Finance Bill

House of Commons

Session 2009 - 10
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Finance Bill

Finance Bill
Schedule 18 — Disclosure of tax avoidance schemes
150

(3)
P must comply with a requirement under or by virtue of subsection
(1) within—
(a)
the prescribed period, or
(b)
such longer period as HMRC may direct.”
Penalties
5
10    (1)
Section 98C of TMA 1970 (penalties for failures to comply with duties
relating to disclosure of tax avoidance schemes) is amended as follows.
      (2)
In subsection (1)(a) (initial penalty for failing to comply with duties), for
“£5,000” substitute—
“(i)
in the case of a provision mentioned in paragraph (a),
10
(b) or (c) of that subsection, £600 for each day during
the initial period (but see also subsections (2A), (2B)
and (2ZC) below), and
(ii)
in any other case, £5,000.”
      (3)
In subsection (2)—
15
(a)
omit the “and” at the end of paragraph (da),
(b)
after that paragraph insert—
“(db)
section 313ZA (duty of promoter to provide details of
clients),”, and
(c)
insert at the end “and
20
(f)
section 313C (duty of introducer to give details of
persons who have provided information).”
      (4)
After that subsection insert—
“(2ZA)
In this section “the initial period” means the period—
(a)
beginning with the relevant day, and
25
(b)
ending with the earlier of the day on which the penalty under
subsection (1)(a)(i) is determined and the last day before the
failure ceases;

and for this purpose “the relevant day” is the day specified in
relation to the failure in the following table.
30
Table

Failure
Relevant day

A failure to comply with
The first day after the end of

subsection (1) or (3) of section
the period prescribed under

308 in so far as the subsection
section 306A(6)

35

applies by virtue of an order

under section 306A

A failure to comply with
The first day after the end of

subsection (1) or (3) of section
the period prescribed under

308 in so far as the subsection
subsections (5) and (6)(a) of

40

applies by virtue of an order
section 308A (as it may have

under section 308A(2)
been extended by a direction

under subsection (6)(b) of

that section)

Any other failure to comply
The first day after the end of

45

with subsection (1) of section
the period prescribed under

308
that subsection

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Schedule 18 — Disclosure of tax avoidance schemes
151

Failure
Relevant day

Any other failure to comply
The first day after the end of

with subsection (3) of section
the period prescribed under

308
that subsection

A failure to comply with
The first day after the end of

5

subsection (1) of section 309
the period prescribed under

that subsection

A failure to comply with
The first day after the latest

section 310
time by which section 310

must be complied with in the

10

case concerned

(2ZB)
The amount of a penalty under subsection (1)(a)(i) is to be arrived at
after taking account of all relevant considerations, including the
desirability of its being set at a level which appears appropriate for
deterring the person, or other persons, from similar failures to
15
comply on future occasions having regard (in particular)—
(a)
in the case of a penalty for a person’s failure to comply with
section 308(1) or (3), to the amount of any fees received, or
likely to have been received, by the person in connection with
the notifiable proposal (or arrangements implementing the
20
notifiable proposal), or with the notifiable arrangements, and
(b)
in the case of a penalty for a person’s failure to comply with
section 309(1) or 310, to the amount of any advantage gained,
or sought to be gained, by the person in relation to any tax
prescribed under section 306(1)(b) in relation to the notifiable
25
arrangements.
(2ZC)
If the maximum penalty under subsection (1)(a)(i) above appears
inappropriately low after taking account of those considerations, the
penalty is to be of such amount not exceeding £1 million as appears
appropriate having regard to those considerations.
30
(2ZD)
Where it appears to an officer of Revenue and Customs that a penalty
under subsection (1)(a)(i) above has been determined on the basis
that the initial period begins with a day later than that which the
officer considers to be the relevant day, an officer of Revenue and
Customs may commence proceedings for a re-determination of the
35
penalty.
(2ZE)
The Treasury may by regulations vary—
(a)
any of the sums for the time being specified in subsection (1)
above, and
(b)
the sum specified in subsection (2ZC) above.”
40
      (5)
In subsection (2A), for “amount specified in subsection (1)(b) above shall be
increased to the prescribed sum” substitute “amounts specified in
subsection (1)(a)(i) and (b) above shall be increased to the prescribed sum in
relation to days falling after the prescribed period”.
      (6)
In subsection (2B), for “amount specified in subsection (1)(b)” substitute
45
“amounts specified in subsection (1)(a)(i) and (b)”.
      (7)
In subsection (2C)(b), after “section” insert “306A or”.
      (8)
In subsection (2D), after “under section” insert “306A or”.

