Session 2010 - 12
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Public Bill Committee: 19 May 2011

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Finance (No. 3) continued

(b)	the difference (or any part of the difference) in the values

might not have been expected applying the assumption that all

relevant connected persons are acting at arm’s length of each

other.

(1B)	In subsection (1A)—

(a)	the reference to sum or asset S is to sum or asset S so far as

sum or asset T is acquired out of it, and

(b)	“relevant connected person” means a person with a

connection (direct or indirect) to the arrangement under which

sum or asset T is acquired.’.

David Gauke

80

Schedule  2,  page  77,  line  43,  at end insert—

‘(2A)

Subsection (3) applies if, on its acquisition, sum or asset T is the

subject of a relevant step within section 554B taken by P.’.

David Gauke

81

Schedule  2,  page  77,  line  44,  leave out ‘mentioned in subsection (1)(d)’.

David Gauke

82

Schedule  2,  page  78,  line  4,  at end insert ‘and’.

David Gauke

83

Schedule  2,  page  78,  line  7,  leave out from ‘(b)’ to end of line 18.

David Gauke

84

Schedule  2,  page  78,  line  20,  leave out from beginning to ‘and’ in line 23 and

insert—

‘(a)	on its acquisition, sum or asset T—

(i)	is the subject of a relevant step within section 554B

taken by P by reason of which Chapter 2 applies or

would apply apart from subsection (3) above or any of

sections 554H to 554LA, 554P or 554S, or

(ii)	if sub-paragraph (i) does not apply, is held by or on

behalf of P on the same basis as that on which sum or

asset S was held by or on behalf of P immediately

before the acquisition,’.

David Gauke

85

Schedule  2,  page  84,  line  42,  at end insert—

‘(5A)

And for that purpose, section 170(2) to (11) is to be read as if for “75

per cent” (wherever occurring) there were substituted “51 per cent”

(with section 1154(2) of CTA 2010 applying accordingly).’

Public Bill Committee: 19 May 2011

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Finance (No. 3) continued

David Gauke

86

Schedule  2,  page  88,  line  8,  after ‘section’ insert ‘or section 554Z6’.

David Gauke

87

Schedule  2,  page  88,  line  9,  leave out ‘sections 554Z5 to’ and insert ‘section 554Z5

or’.

David Gauke

88

Schedule  2,  page  88,  line  43,  after ‘(10)’ insert ‘or 554LA(4), (6) or (8)’.

David Gauke

89

Schedule  2,  page  89,  line  2,  leave out ‘B may grant A a right (“a relevant share

option”)’ and insert ‘a right (“a relevant share option”) may be granted to A’.

David Gauke

90

Schedule  2,  page  89,  line  36,  after ‘554L(10)’ insert ‘or 554LA(8)’.

David Gauke

91

Schedule  2,  page  90,  line  9,  leave out ‘which is three months after’ and insert

‘falling immediately after the period of three months starting with’.

David Gauke

92

Schedule  2,  page  90,  line  11,  after ‘at’ insert ‘the end of’.

David Gauke

93

Schedule  2,  page  96,  line  20,  at end insert—

‘(10)

In relation to times after the relief is given, the Tax Acts have effect as

if this Chapter had never applied by reason of the original relevant

step.’.

David Gauke

105

Schedule  2,  page  96,  line  29,  at end insert—

‘Chapter 3

Undertakings given by employers etc in relation to retirement

benefits etc

554Z15

Application etc

(1)	This Chapter applies if there is an undertaking (“the relevant

undertaking”) that a contribution to which subsection (2) would apply

will be paid.

(2)	This subsection applies to a contribution if—

Public Bill Committee: 19 May 2011

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Finance (No. 3) continued

(a)	the contribution is paid to an arrangement which is not a

registered pension scheme,

(b)	in connection with that arrangement (directly or indirectly),

relevant benefits are to be provided (directly or indirectly) out

of the contribution by a relevant third person,

(c)	the provision of the relevant benefits would be a relevant step,

and

(d)	the contribution is neither a tax-relieved contribution nor tax-

exempt provision.

