Part 1Direct and indirect taxes

Income tax charge and rates

1Income tax charge for tax year 2017-18

Income tax is charged for the tax year 2017-18.

2Main rates of income tax for tax year 2017-18

For the tax year 2017-18 the main rates of income tax are as follows—

(a)the basic rate is 20%;

(b)the higher rate is 40%;

(c)the additional rate is 45%.

3Default and savings rates of income tax for tax year 2017-18

(1)For the tax year 2017-18 the default rates of income tax are as follows—

(a)the default basic rate is 20%;

(b)the default higher rate is 40%;

(c)the default additional rate is 45%.

(2)For the tax year 2017-18 the savings rates of income tax are as follows—

(a)the savings basic rate is 20%;

(b)the savings higher rate is 40%;

(c)the savings additional rate is 45%.

4Starting rate limit for savings for tax year 2017-18

(1)For the amount specified in section 12(3) of ITA 2007 (starting rate for savings) substitute “£5000”.

(2)The amendment made by subsection (1) has effect in relation to the tax year 2017-18 and subsequent tax years.

(3)Section 21 of ITA 2007 (indexation), so far as relating to the starting rate limit for savings, does not apply in relation to the tax year 2017-18 (but this section does not override that section for subsequent tax years).

Corporation tax charge

5Corporation tax charge for financial year 2018

Corporation tax is charged for the financial year 2018.

Income tax: general

6Workers’ services provided to public sector through intermediaries

Schedule 1 makes provision about workers’ services provided to the public sector through intermediaries.

7Optional remuneration arrangements

Schedule 2 makes provision about optional remuneration arrangements.

8Taxable benefits: asset made available without transfer

(1)ITEPA 2003 is amended as follows.

(2)In section 205 (cost of taxable benefit subject to the residual charge: asset made available without transfer)—

(a)in subsection (1), for paragraph (a) substitute—

“(a)the benefit consists in an asset being made available for private use, and”,

(b)after subsection (1) insert—

“(1A)In this section and section 205A, “private use” means private use by the employee or a member of the employee’s family or household.

(1B)For the purposes of subsection (1) and sections 205A and 205B, an asset made available in a tax year for use by the employee or a member of the employee’s family or household is to be treated as made available throughout the year for private use unless—

(a)at all times in the year when it is available for use by the employee or a member of the employee’s family or household, the terms under which it is made available prohibit private use, and

(b)no private use is made of it in the year.

(1C)The cost of the taxable benefit is—

(a)the annual cost of the benefit determined in accordance with subsection (2), less

(b)any amount required to be deducted by section 205A (deduction for periods when asset unavailable for private use).

(1D)In certain cases, the cost of the taxable benefit is calculated under this section in accordance with section 205B (reduction of cost of taxable benefit where asset is shared).”, and

(c)in subsection (2), in the words before paragraph (a), for “cost of the taxable” substitute “annual cost of the”.

(3)After section 205 insert—

“205ADeduction for periods when asset unavailable for private use

(1)A deduction is to be made under section 205(1C)(b) if the asset mentioned in section 205(1) has been unavailable for private use on any day during the tax year concerned.

(2)For the purposes of this section an asset is “unavailable” for private use on any day if—

(a)that day falls before the day on which the asset is first available to the employee,

(b)that day falls after the day on which the asset is last available to the employee,

(c)for more than 12 hours during that day the asset—

(i)is not in a condition fit for use,

(ii)is undergoing repair or maintenance,

(iii)could not lawfully be used,

(iv)is in the possession of a person who has a lien over it and who is not the employer, not a person connected with the employer, not the employee, not a member of the employee’s family and not a member of the employee’s household, or

(v)is used in a way that is neither use by, nor use at the direction of, the employee or a member of the employee’s family or household, or

(d)on that day the employee—

(i)uses the asset in the performance of the duties of the employment, and

(ii)does not use the asset otherwise than in the performance of the duties of the employment.

(3)The amount of the deduction is given by—

(4)The reference in subsection (2)(a) to the time when the asset is first available to the employee is to the earliest time when the asset is made available, by reason of the employment and without any transfer of the property in it, for private use.

(5)The reference in subsection (2)(b) to the time when the asset is last available to the employee is to the last time when the asset is made available, by reason of the employment and without any transfer of the property in it, for private use.

205BReduction of cost of taxable benefit where asset is shared

(1)This section applies where the cost of an employment-related benefit (“the taxable benefit”) is to be determined under section 205.

(2)If, for the whole or part of the tax year concerned, the same asset is available for more than one employee’s private use at the same time, the total of the amounts which are the cost of the taxable benefit for each of those employees is to be limited to the annual cost of the benefit of the asset determined in accordance with section 205(2).

(3)The cost of the taxable benefit for each employee is determined by taking the amount given by section 205(1C) and then reducing that amount on a just and reasonable basis.

(4)For the purposes of this section, an asset is available for an employee’s private use if it is available for private use by the employee or a member of the employee’s family or household.”

(4)In section 365 (deductions where employment-related benefit provided)—

(a)in subsection (1)—

(i)omit the “and” at the end of paragraph (a), and

(ii)after that paragraph insert—

“(aa)the cost of the benefit was determined under section 204 or 206, and”,

(b)in subsection (3), for “sections 204 to 206” substitute “section 204 or 206”, and

(c)in the heading, for “employment-related benefit” substitute “certain employment-related benefits”.

(5)The amendments made by this section have effect for the tax year 2017-18 and subsequent tax years.

9Overseas pensions

Schedule 3 makes provision about—

(a)registered pension schemes established outside the United Kingdom, and

(b)payments made in respect of overseas pension entitlement.

10Pensions: offshore transfers

Schedule 4 contains provision about charging income tax—

(a)where payments are made in respect of overseas pensions, and

(b)on transfers to qualifying recognised overseas pension schemes.

11Deduction of income tax at source

Schedule 5 makes provision about deduction of income tax at source.

Employee shareholder shares

12Employee shareholder shares: amount treated as earnings

(1)In section 226A of ITEPA 2003 (amount treated as earnings)—

(a)in subsection (2), for “calculated in accordance with subsection (3)” substitute “equal to the market value of the shares”;

(b)omit subsection (3);

(c)in subsection (6), omit “and sections 226B to 226D”;

(d)in subsection (7), after “subsection (1)” insert “(but not subsection (2))”.

(2)Omit sections 226B to 226D of ITEPA 2003 (deemed payment).

