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Finance (No. 3) Bill


Finance (No. 3) Bill
Schedule 2 — Employment income provided through third parties

109

 

April 2012; and for the purpose of determining whether section 41(1A) of

that Act applies, section 41(1) is to be read as substituted by paragraph 38(2)

of this Schedule.

     (10)  

For the purposes of section 1293(1A) of CTA 2009 (as inserted by paragraph

47(3) of this Schedule), the early step is treated as having been taken on 6

5

April 2012; and for the purpose of determining whether section 1293(1A) of

that Act applies, section 1293(1) is to be read as substituted by paragraph

47(2) of this Schedule.

54    (1)  

This paragraph applies if—

(a)   

on or after 9 December 2010 but before 6 April 2011 a relevant step

10

(“the early step”) within section 554C(1)(d) of ITEPA 2003 is taken,

(b)   

the relevant step does not involve a sum of money within the

meaning of section 554Y(9) of ITEPA 2003,

(c)   

the asset which is the subject of the early step is a readily convertible

asset which P makes available to secure the payment of a sum of

15

money,

(d)   

Chapter 2 of Part 7A of ITEPA 2003 would have applied by reason of

the early step had the reference in paragraph 52(1) of this Schedule

to 6 April 2011 been a reference to 9 December 2010, and

(e)   

the early step is not chargeable to income tax by virtue of Schedule

20

34 to FA 2004 in whole or in part.

      (2)  

For the purposes of sub-paragraph (1)(a) section 554C(1)(d) of ITEPA 2003 is

to be read as if the words “or makes it available under an arrangement which

permits its use” were omitted.

      (3)  

In this paragraph “readily convertible asset” means anything mentioned in

25

section 702(1)(a) to (c) of ITEPA 2003 (ignoring section 702(3)).

      (4)  

Subject to what follows, Chapter 2 of Part 7A of ITEPA 2003 is to apply by

reason of the early step; and the amendments made by this Schedule have

effect accordingly.

      (5)  

In determining the tax year for which the employment income of A counts

30

for the purposes of section 554Z1(1) of ITEPA 2003, the early step is treated

as having been taken on 6 April 2012; but otherwise Chapter 2 of Part 7A of

that Act applies by reference to when the early step was actually taken.

      (6)  

The amount which (apart from this sub-paragraph) would count as

employment income of A is to be reduced to nil if—

35

(a)   

before 6 April 2012 the readily convertible asset has been returned to

P, and

(b)   

as at that date the asset is not being used to secure the payment of the

sum of money (or any part of it),

           

and the Tax Acts are to apply in relation to the early step as if Chapter 2 of

40

Part 7A of ITEPA 2003 had never applied by reason of it, with any

adjustments that need to be made to any assessment to tax being made

accordingly.

      (7)  

Section 554Z4 of ITEPA 2003 does not apply in relation to the early step and,

in the application of that section in relation to any other relevant step

45

(whenever taken), the early step is to be ignored.

      (8)  

Section 554Z7 of ITEPA 2003 applies in relation to the early step as if

subsection (6)(b) were omitted.

 
 

Finance (No. 3) Bill
Schedule 2 — Employment income provided through third parties

110

 

      (9)  

Section 554Z11 of ITEPA 2003 does not apply in relation to the early step.

     (10)  

For the purposes of section 695A(3)(a) of ITEPA 2003 (as inserted by

paragraph 31 of this Schedule), the early step is treated as having been taken

on 6 April 2012.

     (11)  

For the purposes of section 41(1A) of ITTOIA 2005 (as inserted by paragraph

5

38(3) of this Schedule), the early step is treated as having been taken on 6

April 2012; and for the purpose of determining whether section 41(1A) of

that Act applies, section 41(1) is to be read as substituted by paragraph 38(2)

of this Schedule.

     (12)  

For the purposes of section 1293(1A) of CTA 2009 (as inserted by paragraph

10

47(3) of this Schedule), the early step is treated as having been taken on 6

April 2012; and for the purpose of determining whether section 1293(1A) of

that Act applies, section 1293(1) is to be read as substituted by paragraph

47(2) of this Schedule.

