Finance Bill

House of Commons

Session 2009 - 10
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Finance Bill

Finance Bill
Schedule 3 — Pensions: high income excess relief charge
70

UOLS is the amount of the opening lump sum (see subsection
(7)), uprated in accordance with section 213M, and
OALSARF is the factor which is the appropriate age-related
factor (see section 213L) in relation to the opening lump sum.
(6)
The amount of the closing lump sum is the amount of the lump sum
5
to which the individual would, on the relevant assumptions, be
entitled under the arrangement if the individual became entitled to
it at the end of the tax year.
(7)
The amount of the opening lump sum is the amount of the lump sum
to which the individual would, on the relevant assumptions, be
10
entitled under the arrangement if the individual became entitled to
it at the end of the preceding tax year.
(8)
If, during the tax year, minimum payments are made under—
(a)
section 8 of the Pension Schemes Act 1993, or
(b)
section 4 of the Pension Schemes (Northern Ireland) Act 1993,
15

in relation to the individual in connection with a defined benefits
arrangement, the amount is to be subtracted from what would
otherwise be the pension savings amount in the case of the
individual in respect of the arrangement.
(9)
If during the tax year the individual becomes entitled to a serious ill-
20
health lump sum under the arrangement or dies, the pension savings
amount in the case of the individual in respect of the arrangement is
nil.
213K
Adjustment of closing pension and lump sum
(1)
This section applies for adjusting ACP and ACLS under section 213J.
25
(2)
If, during the tax year, the annual rate of the pension, or the amount
of the lump sum, to which the individual would be entitled under
the arrangement has been reduced by having become subject to a
pension debit, the amount of the reduction is to be added to ACP or
ACLS.
30
(3)
If, during the tax year, the annual rate of the pension, or the amount
of the lump sum, to which the individual would be entitled under
the arrangement has been increased by the individual having
become entitled to a pension credit deriving from the same or
another registered pension scheme, the amount of the increase is to
35
be subtracted from ACP or ACLS.
(4)
If, during the tax year, the annual rate of the pension, or the amount
of the lump sum, to which the individual would be entitled under
the arrangement has been reduced by reason of a transfer relating to
the individual of any sums or assets held for the purposes of, or
40
representing accrued rights under, the arrangement so as to become
held for the purposes of, or to represent rights under, any other
pension scheme that is—
(a)
a registered pension scheme, or
(b)
a qualifying recognised overseas pension scheme,
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the amount of the reduction is to be added to ACP or ACLS.

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Schedule 3 — Pensions: high income excess relief charge
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(5)
If, during the tax year, the annual rate of the pension, or the amount
of the lump sum, to which the individual would be entitled under
the arrangement has been increased by reason of a transfer relating
to the individual of any sums or assets held for the purposes of, or
representing accrued rights under, any pension scheme so as to
5
become held for the purposes of, or to represent rights under, the
arrangement, the amount of the increase is to be subtracted from
ACP or ACLS.
(6)
If, during the tax year, the annual rate of the pension, or the amount
of the lump sum, to which the individual would be entitled under
10
the arrangement has been reduced by any commutation, allocation
or surrender made, or similar action taken, pursuant to an option
available to the individual under the arrangement, the amount of the
reduction is to be added to ACP or ACLS.
(7)
If, during the tax year—
15
(a)
benefit crystallisation event 2 or 3 occurs in relation to the
individual and the arrangement, or
(b)
benefit crystallisation event 6 occurs in relation to the
individual and the arrangement by virtue of the individual
becoming entitled to a pension commencement lump sum or
20
a lifetime allowance excess lump sum,

the annual rate of the pension, or the amount of the lump sum, to
which the individual became entitled (otherwise than by
commutation of lump sum or of pension) is to be added to ACP or
ACLS.
25
213L
Age-related factors
(1)
The Treasury must make regulations about age-related factors.
(2)
Different provision may be made in relation to rights age-related
factors and lump sum age-related factors, on the one hand, and
pension age-related factors on the other.
30
(3)
For the purposes of sections 213H and 213J the “appropriate” age-
related factor is the age-related factor which applies in the case of the
individual, and the amount of the rights or lump sum, or rate of the
pension, in accordance with the regulations.
(4)
Regulations under subsection (1) must make provision for the age-
35
related factor or factors applying in the case of the individual to be
arrived at by reference to—
(a)
the age of the individual, and
(b)
the relevant normal pension age,

at the relevant time.
40
(5)
The relevant time, in relation to factors for a tax year, is the end of the
tax year unless the case is one in which there is a change in the
relevant normal pension age during the tax year.
(6)
In that case, the relevant time, in relation to the relevant normal
pension age and the opening rights, opening pension or opening
45
lump sum for the tax year, is the end of the previous tax year.