(3)In consequence of subsection (2), in ITEPA 2003 omit the following—

(a)section 479(3A);

(b)section 531(3A);

(c)section 532(4A).

(4)In consequence of subsection (2), in CTA 2009 omit the following—

(a)in section 1005, the definition of “employee shareholder share”;

(b)section 1009(6);

(c)in section 1010(1), “and, in the case of employee shareholder shares, section 1038B”;

(d)in section 1011(4)(b), “(but see also section 1038B of this Act)“;

(e)in sections 1018(1) and 1019(1), “and, in the case of employee shareholder shares, section 1038B”;

(f)sections 1022(5), 1026(5), 1027(5), 1033(5) and 1034(5);

(g)section 1038B;

(h)sections 1292(6ZA) and 1293(5A);

(i)in Schedule 4, the entry relating to “employee shareholder share”.

(5)The amendments made by this section have effect in relation to shares acquired in consideration of an employee shareholder agreement entered into on or after the relevant day.

(6)The relevant day is 1 December 2016, subject to subsection (7).

(7)Where the individual entering into an employee shareholder agreement receives the advice referred to in section 205A(6)(a) of the Employment Rights Act 1996—

(a)on 23 November 2016, but

(b)before 1.30 pm on that day,

the relevant day is 2 December 2016.

13Employee shareholder shares: abolition of CGT exemption

(1)TCGA 1992 is amended as follows.

(2)In section 58 (spouses and civil partners)—

(a)in subsection (2)—

(i)at the end of paragraph (a) insert “or”;

(ii)omit paragraph (c) and the preceding “or”;

(b)omit subsections (3) to (5).

(3)In section 149AA (restricted and convertible employment-related securities and employee shareholder shares), for subsection (6A) substitute—

“(6A)For the purposes of this section—

• shares are “acquired” by an employee if the employee becomes beneficially entitled to them (and they are acquired at the time when the employee becomes so entitled);

• “employee shareholder share” means a share acquired in consideration of an employee shareholder agreement and held by the employee;

• “employee shareholder agreement” means an agreement by virtue of which an employee is an employee shareholder (see section 205A(1)(a) to (d) of the Employment Rights Act 1996);

• “employee” and “employer company”, in relation to an employee shareholder agreement, mean the individual and the company which enter into the agreement.”

(4)Omit sections 236B to 236F (exemption for employee shareholder shares).

(5)In section 236G (relinquishment of employment rights is not disposal of an asset), in subsection (1), for “employee shareholder agreement” substitute “agreement by virtue of which the individual is an employee shareholder (see section 205A(1)(a) to (d) of the Employment Rights Act 1996)”.

(6)The amendments made by this section have effect in relation to shares acquired in consideration of an employee shareholder agreement entered into on or after the relevant day.

(7)The relevant day is 1 December 2016, subject to subsection (8).

(8)Where the individual entering into an employee shareholder agreement receives the advice referred to in section 205A(6)(a) of the Employment Rights Act 1996—

(a)on 23 November 2016, but

(b)before 1.30 pm on that day,

the relevant day is 2 December 2016.

14Employee shareholder shares: purchase by company

(1)In ITTOIA 2005, omit section 385A (no charge to income tax on purchase by company of exempt employee shareholder shares).

(2)The amendment made by this section has effect in relation to the purchase from an individual of shares which were acquired in consideration of an employee shareholder agreement entered into on or after the relevant day.

(3)The relevant day is 1 December 2016, subject to subsection (4).

(4)Where the individual entering into an employee shareholder agreement receives the advice referred to in section 205A(6)(a) of the Employment Rights Act 1996—

(a)on 23 November 2016, but

(b)before 1.30 pm on that day,

the relevant day is 2 December 2016.

Disguised remuneration

15Employment income provided through third parties

Schedule 6 makes provision about employment income provided through third parties.

Indirect taxes

16VAT: zero-rating of adapted motor vehicles etc

Schedule 7 contains amendments of Schedule 8 to VATA 1994 (zero-rating).

17Insurance premium tax: standard rate

(1)In section 51(2)(b) of FA 1994 (standard rate of insurance premium tax), for “10 per cent” substitute “12 per cent”.

(2)Subject to subsection (3), the amendment made by subsection (1) has effect in relation to a premium falling to be regarded for the purposes of Part 3 of FA 1994 as received under a taxable insurance contract by an insurer on or after 1 June 2017.

(3)That amendment does not have effect in relation to a premium falling within subsection (4), unless the premium falls to be regarded for the purposes of Part 3 of FA 1994 as received under a taxable insurance contract by an insurer on or after 1 June 2018.

(4)A premium falls within this subsection if it is in respect of a risk for which the period of cover begins before 1 June 2017.

(5)In the application of sections 66A and 66B of FA 1994 (anti-forestalling provision) in relation to the increase in insurance premium tax made by this section, the announcement relating to that increase is to be taken to have been made on 8 March 2017 (and “the change date” is to be taken to be 1 June 2017).

(6)This section is to be read with section 66C of FA 1994 (premiums relating to more than one period of cover).

18Insurance premium tax: anti-forestalling provision

(1)FA 1994 is amended as follows.

(2)After section 66 insert—

“66ARate increases: deemed date of receipt of certain premiums

(1)This section applies where a Minister of the Crown announces a proposed increase in the rate at which tax is to be charged on a premium if it is received by the insurer on or after a date specified in the announcement (“the change date”).

(2)This section applies whether or not the announcement includes an announcement of a proposed exception from the increase (for example, for premiums in respect of risks for which the period of cover begins before the change date).

(3)Subsection (4) applies where—

(a)a premium under a contract of insurance is received by the insurer on or after the date of the announcement and before the change date, and

(b)the period of cover for the risk begins on or after the change date.

(4)For the purposes of this Part the premium is to be taken to be received on the change date.

(5)Subsection (6) applies where—

(a)a premium under a contract of insurance is received by the insurer on or after the date of the announcement and before the change date,

(b)the period of cover for the risk—

(i)begins before the change date, and

(ii)ends on or after the first anniversary of the change date (“the first anniversary”), and

(c)the premium, or any part of it, is attributable to such of the period of cover as falls on or after the first anniversary.

(6)For the purposes of this Part—

(a)so much of the premium as is attributable to such of the period of cover as falls on or after the first anniversary is to be taken to be received on the change date, and

(b)so much as is so attributable is to be taken to be a separate premium.

(7)In determining whether the condition in subsection (3)(a) or (5)(a) is met, regulations under section 68(3) or (7) apply as they would apart from this section.