55    (1)  

For the purpose of determining whether Chapter 2 of Part 7A of ITEPA 2003

15

would have applied by reason of the early step as mentioned in paragraph

53(1)(b) or 54(1)(d), section 554G of ITEPA 2003 is to be read—

(a)   

as if subsection (1)(a) were omitted, and

(b)   

as if the definition contained in sub-paragraph (2) applied for the

purposes of the reference to a group of companies in subsection

20

(4)(d) instead of section 554Y(5) of ITEPA 2003.

      (2)  

The definition referred to in sub-paragraph (1)(b) is—

““group of companies” means a company and any other

companies of which it has control (as defined in section 995

of ITA 2007)”.

25

      (3)  

For the purpose of determining whether Chapter 2 of Part 7A of ITEPA 2003

would have applied by reason of the early step, Chapter 1 of that Part is to

be read as if section 554M(7) to (11) were omitted.

      (4)  

If, by virtue of section 554N of ITEPA 2003, Chapter 2 of Part 7A of that Act

would not have applied by reason of the early step, section 554N(3) and (4)

30

have effect in relation to the car loan.

      (5)  

But, for this purpose, if the repayment date is before 6 April 2012, in section

section 554N(3) and (4) references to the repayment date are to be read as

references to 6 April 2012.

56    (1)  

This paragraph applies for the purposes of section 554P of ITEPA 2003 in a

35

case in which—

(a)   

the relevant step mentioned in subsection (2)(a) of that section was

taken before 6 April 2011, and

(b)   

the requirement of subsection (2)(b) of that section would have been

met had Part 7A of ITEPA 2003 had effect in relation to relevant steps

40

within section 554B of that Act taken before that date.

      (2)  

The requirement of subsection (2)(b) of that section is to be treated as met in

that case.

57    (1)  

This paragraph applies for the purposes of section 554Q of ITEPA 2003 in a

case in which—

45

(a)   

the relevant step mentioned in subsection (3)(a) of that section was

taken before 6 April 2011, and

 
 

Finance (No. 3) Bill
Schedule 2 — Employment income provided through third parties

111

 

(b)   

the requirement of subsection (3)(b) of that section would have been

met had Part 7A of ITEPA 2003 had effect in relation to relevant steps

within section 554B of that Act taken before that date.

      (2)  

The requirement of subsection (3)(b) of that section is to be treated as met in

that case.

5

58    (1)  

This paragraph applies if—

(a)   

a relevant step within section 554C or 554D of ITEPA 2003 (“the

chargeable step”) is taken,

(b)   

Chapter 2 of Part 7A of ITEPA 2003 applies by reason of the

chargeable step,

10

(c)   

in a tax year before 6 April 2011 (“the pre-6 April 2011 tax year”) a

relevant step (“the pre-6 April 2011 step”) within section 554B of

ITEPA 2003 was taken,

(d)   

before the chargeable step is taken—

(i)   

an agreement was made between Her Majesty’s Revenue and

15

Customs and either A or B (or both) under which it was

agreed that the pre-6 April 2011 step was to be treated as

giving rise to earnings within Chapter 1 of Part 3 of ITEPA

2003 for the pre-6 April 2011 tax year, and

(ii)   

A or B has paid, or otherwise accounted for, any tax which A

20

or B is required to pay or otherwise account for as a

consequence of the agreement, and

(e)   

Chapter 2 of Part 7A of ITEPA 2003 would have applied by reason of

the pre-6 April 2011 step but for the step having been taken before 6

April 2011.

25

      (2)  

In relation to the chargeable step, section 554Z4 of ITEPA 2003 has effect as

if Chapter 2 of Part 7A of that Act applied by reason of the pre-6 April 2011

step.

Other commencement provision

59         

The amendments made by paragraph 14 of this Schedule, so far as relating

30

to general earnings, have effect in relation to benefits to which Chapter 2 of

Part 6 of ITEPA 2003 applies received on or after 6 April 2011.

60         

The amendments made by paragraphs 36, 39(a), 45 and 48(a) of this

Schedule have effect in relation to acts or omissions occurring on or after 6

April 2011.

35

61         

The amendments made by paragraphs 37(2), 39(b), 46(2) and 48(b) of this

Schedule have effect in relation to payments or transfers made on or after 6

April 2011.

62         

The amendments made by paragraphs 38(2) and 47(2) of this Schedule have

effect in relation to money treated as received on or after 6 April 2011

40

(subject to paragraphs 53(9) and (10) and 54(11) and (12) of this Schedule).