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Schedule 19 — Sale of lessors: election out of charge
152

      (9)
In subsection (2E), after “under section” insert “306A or”.
     (10)
In subsection (2F)—
(a)
in the opening words, for “subsection (2C)” substitute “this section”,
and
(b)
in paragraph (c), after “subsection” insert “(2ZE) or”.
5
Commencement
11    (1)
The amendments made by this Schedule come into force on such day as the
Treasury may by order made by statutory instrument appoint.
      (2)
An order may appoint different days for different provisions or for different
purposes.
10
Schedule 19
Section 63

Sale of lessors: election out of charge
Main changes
1
Chapter 3 of Part 9 of CTA 2010 (sale of lessors: leasing business carried on
by company alone) is amended as follows.
15
2     (1)
Section 382 (introduction to Chapter) is amended as follows.
      (2)
In subsection (1)—
(a)
for “qualifying change of ownership in relation to” substitute
“relevant change in the relationship between”, and
(b)
insert at the end “and a principal company of the company.”
20
      (3)
In subsection (3), for ““qualifying change of ownership”, see sections 392 to
398.” substitute ““relevant change in the relationship between a company
and a principal company of the company”, see sections 392 to 394.”
3
In section 383 (income and matching expense in different accounting
periods), after subsection (1) insert—
25
“(1A)
For the meaning of “qualifying change of ownership”, see sections
394A to 398A”
4
For section 392 (and the italic heading before it) substitute—
““Relevant change in relationship”
392
“Relevant change in relationship”
30
  For the purposes of the sales of lessors Chapters there is a relevant
change in the relationship between a company (“A”) and a principal
company of A on any day in any of the circumstances in section 393
or 394 (qualifying 75% subsidiaries and consortium relationships).”

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Schedule 19 — Sale of lessors: election out of charge
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5
After section 394 insert—
““Qualifying change of ownership”
394A
“Qualifying change of ownership”
  For the purposes of the sales of lessors Chapters there is a qualifying
change of ownership in relation to a company (“A”) on any day if
5
there is a relevant change in the relationship on that day between A
and a principal company of A unless any of the following apply—
(a)
section 395(2),
(b)
section 396(2), or
(c)
section 398A(2) or (5).”
10
6
After section 398 insert—
“Election out of qualifying change of ownership
398A
Election out of qualifying change of ownership
(1)
This section applies if—
(a)
on any day (“the relevant day”) a company (“A”) carries on a
15
business of leasing plant or machinery otherwise than in
partnership,
(b)
there is a relevant change in the relationship between A and
a principal company of A (“P”) on the relevant day, and
(c)
an election that this section is to apply is made by A.
20
(2)
For the purposes of the sales of lessors Chapters, there is no
qualifying change of ownership in relation to A on the relevant day
as a result of the change in the relationship but—
(a)
subsections (2)(b) and (4)(b) of section 383 nevertheless
apply,
25
(b)
section 398D (and section 398C so far as relating to it) has
effect during the relevant period, and
(c)
sections 398E to 398G (and section 398C so far as relating to
section 398E) have effect on the relevant day and during the
relevant period.
30
(3)
“The relevant period” is the period—
(a)
beginning with the day after the relevant day, and
(b)
ending with the day on which there is next a relevant change
in the relationship between A and a principal company of A
falling within subsection (4) (or continuing indefinitely if
35
there is not another such relevant change).
(4)
A relevant change in the relationship between A and a principal
company of A falls within this subsection if, as a result of it, the
(unadjusted) basic amount (see section 399) is (or, but for a further
election, would be) treated as a receipt of the business of leasing
40
plant or machinery carried on by A.
(5)
Where during the relevant period there is a relevant change in the
relationship between A and a principal company of A but the
relevant period is not brought to an end by it, for the purposes of the

Finance Bill
Schedule 19 — Sale of lessors: election out of charge
154

sales of lessors Chapters there is no qualifying change of ownership
in relation to A as a result of the change in the relationship.
398B
The election
(1)
The election under section 398A must state the date of the relevant
day.
5
(2)
The election must be made—
(a)
by notice to an officer of Revenue and Customs, and
(b)
during the period of two years beginning with the relevant
day.
(3)
The election is irrevocable.
10
(4)
All such assessments and adjustments of assessments are to be made
as are necessary to give effect to the election.
398C
Special treatment of A’s trade or business that includes leasing
(1)
Sections 398D and 398E make special provision about the trade or
property business consisting of or including A’s business of leasing
15
plant or machinery.
(2)
In those sections “the relevant activity” means—
(a)
if A’s business of leasing plant or machinery constitutes or
forms part of a trade, that trade, and
(b)
if it forms part of a property business, that property business.
20
398D
Restrictions on use of losses etc
(1)
No loss may be deducted under—
(a)
Chapter 2 of Part 4,
(b)
section 62, or
(c)
section 189,
25

from so much of the total profits of A as are attributable to the
carrying on of the relevant activity except to the extent that the loss
or charge is attributable to the carrying on of the relevant activity.
(2)
Group relief is not to be given under Part 5 against so much of the
total profits of A as are attributable to the carrying on of the relevant
30
activity.
(3)
No deficit may be set off under section 461 of CTA 2009 (non-trading
deficit from loan relationship) against profits attributable to the
carrying on of the relevant activity except to the extent that the deficit
is attributable to the carrying on of the relevant activity.
35
(4)
No loss may be set off under section 753 of CTA 2009 (non-trading
loss on intangible fixed assets) against so much of the total profits of
A as are attributable to the carrying on of the relevant activity except
to the extent that the loss or charge is attributable to the carrying on
of the relevant activity.
40
(5)
No deduction is to be allowed under section 1219 of CTA 2009
(expenses of management of investment business) from so much of
the total profits of A as are attributable to the carrying on of the