(8)But where subsection (4) or (6) applies—

(a)that subsection has effect despite anything in section 68 or regulations under that section, and

(b)any regulations under section 68 have effect as if the entry made in the accounts of the insurer showing the premium as due to the insurer had been made as at the change date.

(9)A premium treated by subsection (6) as received on the change date is not to be taken to fall within any exception, from an increase announced by the announcement, for premiums in respect of risks for which the period of cover begins before the change date.

(10)Any attribution under this section is to be made on such basis as is just and reasonable.

(11)In this section—

• “increase”, in relation to the rate of tax, includes the imposition of a charge to tax by adding to the descriptions of contract which are taxable insurance contracts;

• “Minister of the Crown” has the same meaning as in the Ministers of the Crown Act 1975.

66BSection 66A: exceptions and apportionments

(1)Section 66A(3) and (4) do not apply in relation to a premium if the risk to which that premium relates belongs to a class of risk as regards which the normal practice is for a premium to be received by or on behalf of the insurer before the date when cover begins.

(2)Section 66A(5) and (6) do not apply in relation to a premium if the risk to which that premium relates belongs to a class of risk as regards which the normal practice is for cover to be provided for a period of more than twelve months.

(3)If a contract relates to more than one risk, then in the application of section 66A(3) and (4) or 66A(5) and (6)—

(a)the reference in section 66A(3)(b) or (5)(b) to the risk is to be read as a reference to any given risk,

(b)so much of the premium as is attributable to any given risk is to be taken for the purposes of section 66A(3) and (4) or 66A(5) and (6) to be a separate premium relating to that risk,

(c)those provisions then apply separately in the case of each given risk and the separate premium relating to it, and

(d)any further attribution required by section 66A(5) and (6) is to be made accordingly,

and subsections (1) and (2) and section 66A(9) apply accordingly.

(4)Any attribution under this section is to be made on such basis as is just and reasonable.

66CRate changes: premiums relating to more than one period of cover

(1)This section applies if any Act—

(a)makes an amendment of section 51(2)(a) or (b) which alters the higher rate or standard rate (“the relevant rate”),

(b)provides for the amendment to have effect in relation to a premium falling to be regarded for the purposes of this Part as received under a taxable insurance contract by an insurer on or after a particular date (“the change date”), and

(c)makes provision that excepts from that amendment a premium which is in respect of a risk for which the period of cover begins before the change date.

(2)Subsection (3) applies if a premium which is liable to tax at the relevant rate, and which falls to be regarded for the purposes of this Part as received under a taxable insurance contract by an insurer on or after the change date, is—

(a)partly in respect of a risk for which the period of cover begins before the change date, and

(b)partly in respect of a risk for which the period of cover begins on or after that date.

(3)So much of the premium as is attributable to the risk for which the period of cover begins on or after the change date is to be treated for the purposes of this Part and the provision mentioned in subsection (1)(c) as a separate premium.

(4)Where a premium is in respect of a relevant rate matter and also a matter that is not a relevant rate matter—

(a)for the purposes of the provision mentioned in subsection (1)(c), the premium is to be treated as in respect of a risk for which the period of cover begins before the change date if the part of it attributable to the relevant rate matter is in respect of such a risk, and

(b)the reference in subsection (2) to a premium which is liable to tax at the relevant rate is to be read as a reference to so much of the premium as is attributable to the relevant rate matter (and subsection (3) is to be read accordingly).

(5)If premiums of any description are excluded from the exception mentioned in subsection (1)(c), nothing in subsections (2) to (4) applies to a premium of that description.

(6)Nothing in subsection (4) applies to an excepted premium (within the meaning given by section 69A).

(7)Any attribution under this section is to be made on such basis as is just and reasonable.

(8)In this section a “relevant rate matter” means—

(a)where the relevant rate is the standard rate, a standard rate matter as defined by section 69(12)(c);

(b)where the relevant rate is the higher rate, a higher rate matter as defined by section 69(12)(d).

(9)In subsection (1) the reference to any Act includes a resolution which has statutory effect under the Provisional Collection of Taxes Act 1968.”

(3)Omit—

(a)section 67 (spent transitional provision), and

(b)sections 67A to 67C (which are superseded by sections 66A and 66B inserted by subsection (2)).

(4)The amendments made by subsections (2) and (3)(b) have effect on and after 8 March 2017.

(5)Despite the repeal by subsection (3) of sections 67A and 67C of FA 1994, those sections continue to have effect so far as they apply to premiums received on or after 23 November 2016 and before 8 March 2017.

19Air passenger duty: rates from 1 April 2017

(1)In section 30 of FA 1994 (air passenger duty: rates of duty), in subsection (4A) (long haul rates of duty)—

(a)in paragraph (a), for “£73” substitute “£75”;

(b)in paragraph (b), for “£146” substitute “£150”.

(2)The amendments made by this section have effect in relation to the carriage of passengers beginning on or after 1 April 2017.

20Vehicle excise duty: rates

(1)Schedule 1 to VERA 1994 (annual rates of duty) is amended as follows.

(2)In paragraph 1 (general rate of duty)—

(a)in sub-paragraph (2) (vehicle not covered elsewhere in Schedule with engine cylinder capacity exceeding 1,549cc), for “£235” substitute “£245”, and

(b)in sub-paragraph (2A) (vehicle not covered elsewhere in Schedule with engine cylinder capacity not exceeding 1,549cc), for “£145” substitute “£150”.

(3)In paragraph 1B (graduated rates of duty for light passenger vehicles)—

(a)in the words before paragraph (a), for “tables” substitute “table”,

(b)in paragraph (a), at the end insert “and”,

(c)in paragraph (b), at the end omit “, and”,

(d)omit paragraph (c),

(e)for Tables 1 and 2 substitute—

(f)in the sentence immediately following Table 2—

(i)at the beginning, for “Table 2” substitute “The table”, and

(ii)for paragraphs (a) and (b) substitute—

“(a)in column (3), in the last two rows, “295” were substituted for “510” and “525”, and

(b)in column (4), in the last two rows, “305” were substituted for “520” and “535”.”

(4)In paragraph 1J (VED rates for light goods vehicles), in paragraph (a), for “£230” substitute “£240”.

(5)In paragraph 2(1) (VED rates for motorcycles)—

(a)in paragraph (a), for “£17” substitute “£18”,

(b)in paragraph (b), for “£39” substitute “£41”,

(c)in paragraph (c), for “£60” substitute “£62”, and

(d)in paragraph (d), for “£82” substitute “£85”.

