Finance (No. 3) Bill

Session 2010 - 11
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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
113

(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
115

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.