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Schedule 3 — Pensions: high income excess relief charge
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(7)
Regulations under subsection (1) may make provision for the age-
related factor or factors applying in the case of an individual and an
arrangement to vary according to the nature and extent of the
benefits which may be provided to or in respect of the individual
under the arrangement.
5
(8)
Before making the first regulations under subsection (1) the Treasury
must seek advice from the Government Actuary or the Deputy
Government Actuary.
(9)
Before making any other regulations under subsection (1) the
Treasury must carry out a review of the provision made by the
10
regulations for the time being in force under this section; and when
conducting such a review the Treasury must seek advice from the
Government Actuary or the Deputy Government Actuary.
(10)
The Treasury must carry out a review of the provision made by the
regulations for the time being in force under subsection (1)—
15
(a)
no later than the end of the period of 5 years beginning with
the day on which the first regulations are made under this
section, and
(b)
no later than the end of the period of 5 years beginning with
the last review of the provision made by the regulations for
20
the time being in force under this section.
(11)
In this section “the relevant normal pension age”, in relation to an
individual and an arrangement, means the age at which the
individual would be unconditionally entitled to benefits under the
arrangement without any reduction on account of age (assuming
25
that the individual were a deferred member of the pension scheme
under which it is an arrangement and it were the only arrangement
under the pension scheme relating to the individual).
(12)
But the Treasury may by regulations make provision for the relevant
normal pension age to be the age specified in, or determined in
30
accordance with, the regulations in cases of such descriptions as are
specified in the regulations.
(13)
The Treasury may by regulations make provision modifying the
operation of sections 213H to 213K in relation to cases where the
relevant normal pension age in relation to an individual and an
35
arrangement is not the same in relation to all the rights or benefits
under the arrangement.
213M
Uprating of opening rights, pension and lump sum
(1)
This section applies for uprating UOR under section 213H and UOP
and UOLS under section 213J.
40
(2)
Each is to be increased by the appropriate percentage.
(3)
The appropriate percentage for a tax year is the percentage arrived at
for the tax year in accordance with provision made by order made by
the Treasury.
(4)
An order under subsection (3)—
45

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Schedule 3 — Pensions: high income excess relief charge
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(a)
must make provision for securing that the appropriate
percentage for a tax year reflects any decrease in the value of
money over a specified period, and
(b)
may do so by reference to any movement in a specified index,
or an average of any movements in specified indices, over a
5
specified period.
(5)
If an order is made under subsection (3) which amends any provision
included in an order by virtue of subsection (4)(b), the Treasury must
as soon as reasonably practicable after the making of the order carry
out a review of the provision made by the regulations for the time
10
being in force under section 213L(1).
213N
Hybrid arrangements
(1)
The pension savings amount in respect of a hybrid arrangement is
the greater or greatest of such of amounts A, B and C as are relevant
amounts.
15
(2)
An amount is a relevant amount in the case of a hybrid arrangement
if, in any circumstances, the benefits that may be provided to or in
respect of the individual under the arrangement may be benefits of
the variety mentioned in the definition of that amount.
(3)
Amount A is what would be the pension savings amount under
20
section 213G if the benefits provided to or in respect of the individual
under the arrangement were money purchase benefits other than
cash balance benefits.
(4)
Amount B is what would be the pension savings amount under
section 213H if the benefits provided to or in respect of the individual
25
under the arrangement were cash balance benefits.
(5)
Amount C is what would be the pension savings amount under
section 213J if the benefits provided to or in respect of the individual
under the arrangement were defined benefits.
213O
Anti-avoidance
30
(1)
This section applies if a high income excess relief charge scheme
applies in the case of the individual for the tax year.
(2)
A scheme is a high income excess relief charge scheme if in the case
of the individual for the tax year conditions A to C are met.
(3)
Condition A is that it is reasonable to assume that the main purpose,
35
or one of the main purposes, of the scheme is to avoid the whole or
any part of the liability of the individual to the high income excess
relief charge for the tax year.
(4)
Condition B is that the scheme involves either or both of the
following—
40
(a)
reducing the individual’s gross income or relevant income
for the tax year, and
(b)
reducing the total pension savings amount in the case of the
individual for the tax year.
(5)
Condition C is that the scheme involves the reduction, or any of the
45
reductions, being redressed by—

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Schedule 3 — Pensions: high income excess relief charge
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(a)
an increase in the individual’s gross income or relevant
income, or the total pension savings amount in the case of the
individual, for a different tax year, or
(b)
the provision at any time of some other benefit to or for the
benefit of the individual or any person who is a dependant of,
5
or is connected with, the individual.
(6)
The individual is to be treated for the purposes of the high income
excess relief charge as if—
(a)
the individual’s gross income and relevant income for the tax
year, and
10
(b)
the total pension savings amount in the case of the individual
for the tax year,