(6)The amendments made by this section have effect in relation to licences taken out on or after 1 April 2017.

21Alcoholic liquor duties: rates

(1)ALDA 1979 is amended as follows.

(2)In section 5 (rate of duty on spirits), for “£27.66” substitute “£28.74”.

(3)In section 36(1AA) (rates of general beer duty)—

(a)in paragraph (za) (rate of duty on lower strength beer), for “£8.10” substitute “£8.42”, and

(b)in paragraph (a) (standard rate of duty on beer), for “£18.37” substitute “£19.08”.

(4)In section 37(4) (rate of high strength beer duty), for “£5.48” substitute “£5.69”.

(5)In section 62(1A) (rates of duty on cider)—

(a)in paragraph (a) (rate of duty per hectolitre on sparkling cider of a strength exceeding 5.5%), for “£268.99” substitute “£279.46”,

(b)in paragraph (b) (rate of duty per hectolitre on cider of a strength exceeding 7.5% which is not sparkling cider), for “£58.75” substitute “£61.04”, and

(c)in paragraph (c) (rate of duty per hectolitre in any other case), for “£38.87” substitute “£40.38”.

(6)For the table in Schedule 1 substitute—

“Table of rates of duty on wine and made-wine

Part 1Wine or made-wine of a strength not exceeding 22%

Part 2Wine or made-wine of a strength exceeding 22%

(7)The amendments made by this section are treated as having come into force on 13 March 2017.

22Tobacco products duty: rates

(1)TPDA 1979 is amended as follows.

(2)For the table in Schedule 1 substitute—

(3)The amendment made by this section is treated as having come into force at 6pm on 8 March 2017.

23Tobacco products duty: minimum excise duty

(1)TPDA 1979 is amended as follows.

(2)In section 6(5)(a) (alteration of rates of duty), for “the amount” substitute “each amount”.

(3)For the first row in the table in Schedule 1 (as substituted by section 22) substitute—

(4)The amendments made by this section are treated as having come into force on 20 May 2017.

Avoidance

24Promoters of tax avoidance schemes: threshold conditions etc

(1)In Part 2 of Schedule 34 to FA 2014 (meeting the threshold conditions: bodies corporate and partnerships), in paragraph 13A (interpretation), for sub-paragraphs (6) to (8) substitute—

“(6)Two or more persons together control a body corporate if together they have the power to secure that the affairs of the body corporate are conducted in accordance with their wishes in any way specified in sub-paragraph (5)(a) to (c).

(7)A person controls a partnership if the person is a member of the partnership and—

(a)has the right to a share of more than half the assets, or more than half the income, of the partnership, or

(b)directs, or is on a day-to-day level in control of, the management of the business of the partnership.

(8)Two or more persons together control a partnership if they are members of the partnership and together they—

(a)have the right to a share of more than half the assets, or of more than half the income, of the partnership, or

(b)direct, or are on a day-to-day level in control of, the management of the business of the partnership.

(9)Paragraph 19(2) to (5) of Schedule 36 (connected persons etc) applies to a person referred to in sub-paragraph (7) or (8) as if references to “P” were to that person.

(10)A person has significant influence over a body corporate or partnership if the person—

(a)does not control the body corporate or partnership, but

(b)is able to, or actually does, exercise significant influence over it (whether or not as the result of a legal entitlement).

(11)Two or more persons together have significant influence over a body corporate or partnership if together those persons—

(a)do not control the body corporate or partnership, but

(b)are able to, or actually do, exercise significant influence over it (whether or not as the result of a legal entitlement).

(12)References to a person being a promoter are to the person carrying on business as a promoter.”

(2)In Part 2 of Schedule 34 to FA 2014, for paragraphs 13B to 13D substitute—

“Relevant bodies controlled etc by other persons treated as meeting a threshold condition

13B(1)A relevant body is treated as meeting a threshold condition at the relevant time if any of Conditions A to C is met.

(2)Condition A is that—

(a)a person met the threshold condition at a time when the person was a promoter, and

(b)the person controls or has significant influence over the relevant body at the relevant time.

(3)Condition B is that—

(a)a person met the threshold condition at a time when the person controlled or had significant influence over the relevant body,

(b)the relevant body was a promoter at that time, and

(c)the person controls or has significant influence over the relevant body at the relevant time.

(4)Condition C is that—

(a)two or more persons together controlled or had significant influence over the relevant body at a time when one of those persons met the threshold condition,

(b)the relevant body was a promoter at that time, and

(c)those persons together control or have significant influence over the relevant body at the relevant time.

(5)Where the person referred to in sub-paragraph (2)(a) or (3)(a) or (4)(a) as meeting a threshold condition is an individual, sub-paragraph (1) only applies if the threshold condition is a relevant threshold condition.

(6)For the purposes of sub-paragraph (2) it does not matter whether the relevant body existed at the time referred to in sub-paragraph (2)(a).

Persons who control etc a relevant body treated as meeting a threshold condition

13C(1)If at a time when a person controlled or had significant influence over a relevant body—

(a)the relevant body met a threshold condition, and

(b)the relevant body, or another relevant body which the person controlled or had significant influence over, was a promoter,

the person is treated as meeting the threshold condition at the relevant time.

(2)It does not matter whether any relevant body referred to sub-paragraph (1) exists at the relevant time.

Relevant bodies controlled etc by the same person treated as meeting a threshold condition

13D(1)If—

(a)a person controlled or had significant influence over a relevant body at a time when it met a threshold condition, and

(b)at that time that body, or another relevant body which the person controlled or had significant influence over, was a promoter,

any relevant body which the person controls or has significant influence over at the relevant time is treated as meeting the threshold condition at the relevant time.

(2)If—

(a)two or more persons together controlled or had significant influence over a relevant body at a time when it met a threshold condition, and

(b)at that time that body, or another relevant body which those persons together controlled or had significant influence over, was a promoter,

any relevant body which those persons together control or have significant influence over at the relevant time is treated as meeting the threshold condition at the relevant time.

(3)It does not matter whether—

(a)a relevant body referred to in sub-paragraph (1)(a) or (b) or (2)(a) or (b) exists at the relevant time, or

(b)a relevant body existing at the relevant time existed at the time referred to in sub-paragraph (1)(a) or (2)(a).”