(3)	In subsection (2)—

“relevant benefits” has the same meaning as in Chapter 2 of Part 6, but

ignoring section 393B(2)(a),

“relevant third person” means a person within section 554A(7)(a) to (c)

(ignoring this Chapter), and

“tax-exempt provision” and “tax-relieved contribution” have the

meaning given by paragraph 3(3) and (4) of Schedule 34 to FA 2004.

(4)	In this Chapter references to an undertaking include references to—

(a)	an undertaking which is not legally enforceable, and

(b)	an undertaking which is to be performed only on or following

the meeting of a condition (including a condition which might

never be met).

554Z16

Employer etc to be treated as relevant third person etc

(1)	If B takes a step within section 554Z17 or 554Z18, Chapters 1 and 2

have effect in relation to the step—

(a)	as if B were a relevant third person for the purposes of section

554A(1)(d), and

(b)	as if the step were a relevant step within section 554B (if it

would not otherwise be).

(2)	For the purpose of determining whether Chapter 2 applies by reason

of the step, Chapter 1 has effect—

(a)	as if sections 554F to 554N, 554R to 554T, 554V and 554W

were omitted,

(b)	if the step is within section 554Z17, as if sections 554P(2)(d),

(3) and (4) and 554Q(1)(c) and (d), (1A) and (1B) were

omitted, and

(c)	if the step is within section 554Z18, as if sections 554P and

554Q were omitted.

(3)	If Chapter 2 applies by reason of the step, Chapter 2 has effect as if

sections 554Z6 to 554Z11 were omitted.

(4)	If Chapter 2 does not apply by reason of the step by virtue of section

554E(3) or (5A), section 554E(6) and (7) does not apply in relation to

the step.

(5)	For further modifications of Chapters 1 and 2, see sections 554Z17(3)

and (4), 554Z18(5) and (6), 554Z19 and 554Z20.

(6)	Regulations under section 554X may (in particular) make provision

covering cases in which Chapters 1 and 2 have effect as provided for

by this section.

Public Bill Committee: 19 May 2011

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Finance (No. 3) continued

(7)	In this Chapter—

(a)	references to B do not include references to B acting as a

trustee,

(b)	if B is a company and is a member of a group of companies,

references to B are to be read as including references to any

other company which is a member of that group, and

(c)	if B is a limited liability partnership, references to B are to be

read as including references to any company which is a

wholly-owned subsidiary (as defined in section 1159(2) of the

Companies Act 2006) of B.

554Z17

Earmarking etc

(1)	B takes a step within this section if—

(a)	a sum of money or asset held by or on behalf of B is earmarked

(however informally) by B with a view to the relevant

undertaking being performed at a later time (wholly or partly)

out of—

(i)	that sum of money or asset, or

(ii)	any sum of money or asset which may arise or derive

(directly or indirectly) from it, or

(b)	a sum of money or asset otherwise starts being held by or on

behalf of B, specifically with a view, so far as B is concerned,

to the relevant undertaking being performed at a later time

(wholly or partly) out of—

(i)	that sum of money or asset, or

(ii)	any sum of money or asset which may arise or derive

(directly or indirectly) from it.

(2)	For the purposes of subsection (1)(b) it does not matter whether or not

the sum of money or asset in question has previously been held by or

on behalf of B on a basis which is different to that mentioned in

subsection (1)(b).

(3)	Subsection (4) applies if, in the application of section 554P or 554Q in

any case, the relevant step mentioned in section 554P(2)(a) or

554Q(3)(a) is a step within this section taken by B.

(4)	In section 554P(2)(c) or 554Q(3)(c) (as the case may be) the reference

to section 554B(1)(a) or (b) is to be read as a reference to subsection

(1)(a) or (b) above.