were what they would be apart from the scheme.
(7)
In this section “scheme” includes any arrangement, agreement,
understanding, transaction or series of transactions (whether or not
15
legally enforceable).
(8)
Section 993 of ITA 2007 (meaning of “connected” persons) applies for
the purposes of subsection (5).
213P
Power to make regulations about charge
(1)
The Treasury may by regulations make provision about the high
20
income excess relief charge.
(2)
The provision may include modifications of any provision made in
sections 213A to 213O.
(3)
The provision may include provision consequential on, or
supplementary or incidental to, the provision made by those sections
25
and transitional provisions (including provision making
modifications of enactments).
(4)
The provision may not include provision increasing any person’s
liability to tax.
(5)
“Modifications” includes amendments.”
30
3     (1)
Section 282 (orders and regulations) is amended as follows.
      (2)
After subsection (1) insert—
“(1A)
The first regulations under section 213L(1) may not be made unless
a draft of the instrument containing them has been laid before, and
approved by a resolution of, the House of Commons.”
35
      (3)
In subsection (2), after “Part” insert “(other than one of which a draft has
been approved by a resolution of the House of Commons)”.
4
In Schedule 34 (non-UK schemes: application of certain charges), after
paragraph 7A insert—
“High income excess relief charge
40
7B    (1)
The Commissioners for Her Majesty’s Revenue and Customs may
by regulations make provision for the provisions of this Part of
this Act relating to the high income excess relief charge to apply in

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Schedule 4 — Sideways relief etc
75

relation to individuals who are or have been members of a
currently-relieved non-UK pension scheme subject to
modifications contained in the regulations.
      (2)
Regulations under sub-paragraph (1) may—
(a)
include provision having effect in relation to times before
5
they are made,
(b)
confer discretion on the Commissioners for Her Majesty’s
Revenue and Customs or officers of Revenue and
Customs, and
(c)
make different provision for different cases.”
10
5
The amendments made by this Schedule have effect for the tax year 2011-12
and subsequent tax years.
Schedule 4
Section 25

Sideways relief etc
Amendments of Chapter 2 of Part 4 of ITA 2007
15
1
Chapter 2 of Part 4 of ITA 2007 (trade losses) is amended as follows.
2
In section 60(1)(c) (overview of Chapter), for “(see sections 75” substitute
“and capital gains relief (see sections 74ZA”.
3
In section 64(8) (deduction of losses from general income)—
(a)
in paragraph (ba), for “74A” substitute “74ZA”,
20
(b)
at the end of paragraph (c), insert “and”, and
(c)
omit paragraph (e).
4
In section 72(5) (relief for individuals for losses in first 4 years of trade)—
(a)
in paragraph (ba), for “74A” substitute “74ZA”,
(b)
at the end of paragraph (c), insert “and”, and
25
(c)
omit paragraph (e).
5
Before section 74A insert—
“74ZA
No relief for tax-generated losses
(1)
This section applies if—
(a)
during a tax year a person carries on (alone or in partnership)
30
a trade, profession or vocation (“the relevant activity”),
(b)
the person makes a loss in the relevant activity in that tax
year, and
(c)
the loss arises directly or indirectly in consequence of, or
otherwise in connection with, relevant tax avoidance
35
arrangements.
(2)
No sideways relief or capital gains relief may be given to the person
for the loss (but subject to subsection (5)).
(3)
In subsection (1) “relevant tax avoidance arrangements” means
arrangements—
40

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Schedule 4 — Sideways relief etc
76

(a)
to which the person is a party, and
(b)
the main purpose, or one of the main purposes, of which is
the obtaining of a reduction in tax liability by means of
sideways relief or capital gains relief.
(4)
In subsection (3) “arrangements” includes any agreement,
5
understanding, scheme, transaction or series of transactions
(whether or not legally enforceable).
(5)
This section has no effect in relation to any loss that derives wholly
from qualifying film expenditure (see section 74D).
(6)
For the purposes of this section—
10
(a)
capital gains relief is, in relation to a loss, the treatment of a
loss as an allowable loss by virtue of section 261B of TCGA
1992 (use of trading loss as a CGT loss), and
(b)
capital gains relief is given for a loss when it is so treated.”
6
Omit section 74B (no relief for tax-generated losses in case of non-active
15
individuals carrying on trade).
7     (1)
Section 74C (meaning of “non-active capacity” for purposes of sections 74A
and 74B etc) is amended as follows.
      (2)
In subsection (1), for “sections 74A and 74B” substitute “section 74A”.
      (3)
In the heading, for “sections 74A and 74B” substitute “section 74A”.
20
8     (1)
Section 74D (meaning of “qualifying film expenditure” for purposes of
sections 74A and 74B) is amended as follows.
      (2)
In subsections (1) and (4), for “74A and 74B” substitute “74ZA and 74A”.
      (3)
In the heading, for “74A and 74B” substitute “74ZA and 74A”.
9
Omit section 81 (dealings in commodity futures).
25
Other amendments
10
In FA 2009, in Schedule 6, in paragraph 1(11)—
(a)
in paragraph (b), for “74B” substitute “74ZA”,
(b)
at the end of paragraph (c), insert “and”, and
(c)
omit paragraph (e) (and the “and” before it).
30
Commencement
11    (1)
The amendments made by this Schedule have effect in relation to a loss if it
arises directly or indirectly in consequence of, or otherwise in connection
with—
(a)
arrangements which are entered into on or after 21 October 2009, or
35
(b)
any transaction forming part of arrangements which is entered into
on or after that date.
      (2)
But those amendments do not have effect where the arrangements are, or
any such transaction is, entered into pursuant to an unconditional obligation
in a contract made before that date.
40