(3)In Part 4 of Schedule 34A to FA 2014 (meeting section 237A conditions: bodies corporate and partnerships), for paragraphs 20 to 22 substitute—

“Relevant bodies controlled etc by other persons treated as meeting section 237A condition

20(1)A relevant body is treated as meeting a section 237A condition at the section 237A(2) relevant time if any of Conditions A to C is met.

(2)Condition A is that—

(a)a person met the section 237A condition at a time when the person was a promoter, and

(b)the person controls or has significant influence over the relevant body at the section 237A(2) relevant time.

(3)Condition B is that—

(a)a person met the section 237A condition at a time when the person controlled or had significant influence over the relevant body,

(b)the relevant body was a promoter at that time, and

(c)the person controls or has significant influence over the relevant body at the section 237A(2) relevant time.

(4)Condition C is that—

(a)two or more persons together controlled or had significant influence over the relevant body at a time when one of those persons met the section 237A condition,

(b)the relevant body was a promoter at that time, and

(c)those persons together control or have significant influence over the relevant body at the section 237A(2) relevant time.

(5)Sub-paragraph (1) does not apply where the person referred to in sub-paragraph (2)(a), (3)(a), or (4)(a) as meeting a section 237A condition is an individual.

(6)For the purposes of sub-paragraph (2) it does not matter whether the relevant body existed at the time referred to in sub-paragraph (2)(a).

Persons who control etc a relevant body treated as meeting a section 237A condition

21(1)If at a time when a person controlled or had significant influence over a relevant body—

(a)the relevant body met a section 237A condition, and

(b)the relevant body, or another relevant body which the person controlled or had significant influence over, was a promoter,

the person is treated as meeting the section 237A condition at the section 237A(2) relevant time.

(2)It does not matter whether any relevant body referred to sub-paragraph (1) exists at the section 237A(2) relevant time.

Relevant bodies controlled etc by the same person treated as meeting a section 237A condition

22(1)If—

(a)a person controlled or had significant influence over a relevant body at a time when it met a section 237A condition, and

(b)at that time that body, or another relevant body which the person controlled or had significant influence over, was a promoter,

any relevant body which the person controls or has significant influence over at the section 237A(2) relevant time is treated as meeting the section 237A condition at the section 237A(2) relevant time.

(2)If—

(a)two or more persons together controlled or had significant influence over a relevant body at a time when it met a section 237A condition, and

(b)at that time that body, or another relevant body which those persons together controlled or had significant influence over, was a promoter,

any relevant body which those persons together control or have significant influence over at the section 237A(2) relevant time is treated as meeting the section 237A condition at the section 237A(2) relevant time.

(3)It does not matter whether—

(a)a relevant body referred to in sub-paragraph (1)(a) or (b) or (2)(a) or (b) exists at the section 237A(2) relevant time, or

(b)a relevant body existing at the section 237A(2) relevant time existed at the time referred to in sub-paragraph (1)(a) or (2)(a).”

(4)In Part 4 of Schedule 34A to FA 2014, in paragraph 23 (interpretation)—

(a)in sub-paragraph (1), for the definition of “control” substitute—

• ““control” and “significant influence” have the same meanings as in Part 4 of Schedule 34 (see paragraph 13A(5) to (11));

• references to a person being a promoter are to the person carrying on business as a promoter;”;

(b)in sub-paragraph (2), for “20(1)(a), 21(1)(a) and 22(1)(a)” substitute “20 to 22”.

(5)The amendments made by subsections (1) and (2) have effect for the purposes of determining whether a person meets a threshold condition in a period of three years ending on or after 8 March 2017.

(6)The amendments made by subsections (3) and (4) have effect for the purposes of determining whether a person meets a section 237A condition in a period of three years ending on or after 8 March 2017.

Part 2Soft drinks industry levy

Introductory

25Soft drinks industry levy

(1)A tax called “soft drinks industry levy” is to be charged in accordance with this Part.

(2)The Commissioners are responsible for the collection and management of soft drinks industry levy.

26“Soft drink” and “package”

(1)“Soft drink” means—

(a)a beverage of an alcoholic strength not exceeding 1.2%;

(b)a liquid which, when prepared in a specified manner, constitutes a beverage within paragraph (a).

(2)A liquid is prepared in a specified manner if it is—

(a)diluted with water,

(b)combined with crushed ice, or processed so as to create crushed ice,

(c)combined with carbon dioxide, or

(d)prepared by way of a process that involves any combination of the processes mentioned in paragraphs (a) to (c).

(3)A person “packages” a soft drink if the person cans, bottles or otherwise packages the soft drink in a form in which—

(a)in the case of a soft drink within subsection (1)(a), it is suitable to be consumed without further preparation, and

(b)in the case of a soft drink within subsection (1)(b), it is suitable to be consumed when prepared in a specified manner (and without any other preparation),

and “packaged” is to be construed accordingly.

27Meaning of “prepared drink”

(1)In this Part a reference to “prepared drink” is a reference to—

(a)a soft drink within subsection (1)(a) of section 26;

(b)a beverage that would result from preparing a liquid within subsection (1)(b) of that section—

(i)in a specified manner (see section 26(2)), and

(ii)in accordance with the relevant dilution ratio.

(2)The “relevant dilution ratio” means—

(a)the dilution ratio stated on, or calculated by reference to information stated on, the packaging of the soft drink;

(b)where subsection (3) or (4) applies, the dilution ratio determined by the Commissioners.

(3)This subsection applies where the packaging of the soft drink states neither the dilution ratio nor information by reference to which the dilution ratio can be calculated.

(4)This subsection applies where—

(a)the dilution ratio, or information by reference to which the dilution ratio can be calculated, is stated on the packaging of the soft drink, and

(b)it is reasonable to assume that the main purpose, or one of the main purposes, of stating that particular dilution ratio or information is avoiding or reducing liability for soft drinks industry levy.

(5)The Commissioners may by or under regulations make provision about the criteria for—

(a)determining a dilution ratio for the purposes of subsection (2)(b);

(b)determining whether the main purpose, or one of the main purposes, of stating a particular dilution ratio or information is avoiding or reducing liability for soft drinks industry levy.

Chargeable soft drinks

28Meaning of “chargeable soft drink”

“Chargeable soft drink” means a packaged soft drink that—

(a)meets the sugar content condition (see section 29), and

(b)is not an exempt soft drink (see section 30).

29Sugar content condition

(1)A packaged soft drink meets the sugar content condition if it contains—

(a)added sugar ingredients, and

(b)at least 5 grams of sugars (whether or not as a result of containing added sugar ingredients) per 100 millilitres of prepared drink.