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Schedule 19 — Sale of lessors: election out of charge
155

relevant activity except to the extent that the expenses concerned are
attributable to the carrying on of the relevant activity.
(6)
If A is a controlled foreign company within the meaning of Chapter
4 of Part 17 of ICTA in relation to which an apportionment falls to be
made under section 747(3) of that Act in respect of the accounting
5
period ending with the relevant day, no sum may be set off under
paragraph 1 of Schedule 26 to ICTA by any person in respect of so
much of the chargeable profits of A as are apportioned to the person
and are attributable to the carrying on of the relevant activity.
(7)
If A would otherwise be a tonnage tax company under Schedule 22
10
to FA 2000 (tonnage tax) it is to be treated as not being such a
company.
398E
Restriction on artificial losses or reductions in profits
(1)
This section applies if any expenditure incurred by A in carrying on
the relevant activity has an unallowable purpose.
15
(2)
In calculating the profits or losses of A for any accounting period for
the purposes of corporation tax so much of the expenditure as, on a
just and reasonable apportionment, is attributable to the unallowable
purpose is to be left out of account.
(3)
Expenditure has an unallowable purpose if the main purpose, or one
20
of the main purposes, of A in incurring it is to obtain a relevant tax
advantage (“the unallowable purpose”).
(4)
A “relevant tax advantage” is—
(a)
a reduction in the profits which, for the purposes of
corporation tax, are attributable to the carrying on of the
25
relevant activity by A,
(b)
the creation of a loss which, for those purposes, is so
attributable, or
(c)
an increase in losses which, for those purposes, are so
attributable.
30
398F
Limit on availability of capital allowances to A
(1)
Expenditure incurred by A in providing plant or machinery is not
qualifying expenditure for the purposes of Part 2 of CAA 2001 if the
expenditure is incurred on the acquisition or creation of an
independent asset.
35
(2)
An asset is an “independent” asset if, in the normal course of
business—
(a)
it could be used individually (whether or not it could also be
used in conjunction with another asset or other assets as a
constituent part of a single asset consisting of more than one
40
asset (a “combined asset”)), or
(b)
it could be used (at different times) as a constituent part of
different combined assets.
398G
Transfers into and out of A
(1)
Section 948 does not apply where A is the predecessor or the
45
successor.

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Schedule 19 — Sale of lessors: election out of charge
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(2)
Where section 948 does not apply as a result of subsection (1), the
plant or machinery belonging to the trade is to be treated for the
purposes of the Corporation Tax Acts as sold by the predecessor to
the successor on the day of cessation for an amount equal to its
market value on that day.
5
(3)
Where A is the predecessor, section 265(2)(b) of CAA 2001
(successions) applies—
(a)
even if the relevant property has been sold to the successor,
and
(b)
as if the reference to market value were to market value as
10
determined in accordance with section 437(9).”
Interpretation
7
In section 437 of CTA 2010 (interpretation of the sales of lessors Chapters),
after subsection (8) insert—
“(8A)
“Property business” means a UK property business or an overseas
15
property business.”
8
In Schedule 4 to that Act (index of defined expressions), insert at the
appropriate places—

“property business (in Chapters 3
section 437(8A)”

to 6 of Part 9)

20

“relevant change in relationship
section 392”,

(in Chapters 3 to 6 of Part 9)


and in the entry relating to “qualifying change of ownership in relation to a
company (in Chapters 3 to 6 of Part 9)” for “392 to 398” substitute “394A to
398A”).
25
Commencement etc
9
The amendments made by this Schedule have effect where the relevant day
is on or after 9 December 2009.
10
Amendments corresponding to those made by this Schedule, having effect
where the relevant day is on or after that date, are to be treated as having
30
been made in Schedule 10 to FA 2006.
11
Neither section 398F of CTA 2010 (inserted by paragraph 6) nor the
corresponding provision treated as inserted by paragraph 10 apply in
relation to expenditure incurred in pursuance of a written contract which is
finalised by A before 9 December 2009; and for this purpose a contract is
35
finalised on the earliest date on which—
(a)
it is unconditional or (if conditional) the conditions are met, and
(b)
no terms remain to be agreed.
12
Section 398A of CTA 2010 (as inserted by paragraph 6) has effect in relation
to a relevant change in the relationship between A and a principal company
40
of A in the case of which the relevant day is before 24 March 2010 as if—
(a)
in subsection (3)(b), the words “falling within subsection (4)”, and