Finance (No. 3) Bill

Session 2010 - 11
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Other Bills before Parliament

Finance (No. 3) Bill

Finance (No. 3) Bill
Schedule 15 — Chargeable gains: oil activities
Part 2 — Reinvestment of ring fence assets
229

(b)
in the definition of “non-licence consideration”, omit “as determined
at the time the swap arrangements are entered into”.
      (5)
For subsection (5B) substitute—
“(5B)
Subsections (5C) to (5F) apply for the purposes of sections 195A to
195F.
5
(5C)
Any determination—
(a)
of the consideration given for disposal A or disposal B,
(b)
of the non-licence consideration, or
(c)
of the value of a licence comprised in disposal A or disposal
B,
10

is to be made as at the time the swap arrangements are entered into.

But this is subject to subsections (5D) to (5F).
(5D)
Subsections (5E) and (5F) apply if, under the swap arrangements,
economic benefits and liabilities under the licences concerned are
treated as passing at a time (“the effective time”) which falls before
15
or after the day on which the arrangements are entered into.
(5E)
Any determination—
(a)
of the consideration given for disposal A or disposal B,
(b)
of the non-licence consideration, or
(c)
of the value of a licence comprised in disposal A or disposal
20
B,

is to be made as at the effective time.
(5F)
But if the swap arrangements make provision for an increase in the
non-licence consideration to reflect the period between the effective
time and the time it is payable, the non-licence consideration is to be
25
treated as if it were the amount found by making a corresponding
increase in the amount determined under subsection (5E).”
4
The amendments made by this Part of this Schedule have effect in relation
to disposals made on or after 23 March 2011.
Part 2
30
Reinvestment of ring fence assets
5
After section 198H of TCGA 1992 (acquisition by member of same group)
insert—
“198I
Exploration, appraisal and development expenditure
(1)
The incurring of exploration, appraisal and development
35
expenditure in the course of a ring fence trade is to be treated for the
purposes of sections 198A to 198H as the acquisition of assets—
(a)
which are the new assets mentioned in section 152,
(b)
which are taken into use, and used only, for the purposes of
the ring fence trade,
40
(c)
which are oil assets, and
(d)
which fall within the classes of assets listed in section 155.

Finance (No. 3) Bill
Schedule 16 — Benefits under pension schemes
Part 1 — Changes to benefits available under pension schemes etc
230

(2)
The reference in subsection (1) to sections 198A to 198H includes
sections 152, 153, 175 and 198(1) so far as they apply for the purpose
of determining whether a disposal and acquisition qualifies for roll-
over relief or section 153 relief (within the meaning given in section
198F or 198G).
5
(3)
Section 198C has effect in relation to expenditure within subsection
(1) of this section as if subsection (5) of that section were omitted.
(4)
References in this section to exploration, appraisal and development
expenditure are to expenditure on oil and gas exploration, appraisal
and development activities which is treated as such under generally
10
accepted accounting practice.
(5)
Nothing in this section affects sections 152, 153, 175 and 198(1) so far
as they apply otherwise than for the purposes of sections 198A to
198H.
(6)
In this section—
15
“oil asset” has the meaning given in section 198E(5);
“ring fence trade” has the meaning given in section 198.”
6
The amendment made by this Part of this Schedule has effect in relation to
disposals made on or after 24 March 2010 (whether the deemed acquisition
takes place before, on or after that date).
20
Schedule 16
Section 65

Benefits under pension schemes
Part 1
Changes to benefits available under pension schemes etc
Unsecured and alternatively secured pension to be replaced by drawdown pension
25
1     (1)
In Part 4 of FA 2004 (pension schemes etc), section 165 (pension rules) is
amended as follows.
      (2)
In subsection (1)—
(a)
in pension rule 4—
(i)
for “If the member has not reached the age of 75, no payment
30
of pension” substitute “No payment of pension”, and
(ii)
for paragraph (c) substitute—
“(c)
drawdown pension,”;
(b)
for pension rule 5 substitute—

“Pension rule 5
35

The total amount of drawdown pension paid in each
drawdown pension year in respect of a money purchase
arrangement must not exceed 100% of the basis amount for
the drawdown pension year.