(2)A packaged soft drink contains “added sugar ingredients” if any of the following are combined with other ingredients at any stage in the production of the soft drink—

(a)calorific mono-saccharides or di-saccharides;

(b)a substance containing calorific mono-saccharides or di-saccharides.

(3)But a packaged soft drink does not contain “added sugar ingredients” only by reason of containing fruit juice, vegetable juice or milk (or any combination of them).

(4)The Commissioners may by regulations make provision about what is, or is not, to be treated for the purposes of this Part as fruit juice, vegetable juice or milk.

(5)Where regulations under subsection (4) contain a reference to an EU instrument or any provision of an EU instrument, the regulations may provide that the reference is to be construed as a reference to that instrument or that provision as amended from time to time.

30Exempt soft drinks

(1)The following are “exempt soft drinks”—

(a)milk-based drinks,

(b)milk substitute drinks,

(c)alcohol substitute drinks, and

(d)soft drinks of a specified description which are for use for medicinal or other specified purposes.

(2)“Milk-based drink” means a soft drink which contains at least 75 millilitres of milk per 100 millilitres of prepared drink.

(3)“Milk substitute drink” means a soft drink which—

(a)contains at least the specified quantities of calcium, and

(b)meets such other conditions as may be specified.

(4)“Alcohol substitute drink” means a soft drink which—

(a)is similar to a particular kind of alcoholic beverage, and

(b)meets such other conditions as may be specified.

(5)“Alcoholic beverage” means a beverage which is of an alcoholic strength exceeding 1.2%.

(6)The Commissioners may by regulations make further provision about the criteria for determining what is, or is not, to be treated as an exempt soft drink.

(7)Where regulations made under, or for the purposes of, this section contain a reference to an EU instrument or any provision of an EU instrument, the regulations may provide that the reference is to be construed as a reference to that instrument or that provision as amended from time to time.

Charging of the soft drinks industry levy

31Charge to soft drinks industry levy

(1)The charge to soft drinks industry levy arises on a chargeable event which occurs on or after 6 April 2018.

(2)Subsection (1) is subject to section 37 (small producer exemption).

32Chargeable events: soft drinks packaged in the UK

(1)This section applies where chargeable soft drinks are packaged by a person on premises in the United Kingdom (the “packaging premises”).

(2)A chargeable event occurs on the removal of the chargeable soft drinks from the packaging premises.

(3)But—

(a)if, on removal from the packaging premises, the secondary warehousing condition is met in relation to the chargeable soft drinks, a chargeable event occurs at the time that the secondary warehousing condition ceases to be met in relation to those soft drinks (and not at the time mentioned in subsection (2));

(b)if the chargeable soft drinks are made available for sale or free of charge before a chargeable event in relation to the soft drinks occurs under subsection (2) or paragraph (a), a chargeable event occurs at the time the soft drinks are made available (and not at the time mentioned in subsection (2) or paragraph (a)).

(4)For the purposes of this section and section 33, the secondary warehousing condition is met, at any time, in relation to chargeable soft drinks if the chargeable soft drinks are, at that time—

(a)in storage in a compliant warehouse, or

(b)being transported—

(i)from the packaging premises to a compliant warehouse, or

(ii)between compliant warehouses,

in compliance with such conditions and requirements as may be imposed by regulations under section 34.

(5)References in this section and in section 33 to a “compliant warehouse” are references to premises—

(a)that are, or are to be, used for the storage of chargeable soft drinks, and

(b)in respect of which the conditions and requirements specified in regulations under section 34(a) are met.

33Chargeable events: soft drinks imported into the UK

(1)This section applies where chargeable soft drinks are imported into the United Kingdom.

(2)A chargeable event occurs, in relation to imported chargeable soft drinks, on first receipt of the soft drinks by a relevant person (the “first recipient”).

(3)But subsection (2) is subject to subsections (7) to (9).

(4)The “first receipt” of imported chargeable soft drinks is the first occasion on which the soft drinks are delivered to a place in the United Kingdom which is a relevant person’s place of business (including where the chargeable soft drinks are delivered from a place outside the United Kingdom which is another place of business of the relevant person).

(5)“Relevant person” means a person who carries on a business involving the sale of chargeable soft drinks.

(6)The reference in subsection (5) to the sale of chargeable soft drinks includes a reference to—

(a)sale by wholesale,

(b)sale by retail, and

(c)sale for consumption on or in the vicinity of premises on which the drinks are sold.

(7)Subsection (8) applies if, on first receipt of the imported chargeable soft drinks, the place of business to which the soft drinks are delivered is a compliant warehouse.

(8)Subject to subsection (9), a chargeable event occurs at the time that the secondary warehousing condition ceases to be met in relation to the imported chargeable soft drinks (and not at the time mentioned in subsection (2)).

(9)If the chargeable soft drinks are made available for sale or free of charge by a relevant person (the “first seller”) before a chargeable event in relation to the soft drinks occurs under subsection (2) or (8), a chargeable event occurs at the time the chargeable soft drinks are made available (and not at the time mentioned in subsection (2) or (8)).

34Secondary warehousing regulations

The Commissioners may by regulations make provision, for the purposes of sections 32 and 33—

(a)specifying conditions and requirements in respect of premises on which chargeable soft drinks may be stored before the occurrence of a chargeable event (see section 32(5)(b));

(b)specifying other conditions and requirements as to the storage of chargeable soft drinks for the purposes of the secondary warehousing condition (see section 32(4));

(c)specifying conditions and requirements as to the transportation of chargeable soft drinks for the purposes of the secondary warehousing condition;

(d)imposing obligations on specified persons to provide information in connection with the storage or transportation of chargeable soft drinks.

35Liability to pay the levy

(1)Where the charge to soft drinks industry levy arises on a chargeable event within section 32(2) or (3), the person who packages the chargeable soft drinks is liable to pay the amount charged.

(2)Where the charge to soft drinks industry levy arises on a chargeable event within section 33(2) or (8), the relevant person who is the first recipient is liable to pay the amount charged.

(3)Where the charge to soft drinks industry levy arises on a chargeable event within section 33(9), the relevant person who is the first seller is liable to pay the amount charged.

36Levy rates

(1)Soft drinks industry levy is charged—

(a)in the case of chargeable soft drinks that meet the higher sugar threshold, at the rate of £0.24 per litre of prepared drink;

(b)in the case of chargeable soft drinks that do not meet the higher sugar threshold, at the rate of £0.18 per litre of prepared drink.