Power to make provision dealing with interactions etc

63    (1)  

The Treasury may by order made by statutory instrument make such

provision as the Treasury consider appropriate dealing with the interaction

between Part 7A of ITEPA 2003 (as inserted by paragraph 1 of this Schedule)

45

 
 

Finance (No. 3) Bill
Schedule 3 — Tainted charity donations
Part 1 — Income tax

112

 

and any other provision of the Tax Acts or any enactment relating to capital

gains tax or inheritance tax.

      (2)  

The Treasury may by order made by statutory instrument make such

provision as the Treasury consider appropriate in consequence of this

Schedule.

5

      (3)  

An order under this paragraph may contain provision having retrospective

effect, so long as it does not increase any person’s liability to any tax.

      (4)  

An order under this paragraph may amend, repeal or revoke any provision

made by or under an Act, including, in the case of an order under sub-

paragraph (1), Part 7A of ITEPA 2003.

10

      (5)  

An order under this paragraph may contain incidental, supplemental,

consequential and transitional provision and savings.

      (6)  

The powers conferred by this paragraph may not be exercised after 5 April

2015.

      (7)  

A statutory instrument containing an order under this paragraph is subject

15

to annulment in pursuance of a resolution of the House of Commons.

Schedule 3

Section 27

 

Tainted charity donations

Part 1

Income tax

20

1          

In Part 13 of ITA 2007 (tax avoidance), after Chapter 7 insert—

“Chapter 8

Tainted charity donations

Introduction

25

809ZH   

 Overview of Chapter

(1)   

This Chapter makes provision for removing entitlement to income

tax reliefs, and counteracting income tax advantages, where a person

makes a relievable charity donation which is a tainted donation.

(2)   

See section 257A of TCGA 1992 and Part 21C of CTA 2010 for the

30

removal of entitlement to other reliefs where a person makes a

relievable charity donation which is a tainted donation.

809ZI   

Relievable charity donations

(1)   

In this Chapter “relievable charity donation” means a gift or other

disposal which—

35

(a)   

is made by a person to a charity, and

 
 

Finance (No. 3) Bill
Schedule 3 — Tainted charity donations
Part 1 — Income tax

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(b)   

is eligible for tax relief.

(2)   

A gift or other disposal is eligible for tax relief if one or both of the

following apply—

(a)   

(ignoring the tainted donation provisions) tax relief would be

available in respect of it under a relevant relieving provision;

5

(b)   

the charity is entitled to claim a repayment of tax in respect of

it.

(3)   

“The tainted donation provisions” are—

(a)   

this Chapter,

(b)   

section 257A of TCGA 1992 (tainted charity donations:

10

disapplication of section 257), and

(c)   

Part 21C of CTA 2010 (tainted charity donations: removal of

corporation tax reliefs).

(4)   

The following are “relevant relieving provisions”—

(a)   

section 257 of TCGA 1992 (gifts of chargeable assets),

15

(b)   

section 63(2)(a), (aa) and (ab) of CAA 2001 (gifts of plant and

machinery),

(c)   

Part 12 of ITEPA 2003 (payroll giving),

(d)   

section 108 of ITTOIA 2005 (gifts of trading stock),

(e)   

Chapters 2 and 3 of Part 8 of this Act (gift aid and gifts of

20

shares),

(f)   

section 105 of CTA 2009 (gifts of trading stock), and

(g)   

Part 6 of CTA 2010 (charitable donations relief).

(5)   

For the purposes of this Chapter, an amount of income which arises

under a UK settlement and to which a charity is entitled under the

25

terms of the settlement is to be regarded as an amount gifted to the

charity by the trustees of the settlement.

   

“UK settlement” has the same meaning as in section 628 of ITTOIA

2005.

Tainted donations

30

809ZJ   

 Tainted donations

(1)   

For the purposes of this Chapter, a relievable charity donation is a

tainted donation if (and only if) Conditions A, B and C are met.

(2)   

Condition A is that—

(a)   

a linked person enters into arrangements (whether before or

35

after the donation is made), and

(b)   

it is reasonable to assume from either or both of—

(i)   

the likely effects of the donation and the

arrangements, and

(ii)   

the circumstances in which the donation is made and

40

the circumstances in which the arrangements are

entered into,

   

that the donation would not have been made and the

arrangements would not have been entered into

independently of one another.