But this limit does not apply in relation to an arrangement to
40
which subsection (3A) applies.”;

Finance (No. 3) Bill
Schedule 16 — Benefits under pension schemes
Part 1 — Changes to benefits available under pension schemes etc
231

(c)
omit pension rules 6 and 7.
      (3)
After subsection (3) insert—
“(3A)
This subsection applies to an arrangement if—
(a)
the member meets the flexible drawdown conditions,
(b)
the member makes a valid declaration to the scheme
5
administrator to that effect, and
(c)
the declaration is accepted by the scheme administrator.
(3B)
The member meets the flexible drawdown conditions if—
(a)
the member satisfied the minimum income requirement on
the relevant day,
10
(b)
no relevant contributions are paid under any money
purchase arrangement (other than a cash balance
arrangement) relating to the member under a registered
pension scheme in the tax year in which the declaration is
made, and
15
(c)
at the time of the declaration the member is not an active
member of any registered pension scheme under which there
is a defined benefits or cash balance arrangement relating to
the member.”
Meaning of “drawdown pension”
20
2
Part 1 of Schedule 28 to FA 2004 (pension rules) is amended as follows.
3     (1)
In paragraph 4 (meaning of “unsecured pension”), for ““Unsecured
pension”” substitute ““Drawdown pension””.
      (2)
The heading before paragraph 4 becomes “Drawdown pension”.
4
In paragraph 6 (short-term annuity), in sub-paragraph (1)—
25
(a)
in paragraph (a), for “member’s unsecured pension fund” substitute
“member’s drawdown pension fund”;
(b)
in paragraph (d), omit “and ends before the member reaches the age
of 75”.
5
For paragraph 7 (meaning of “income withdrawal”) substitute—
30
“7
“Income withdrawal” means an amount (other than an annuity)
which the member is entitled to be paid from the member’s
drawdown pension fund in respect of an arrangement.”
Member’s drawdown pension fund
6     (1)
In Part 1 of Schedule 28 to FA 2004, paragraph 8 (member’s unsecured
35
pension fund) is amended as follows.
      (2)
In sub-paragraph (1), for “member’s unsecured pension fund” substitute
“member’s drawdown pension fund”.
      (3)
In sub-paragraph (1A)(a), for “unsecured pension” substitute “drawdown
pension”.
40
      (4)
Omit sub-paragraphs (2) and (3).

Finance (No. 3) Bill
Schedule 16 — Benefits under pension schemes
Part 1 — Changes to benefits available under pension schemes etc
232

      (5)
In sub-paragraph (4), for “unsecured pension fund” (in each place)
substitute “drawdown pension fund”.
      (6)
The heading before paragraph 8 becomes “Member’s drawdown pension fund”.
Drawdown pension year and basis amount for drawdown pension year
7     (1)
In Part 1 of Schedule 28 to FA 2004, paragraph 9 (unsecured pension year) is
5
amended as follows.
      (2)
In sub-paragraph (1)—
(a)
for ““Unsecured pension year”” substitute ““Drawdown pension
year””;
(b)
in paragraph (a), for “unsecured pension” substitute “drawdown
10
pension”;
(c)
at the end insert—