554Z18

Provision of security

(1)	B takes a step within this section if B provides security for the

performance of the relevant undertaking.

(2)	For the purposes of this Part, the sum of money or asset which is the

subject of the step is to be taken to be—

(a)	any sums of money which, as at the time the step is taken, are

the subject of the security, and

(b)	any assets which, as at that time, are the subject of the

security,

and references to the sum of money or asset which is the subject of a

relevant step are to be read accordingly.

Public Bill Committee: 19 May 2011

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Finance (No. 3) continued

(3)	If, when the step is taken, the security covers other undertakings as

well as the relevant undertaking, the sums of money and assets within

subsection (2)(a) and (b) are to be apportioned between the relevant

undertaking and the other undertakings on a just and reasonable basis.

(4)	Subsections (2) and (3) are subject to section 554Z19(7).

(5)	Section 554P does not apply in any case in which the relevant step

mentioned in section 554P(2)(a) would be a step within this section

taken by B.

(6)	Section 554Q(3) does not apply in any case in which the relevant step

mentioned in section 554Q(3)(a) would be a step within this section

taken by B.

(7)	In this Chapter references to providing security for the performance of

an undertaking are references to providing such security in any way,

however informal.

554Z19

Valuation of step within section 554Z18

(1)	This section applies if, by virtue of section 554Z16, Chapter 2 applies

by reason of a step taken by B within section 554Z18.

(2)	Section 554Z2 has effect as if subsections (3) and (4) below were

substituted for subsections (1) to (6) of that section.

(3)	The value of the relevant step is—

(a)	the amount to be paid as a contribution under the relevant

undertaking determined, as at the time the step is taken, on a

just and reasonable basis assuming that any condition to be

met before any payment is made will be met, or

(b)	if lower, the value of the security.

(4)	For the purposes of subsection (3)(b) the value of the security—

(a)	consists of—

(i)	the total amount of the sums of money included in the

subject of the step (see section 554Z18(2)(a)), and

(ii)	the total market value, as at the time the step is taken,

of the assets included in the subject of the step (see

section 554Z18(2)(b)), but

(b)	is to be subject to a just and reasonable reduction to take

account of any term of the security which limits the total

amount which may be made available under the security for

the performance of the relevant undertaking to an amount

which is lower than the amount determined under paragraph

(a).

(5)	The following subsections apply if, as at the end of the day of an

anniversary of the taking of the step (“the anniversary day”), B

continues to provide the security for the performance of the relevant

undertaking.

(6)	This Part has effect as if B’s continuing to provide the security were a

new step (“the anniversary step”) within section 554Z18—

(a)	which is taken by B at the end of the anniversary day, and

(b)	by reason of which Chapter 2 is to apply by virtue of section

554Z16 (subject only to section 554A(4)).

Public Bill Committee: 19 May 2011

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Finance (No. 3) continued

(7)	If the total amount of the sums of money which are the subject of the

security (“the security sums”) varies from time to time, for the purpose

of determining the sums of money included in the subject of the

anniversary step, in section 554Z18(2)(a) the reference to the time the

step is taken is to be read as a reference to the time during the

preceding year at which the total amount of the security sums is at its

highest.

(8)	For the purposes of subsection (4)(a)(ii) the market value of any asset

included in the subject of the anniversary step may be determined as

at any time during the preceding year (so long as the asset is the subject

of the security, or one of the assets which is the subject of the security,

as at that time).

(9)	In subsections (7) and (8) “the preceding year” means the year ending

with the anniversary day.

554Z20

Relief for earmarking or security not followed by contribution or

relevant benefit

(1)	This section applies if, by virtue of section 554Z16, Chapter 2 applies

by reason of a step taken by B within section 554Z17 or 554Z18.

(2)	Section 554Z13 has effect in relation to the step with the following

modifications.

(3)	Subsection (1)(b) has effect as if for “not a relevant step in relation to

a relevant sum or asset” there were substituted “neither the payment of

the relevant contribution (or any part of it) nor the provision of any

relevant benefit”.