45

 
 

Finance (No. 3) Bill
Schedule 3 — Tainted charity donations
Part 1 — Income tax

114

 

(3)   

“Linked person” means—

(a)   

the person who made the donation (“the donor”), or

(b)   

a person connected with the donor at a relevant time.

(4)   

In subsection (3) “relevant time” means a time during the period

which begins with the earliest, and ends with the latest, of the

5

following times—

(a)   

the time when the arrangements are entered into as

mentioned in subsection (2);

(b)   

the time when the relievable charity donation is made;

(c)   

the time when the arrangements are first materially

10

implemented.

(5)   

Condition B is that the main purpose, or one of the main purposes,

of the linked person in entering into the arrangements is to obtain a

financial advantage—

(a)   

directly or indirectly from the charity to which the donation

15

is made or a connected charity,

(b)   

for one or more linked persons who are not charities (each of

whom is referred to in this Chapter as “a potentially

advantaged person”).

(6)   

Condition C is that the donor is not—

20

(a)   

a qualifying charity-owned company, or

(b)   

a relevant housing provider linked with the charity to which

the donation is made.

(7)   

For the purposes of subsection (6)(b) a relevant housing provider is

linked with the charity if (and only if)—

25

(a)   

one is wholly owned, or subject to control, by the other, or

(b)   

both are wholly owned, or subject to control, by the same

person.

(8)   

In this section—

“qualifying charity-owned company”, in relation to a relievable

30

charity donation, means a company which—

(a)   

is wholly owned by one or more charities, at least one

of which is the charity to which the donation is made

or a connected charity, and

(b)   

has not previously been under the control of, and

35

does not carry on a trade or business previously

carried on by, one or more of the following—

(i)   

a potentially advantaged person;

(ii)   

a person (other than a charity) who, at any

time within the period of 4 years ending with

40

the day on which paragraph (a) was first

satisfied, was connected with a person who is

a potentially advantaged person;

“relevant housing provider” means a body which is—

(a)   

a non-profit registered provider of social housing, or

45

(b)   

entered on a register maintained under section 1 of

the Housing Act 1996, section 20 of the Housing

(Scotland) Act 2010 (asp 17) or Article 14 of the

 
 

Finance (No. 3) Bill
Schedule 3 — Tainted charity donations
Part 1 — Income tax

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Housing (Northern Ireland) Order 1992 (S.I. 1992/

1725 (N.I. 15)).

(9)   

Section 200 of CTA 2010 (company wholly owned by a charity)

applies for the purposes of subsection (8), and for those purposes

references in that section to “charity” include a registered club within

5

the meaning of section 658(6) of that Act.

(10)   

This section is subject to section 809ZL (certain financial advantages

to be ignored).

809ZK   

 Circumstances in which financial advantage deemed to be obtained

(1)   

This section applies for the purposes of Condition B.

10

(2)   

Subsection (3) applies where the arrangements entered into by the

linked person (as mentioned in Condition A) involve a transaction to

which—

(a)   

that or any other linked person (“X”), and

(b)   

another person (“Y”),

15

   

are parties.

(3)   

X obtains a financial advantage from the charity to which the

donation is made or a connected charity if—

(a)   

the terms of the transaction are less beneficial to Y or more

beneficial to X (or both) than those which might reasonably

20

be expected in a transaction concluded between parties

dealing at arm’s length, or

(b)   

the transaction is not of a kind which a person dealing at

arm’s length and in place of Y might reasonably be expected

to make.

25

(4)   

Nothing in this section is intended to limit the circumstances in

which a linked person may be regarded as obtaining a financial

advantage for the purposes of section 809ZJ.

(5)   

In this section—

“Condition A” and “Condition B” have the same meaning as in

30

section 809ZJ;

“linked person” has the meaning given by section 809ZJ(3);

“transaction” includes (for example)—

(a)   

the sale or letting of property,

(b)   

the provision of services,

35

(c)   

the exchange of property,

(d)   

the provision of a loan or any other form of financial

assistance, and

(e)   

investment in a business.

809ZL   

 Certain financial advantages to be ignored

40

(1)   

When determining whether a relievable charity donation is a tainted

donation, a financial advantage within subsection (2), (3), (4) or (5) is

to be ignored.

(2)   

A financial advantage is within this subsection if the person for

whom it is obtained applies the advantage for charitable purposes

45

only.

 
 

 
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