regards income tax or
capital gains tax).
Schemes about deemed foreign tax
4     (1)
In TIOPA 2010, after section 85 insert—
5
“85A
Section 83(2) and (4): schemes involving deemed foreign tax
(1)
This section applies to a scheme or arrangement if in relation to a
claimant—
(a)
an amount (“amount X”) is treated by virtue of a provision of
the Tax Acts as if it were an amount of foreign tax paid or
10
payable by the claimant in respect of a source of income, and
(b)
condition A or B is met.
(2)
Condition A is met if, when the claimant entered into the scheme or
arrangement, it could reasonably be expected that, under the scheme
or arrangement, no real foreign tax would be paid or payable by a
15
participant.
(3)
Condition B is met if, when the claimant entered into the scheme or
arrangement, it could reasonably be expected that, under the scheme
or arrangement—
(a)
an amount of real foreign tax (“the RFT amount”) would be
20
paid or payable by a participant, but
(b)
the effect on the foreign-tax total of the RFT amount being so
paid or payable would be to increase the foreign-tax total by
less than the amount allowable to the claimant as a credit in
respect of amount X.
25
(4)
In this section—
“claimant” means a person who for a chargeable period has
claimed, or is in a position to claim, for any credit that under
the arrangements is to be allowed for foreign tax;
“the foreign-tax total” has the meaning given by section 85(3),
30
except that the reference to “the FT amount being paid or
payable by C” must be read as a reference to “the RFT amount
being paid or payable by any of them”;
“income” includes a chargeable gain;
“participant” means a person who is party to, or concerned in,
35
the scheme or arrangement;
“real foreign tax” means—
(a)
in a case involving section 10 (accrued income
profits), the foreign tax chargeable in respect of the
interest on the securities, as mentioned in subsection
40
(1)(c) of that section,
(b)
in a case involving section 792 or 794 of CTA 2010
(manufactured overseas dividends), the foreign tax
chargeable in respect of the overseas dividend of
which the manufactured overseas dividend is
45
representative, as mentioned in section 790 of that
Act, and

Finance Bill
Schedule 12 — Reliefs and reductions for foreign tax
120

(c)
in any other case, the foreign tax chargeable in respect
of the source of income of which the source
mentioned in subsection (1)(a) is representative.”
      (2)
The amendment made by this paragraph has effect in relation to amounts
treated as if they were amounts of foreign tax paid or payable on or after 21
5
October 2009.
      (3)
A corresponding amendment, having effect in relation to such amounts, is
to be treated as having been made in Schedule 28AB to ICTA.
Foreign tax payable by other participants
5     (1)
In section 85 of TIOPA 2010 (schemes about effect of paying foreign tax) as
10
amended by paragraph 2—
(a)
in subsection (1), for “for foreign tax” substitute “in respect of the
payment of an amount of foreign tax (“the FT amount”)”,
(b)
for subsection (2) substitute—
“(2)
The condition is that, when C entered into the scheme or
15
arrangement, it could reasonably be expected that the effect
on the foreign-tax total of the FT amount being paid or
payable would be to increase that total by less than amount
X.”, and
(c)
in subsection (3)—
20
(i)
for “subsection (2)(b)” substitute “subsection (2)”, and
(ii)
in paragraph (b) of the definition of “the foreign-tax total”,
omit “by C”.
      (2)
In section 85A of TIOPA 2010 (schemes involving deemed foreign tax) as
inserted by paragraph 4—
25
(a)
in subsection (1)(a), omit “by the claimant”, and
(b)
in subsection (4), in the definition of “the foreign-tax total”, omit “by
C”.
      (3)
The amendments made by this paragraph have effect in relation to amounts
of foreign tax, or amounts treated as if they were amounts of foreign tax,
30
payable—
(a)
as regards corporation tax, on or after 1 April 2010, and
(b)
as regards income tax or capital gains tax, on or after 6 April 2010.
Claims etc made before scheme or arrangement made
6     (1)
In section 86 of TIOPA 2010 (schemes about claims or elections etc)—
35
(a)
in subsection (1), omit “under the scheme or arrangement”, and
(b)
after subsection (3) insert—
“(3A)
Reference in subsection (1) to a step that is taken or not taken
by a participant includes one that was taken or not taken by
a participant before the scheme or arrangement was made.
40
(3B)
The reason for taking or not taking a step does not matter so
long as it has the effect mentioned in subsection (1).”
      (2)
The amendments made by this paragraph have effect in relation to amounts
of foreign tax payable—