(4)	Subsection (1)(c) has effect as if for the words from “no further

relevant step” to “any relevant sum or asset” there were substituted

“the relevant contribution (or any part of it) will not be paid or a

relevant benefit will not be provided”.

(5)	Subsection (1) has effect as if subsection (6) below were substituted

for subsection (3).

(6)	In subsection (1)—

(a)	“the relevant contribution” means the contribution to be paid

under the relevant undertaking (within the meaning of

Chapter 3), and

(b)	“relevant benefit” means a relevant benefit to be provided out

of the relevant contribution as mentioned in section

554Z15(2)(b) and (c).”’.

David Gauke

106

Schedule  2,  page  111,  line  5,  at end insert—

‘57A (1)

This paragraph applies if—

(a)	B takes a step within section 554Z18 of ITEPA 2003 before 6 April

2011 by providing security (“the early security”) for the performance

of an undertaking (“the early undertaking”),

(b)	on or after 6 April 2011 at a time when B is continuing to provide the

early security, there is a change in the terms of the early undertaking

which does not amount to the giving of a new undertaking, and

Public Bill Committee: 19 May 2011

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Finance (No. 3) continued

(c)	as a result of the change, the amount to be paid as a contribution (“the

early contribution”) under the early undertaking increases, or will

increase.

(2)	Chapter 3 of Part 7A of ITEPA 2003 has effect—

(a)	as if the change in the terms of the early undertaking were a new

undertaking to pay a contribution covering the increase in the amount

of the early contribution as determined on a just and reasonable basis,

and

(b)	as if B, in continuing to provide the early security, provides security

for the performance of the new undertaking at the time of the change

in the terms.

(3)	Section 554Z16(7) of ITEPA 2003 applies for the purposes of this paragraph

as it applies for the purposes of Chapter 3 of Part 7A of that Act.’.

David Gauke

94

Schedule  2,  page  111,  line  18,  leave out from ‘earnings’ to end of line 28 and insert

‘of A from A’s employment with B within Chapter 1 of Part 3 of ITEPA 2003 for the pre-

6 April 2011 tax year, or

(ii)	the tax payable by A for the pre-6 April 2011 tax year was

otherwise decided on the basis that the pre-6 April 2011 step

was to be treated as giving rise to earnings of A from A’s

employment with B within Chapter 1 of Part 3 of ITEPA 2003

for that tax year,

(e)	before the chargeable step is taken, A or B has paid, or otherwise

accounted for, any tax which A or B is required to pay or otherwise

account for as a consequence of—

(i)	the agreement mentioned in paragraph (d)(i), or

(ii)	the tax payable by A for the pre-6 April 2011 tax year having

otherwise been decided on the basis mentioned in paragraph

(d)(ii), and

(f)	after any reductions under sections 554Z3 to 554Z7 of ITEPA 2003, it

is determined on a just and reasonable basis that the value of the

chargeable step represents (or still represents after any such

reductions) to any extent—

(i)	the earnings treated as arising from the pre-6 April 2011 step

as mentioned in paragraph (d)(i) or (ii), or

(ii)	any return on those earnings since the taking of the pre-6 April

2011 step (whether income or capital, direct or indirect or

realised or unrealised).

(2)	After any reductions under sections 554Z3 to 554Z7 of ITEPA 2003, the value

of the chargeable step is to be reduced (but not below nil) by an amount

reflecting the extent to which, as determined under sub-paragraph (1)(f), that

value represents (or still represents) the earnings mentioned in sub-paragraph

(1)(f)(i) or any return on those earnings mentioned in sub-paragraph (1)(f)(ii).

(3)	In sub-paragraph (1)(f)(ii) “return” does not include any return so far as, it is

reasonable to suppose, the return exceeds the return which might have been

expected applying the assumption that all relevant connected persons are

acting at arm’s length of each other.

© Parliamentary copyright	Revised 19 May 2011