(2)A chargeable soft drink meets the higher sugar threshold if it contains at least 8 grams of sugars (whether or not as a result of containing added sugar ingredients) per 100 millilitres of prepared drink.

Exemption etc

37Small producer exemption

(1)No charge to soft drinks industry levy arises—

(a)on a chargeable event within section 32 in relation to chargeable soft drinks produced by a person who is, on the relevant day, a qualifying small producer;

(b)on a chargeable event within section 33 in relation to chargeable soft drinks produced by a person who is, on the relevant day, a small producer.

(2)Chargeable soft drinks are “produced” by a person if they are packaged (by or on behalf of the person) for marketing under—

(a)the person’s name or business name, or

(b)another name which is used in accordance with a licence granted to the person.

(3)For the purposes of this section and section 38, the “relevant day”, in relation to chargeable soft drinks, is the day on which the charge to soft drinks industry levy on the chargeable soft drinks would (apart from this section) arise.

(4)“Small producer” has the meaning given by section 38.

(5)A person is a “qualifying small producer” if the person is a small producer who is either—

(a)registered under section 45 (voluntary registration: small producers), or

(b)ineligible for registration under that section because the person does not meet the condition in section 45(2)(c) (voluntary registration eligibility conditions: packaging by a person other than the producer).

38Meaning of “small producer”

(1)A person (“the producer”) who produces chargeable soft drinks is a “small producer” on the relevant day if Conditions A and B are met.

(2)Condition A is met if the aggregate of—

(a)the amount of the producer’s chargeable soft drinks within section 26(1)(a) in respect of which a relevant event has occurred during the relevant 12 month period, and

(b)the amount of prepared drink that would result from the producer’s chargeable soft drinks within section 26(1)(b) in respect of which a relevant event has occurred during the relevant 12 month period,

does not exceed the small producer threshold.

(3)Condition B is met if there are reasonable grounds for believing that the aggregate of—

(a)the amount of the producer’s chargeable soft drinks within section 26(1)(a) in respect of which a relevant event will occur during the relevant 30 day period, and

(b)the amount of prepared drink that would result from the producer’s chargeable soft drinks within section 26(1)(b) in respect of which a relevant event will occur during the relevant 30 day period,

will not exceed the small producer threshold.

(4)A “relevant event” occurs in respect of chargeable soft drinks on the removal of the chargeable soft drinks from the premises on which they are packaged.

(5)But—

(a)if, on removal from the premises on which the chargeable soft drinks are packaged, the secondary warehousing condition is met in relation to the soft drinks, a “relevant event” occurs in relation to those soft drinks at the time that the secondary warehousing condition ceases to be met in relation to them (and not at the time mentioned in subsection (4));

(b)if the chargeable soft drinks are made available for sale or free of charge before a relevant event in relation to the soft drinks occurs under subsection (4) or paragraph (a), a “relevant event” occurs at the time they are made available (and not at the time mentioned in subsection (4) or paragraph (a)).

(6)For the purposes of subsections (2) and (3)—

(a)the “relevant 12 month period” is the period of 12 months ending with the end of the month that immediately precedes the month in which the relevant day falls, and

(b)the “relevant 30 day period” is the period of 30 days beginning with the relevant day.

(7)The “small producer threshold” is 1 million litres.

(8)References in this section to “the producer’s chargeable soft drinks” are references to chargeable soft drinks produced by the producer or a person connected with the producer.

39Tax credits

(1)The Commissioners may by regulations make provision in relation to cases where, after a charge to soft drinks industry levy has arisen in relation to chargeable soft drinks—

(a)the soft drinks are exported from the United Kingdom;

(b)the soft drinks are lost or destroyed.

(2)The provision that may be made is provision—

(a)for the liable person to be entitled to a tax credit in respect of any soft drinks industry levy charged on the soft drinks that are exported or (as the case may be) lost or destroyed;

(b)for the tax credit to be brought into account when the person is accounting for soft drinks industry levy due from the person for the prescribed accounting period or periods.

(3)Regulations under this section may include provision—

(a)for any entitlement to a tax credit to be conditional on the making of a claim by the liable person, and specifying the period within which and the manner in which a claim may be made;

(b)for any entitlement to bring a tax credit into account to be conditional on compliance with prescribed requirements;

(c)specifying circumstances in which, and criteria for determining the period for which, a liable person is not entitled to a tax credit;

(d)requiring a claim for a tax credit to be evidenced and quantified by reference to prescribed records and other documents;

(e)requiring a person claiming any entitlement to a tax credit to keep, for the prescribed period and in the prescribed form and manner, those records and documents and a record of prescribed information relating to the claim;

(f)for the withdrawal of a tax credit where any requirement of the regulations is not complied with;

(g)about adjustments of liability for soft drinks industry levy in connection with entitlement or withdrawal of entitlement to a tax credit in prescribed circumstances;

(h)about the treatment of a tax credit where the liable person ceases to carry on a business involving the package or sale of chargeable soft drinks.

(4)Regulations under paragraph (a) of subsection (1) may include provision for the sale or provision of chargeable soft drinks on passenger transport operating between the United Kingdom and a place outside of the United Kingdom to be treated as “export from the United Kingdom” for the purposes of regulations under that paragraph.

(5)Regulations under paragraph (b) of subsection (1) may include provision about the circumstances in which chargeable soft drinks are to be treated as lost or destroyed for the purposes of regulations under that paragraph.

(6)In this section—

• “liable person” means the person who is liable under section 35 to pay the charge to soft drinks industry levy referred to in subsection (1);

• “prescribed” means specified in, or determined in accordance with, regulations under this section.

Registration

40The register

(1)The Commissioners must establish and maintain a register for the purposes of this Part.

(2)In this Part, “the register” means the register under subsection (1) and references to registration are to registration in it.

(3)The register may contain such information as the Commissioners think is required for the purposes of the collection and management of soft drinks industry levy.

41Liability to register: packagers

(1)A person becomes liable to be registered—

(a)at the end of any month, if the person has packaged any chargeable soft drinks in respect of which a chargeable event within section 32 has occurred during that month;

(b)on any day, if there are reasonable grounds for believing that, during the period of 30 days beginning with that day, a chargeable event within section 32 will occur in respect of chargeable soft drinks packaged by the person.