“This is subject to paragraph 10B.”
      (3)
For sub-paragraph (2) substitute—
    “(2)
The drawdown pension year in which the member dies is the last
15
drawdown pension year and ends immediately before the
member’s death.”
      (4)
The heading before paragraph 9 becomes “Drawdown pension year and basis
amount for drawdown pension year”.
8     (1)
Paragraph 10 of that Schedule (basis amount) is amended as follows.
20
      (2)
For sub-paragraph (1) substitute—
   “(A1)
This paragraph applies in relation to drawdown pension years
beginning on or before the member’s 75th birthday.
      (1)
Subject as follows, the period of three drawdown pension years
beginning with the first drawdown pension year, and each
25
succeeding period of three drawdown pension years, is a
“reference period”.
    (1ZA)
But the reference period in which the member reaches the age of
75 ends with the drawdown pension year in which the member
reaches that age.”
30
      (3)
In sub-paragraph (1B)(b)—
(a)
after “subject to” insert “sub-paragraph (1ZA) and”;
(b)
for “five unsecured pension years” (in both places) substitute “three
drawdown pension years”.
      (4)
In sub-paragraphs (2) and (4)—
35
(a)
for “unsecured pension year” substitute “drawdown pension year”;
(b)
for “member’s unsecured pension fund” substitute “member’s
drawdown pension fund”.
      (5)
In sub-paragraph (5)—
(a)
for “an unsecured pension year” substitute “a drawdown pension
40
year”;
(b)
for “that unsecured pension year” substitute “that drawdown
pension year”.

Finance (No. 3) Bill
Schedule 16 — Benefits under pension schemes
Part 1 — Changes to benefits available under pension schemes etc
233

      (6)
In sub-paragraph (6)—
(a)
for “unsecured pension year” substitute “drawdown pension year”;
(b)
for “member’s unsecured pension fund” substitute “member’s
drawdown pension fund”.
      (7)
After sub-paragraph (6) insert—
5
   “(6A)
But sub-paragraph (5) does not apply where the operation of that
sub-paragraph in relation to an additional fund designation
during a drawdown pension year would reduce the basis amount
for that drawdown pension year.”
      (8)
In sub-paragraph (7), for “member’s unsecured pension fund” substitute
10
“member’s drawdown pension fund”.
      (9)
In sub-paragraph (8), for “unsecured pension” substitute “drawdown
pension”.
     (10)
In sub-paragraph (8A), for “member’s unsecured pension fund” substitute
“member’s drawdown pension fund”.
15
     (11)
In sub-paragraph (9)(b), for “unsecured pension year” substitute
“drawdown pension year”.
     (12)
After sub-paragraph (10) insert—
   “(11)
Nothing in this paragraph applies in respect of an arrangement to
which section 165(3A) applies.”
20
9
After paragraph 10 of that Schedule insert—
“10A  (1)
This paragraph applies in relation to drawdown pension years
beginning after the member’s 75th birthday.
      (2)
For the first drawdown pension year beginning after the member
reached the age of 75, and each succeeding drawdown pension
25
year, the basis amount is the annual amount of the relevant
annuity which could have been purchased by the application of
the sums and assets representing the member’s drawdown
pension fund on the nominated date.

But this is subject to sub-paragraph (6).
30
      (3)
In a case where the member first becomes entitled to drawdown
pension in respect of the arrangement after reaching the age of 75,
“the nominated date”, in relation to the first drawdown pension
year in respect of the arrangement, is the first day of that year.
      (4)
In any other case, “the nominated date”, in relation to the first
35
drawdown pension year beginning after the member reached the
age of 75, is—
(a)
if the member and the scheme administrator so agree, the
day immediately before the member’s 75th birthday, or
(b)
if they do not so agree, such day within the period of 60
40
days ending with the first day of the drawdown pension
year as is nominated by the scheme administrator (or, if no
day is nominated by the scheme administrator, the first
day of that year).

Finance (No. 3) Bill
Schedule 16 — Benefits under pension schemes
Part 1 — Changes to benefits available under pension schemes etc
234

      (5)
“The nominated date”, in relation to each other drawdown
pension year, is such day within the period of 60 days ending with
the first day of the drawdown pension year as is nominated by the
scheme administrator (or, if no day is nominated by the scheme
administrator, is the first day of that year).
5
      (6)
On the occasion of each additional fund designation during a
drawdown pension year, the basis amount of that drawdown
pension year is to be recalculated in accordance with sub-
paragraph (7).
      (7)
The basis amount for the drawdown pension year is the annual
10
amount of the relevant annuity which could have been purchased
by the application of the sums and assets representing the
member’s drawdown pension fund immediately after the
additional fund designation.
      (8)
But sub-paragraph (6) does not apply where the operation of that
15
sub-paragraph in relation to an additional fund designation
during a drawdown pension year would reduce the basis amount
for that drawdown pension year.
      (9)
“Additional fund designation” has the meaning given by
paragraph 10(8).
20
     (10)
Paragraph 14 defines “relevant annuity”.
     (11)
Nothing in this paragraph applies in respect of an arrangement to
which section 165(3A) applies.
10B   (1)
This paragraph applies if the member has reached the age of 75.
      (2)
Sub-paragraph (3) applies if, at any time during a drawdown
25
pension year in respect of an arrangement (“the current
drawdown pension year”), the member notifies the scheme
administrator that the member wishes the drawdown pension
year following the current drawdown pension year to begin on the
day on which the next drawdown pension year in respect of
30
another arrangement relating to the member under the pension
scheme (including any arrangement relating to that person as a
dependant) will begin.
      (3)
The scheme administrator may determine—
(a)
that the current drawdown pension year is to end
35
immediately before that day, and
(b)
that the period of 12 months beginning with that day, and
each succeeding period of 12 months, is a drawdown
pension year in respect of the arrangement.
      (4)
The scheme administrator may not make a determination under
40
this paragraph more than once in relation to the same
arrangement.”

Finance (No. 3) Bill
Schedule 16 — Benefits under pension schemes
Part 1 — Changes to benefits available under pension schemes etc
235

Flexible drawdown: minimum income requirement etc
10
In Part 1 of Schedule 28 to FA 2004, after paragraph 14 insert—
“Minimum income requirement
14A   (1)
The member satisfies the minimum income requirement at any
time in a tax year if the amount of relevant income payable to the
5
member for that tax year is not less than the minimum income
threshold.
      (2)
The minimum income threshold is £20,000.
      (3)
“Relevant income” means any of the following kinds of income—
(a)
payments of a scheme pension or dependants’ scheme
10
pension provided by a registered pension scheme;
(b)
payments of a lifetime annuity or dependants’ annuity
made by a registered pension scheme;
(c)
payments under an overseas pension scheme which, if the
scheme were a registered pension scheme, would fall
15
within paragraph (a) or (b);
(d)
payments of a social security pension;
(e)
payments under the financial assistance scheme which are
payable until the member’s death;
(f)
payments made under that scheme in anticipation of, and
20
on account of, payments falling within paragraph (e).
      (4)
But “relevant income” does not include—
(a)
drawdown pension or dependants’ drawdown pension, or
(b)
any payments under an overseas pension scheme which, if
the scheme were a registered pension scheme, would be
25
drawdown pension or dependants’ drawdown pension.
      (5)
A payment of any pension or annuity within sub-paragraph (3), or
a payment under the financial assistance scheme, is not to be
regarded as relevant income unless the member has, at any time
before the time mentioned in sub-paragraph (1), already received
30
a payment of that pension or annuity or (as the case may be) a
payment under that scheme.
      (6)
For the purposes of sub-paragraph (1), the amount of any relevant
income payable in a currency other than sterling is to be taken to
be the equivalent amount in sterling, calculated by reference to an
35
appropriate spot rate of exchange prevailing on the relevant day.
      (7)
In this paragraph—
“financial assistance scheme” means the scheme provided for
by regulations under section 286 of the Pensions Act 2004;
“social security pension” means—
40
(a)
any pension, benefit or allowance to which section
577 of ITEPA 2003 applies, and
(b)
any pension, benefit or allowance which—
(i)
is payable under the law of a country or
territory outside the United Kingdom, and
45