(2)But subsection (1) does not apply to a person if—

(a)the chargeable soft drinks packaged by the person are also produced by the person, and

(b)the person is not liable to be registered under section 42 (liability to register: producers).

(3)Subsection (1) does not apply in relation to a person who is already registrable.

(4)In this section and in sections 42 and 43 references to “a person who is already registrable” are references to a person who—

(a)is registered under this section, section 42 or section 43,

(b)is subject to a relevant notification requirement, or

(c)would, if the person had complied with a relevant notification requirement, be registered under this section, section 42 or section 43.

(5)In subsection (4)(c) “relevant notification requirement” means a requirement under section 44(1) to notify the Commissioners of a liability to register—

(a)arising on a previous occasion, and

(b)in respect of which the notification period has expired.

(6)In this section “notification period” has the meaning given by section 44(2).

42Liability to register: producers

(1)A person (“the producer”) who produces chargeable soft drinks becomes liable to be registered—

(a)at the end of any month, if the qualifying amount of the producer’s chargeable soft drinks in respect of which a chargeable event within section 32 has occurred during the immediately preceding period of 12 months exceeds the small producer threshold;

(b)on any day, if there are reasonable grounds for believing that the qualifying amount of the producer’s chargeable soft drinks in respect of which a chargeable event within section 32 will occur during the period of 30 days beginning with that day will exceed the small producer threshold.

(2)The “qualifying amount” of chargeable soft drinks in respect of which a chargeable event occurs is the aggregate of—

(a)the amount of the chargeable soft drinks within section 26(1)(a) in respect of which the chargeable event occurs, and

(b)the amount of prepared drink that would result from the chargeable soft drinks within section 26(1)(b) in respect of which the chargeable event occurs.

(3)Subsection (1) does not apply in relation to a person who is already registrable.

(4)References in this section to “the producer’s chargeable soft drinks” are references to chargeable soft drinks produced by the producer or a person connected with the producer.

43Liability to register: imported chargeable soft drinks

(1)A person becomes liable to be registered—

(a)at the end of any month if, during that month, a chargeable event within section 33 has occurred—

(i)on the first receipt, or on the making available, of chargeable soft drinks by the person, or

(ii)on the secondary warehousing condition ceasing to be met in relation to chargeable soft drinks in respect of which the person is the first recipient;

(b)on any day, if there are reasonable grounds for believing that, during the period of 30 days beginning with that day, a chargeable event within section 33 will occur—

(i)on the first receipt, or on the making available, of chargeable soft drinks by the person, or

(ii)on the secondary warehousing condition ceasing to be met in relation to chargeable soft drinks in respect of which the person is the first recipient.

(2)Subsection (1) does not apply in relation to a person who is already registrable.

44Notification of liability and registration

(1)A person who becomes liable to be registered under section 41, 42 or 43 must notify the Commissioners of the liability before the end of the notification period.

(2)The “notification period” is the period of 30 days beginning with the day on which the liability arises.

(3)Where the Commissioners are satisfied that a person is liable to be registered (whether or not the person has notified liability under subsection (1)), the Commissioners must register the person with effect from the day on which the liability to register arises.

45Voluntary registration: small producers

(1)The Commissioners must register a person who—

(a)meets the voluntary registration eligibility conditions, and

(b)applies to the Commissioners for registration under this section.

(2)The voluntary registration eligibility conditions are met by a person (P) if—

(a)P produces chargeable soft drinks,

(b)P is not liable to be registered under section 42 (liability to register: producers), and

(c)some or all of the chargeable soft drinks produced by P are packaged on premises in the United Kingdom by a person other than P.

(3)A person who is registered under section 41 or 43 may also be registered under this section.

46Cancellation of registration under section 41, 42 or 43

(1)A registration under section 41, 42 or 43 may be cancelled only in accordance with this section.

(2)For the purposes of this section, a person meets the “liability condition” at a particular time if—

(a)at the end of the preceding month, the condition in section 41(1)(a), 42(1)(a) or 43(1)(a) is met in relation to the person, or

(b)at that time, the condition in section 41(1)(b), 42(1)(b) or 43(1)(b) is met in relation to the person.

(3)The Commissioners must cancel a person’s registration under section 41, 42 or 43 if—

(a)the person requests the cancellation, and

(b)the person satisfies the Commissioners that the person does not, at the time of the request, meet the liability condition.

(4)A cancellation under subsection (3) is to be made with effect from—

(a)the day on which the request is made, or

(b)such later day as may be agreed between the Commissioners and the person.

(5)The Commissioners may cancel a person’s registration under section 41, 42 or 43 if they are satisfied that the person does not meet the liability condition.

(6)A cancellation under subsection (5) is to be made with effect from—

(a)the day on which the person ceased to meet the liability condition, or

(b)such later day as may be agreed between the Commissioners and the person.

(7)But the Commissioners must not cancel a registration under subsection (3) or (5) with effect from any time unless—

(a)they are satisfied that it is not a time when the person would meet the liability condition, and

(b)it is reasonable to believe that the person will not become liable to be registered under section 41(1)(a) or 43(1)(a) during the period of 12 months beginning with that time.

(8)The Commissioners may cancel a person’s registration under section 41, 42 or 43 if they are satisfied that the person did not meet the liability condition on the day on which the person was registered, and has not at any subsequent time met the liability condition.

(9)A cancellation under subsection (8) is to be made with effect from the day on which the person was registered.

47Cancellation of voluntary registration

(1)The Commissioners may cancel a person’s registration under section 45 if they are satisfied that the person does not meet the voluntary registration eligibility conditions (see subsection (2) of that section).

(2)A cancellation under subsection (1) is to be made with effect from the day on which the person ceased to meet the voluntary registration eligibility conditions.

(3)The Commissioners must cancel a person’s registration under section 45 if the person requests the cancellation.

(4)A cancellation under subsection (3) is to be made with effect from—

(a)the day on which the request is made, or

(b)such later day as may be agreed between the Commissioners and the person.

48Correction of the register

(1)The Commissioners may by regulations make provision about the correction of entries in the register.

(2)Regulations under subsection (1) may make provision for requiring persons who are, or are liable to be, registered to notify the Commissioners of changes in circumstances which are relevant to the register.

49Applications, notifications etc

The Commissioners may by or under regulations make provision—

(a)about the form and manner in which a notification under section 44 (notification of liability to register) is to be given;

(b)about the information to be contained in or provided with a notification under that section;

(c)about the form and manner of an application under section 45 (voluntary registration: small producers);

(d)requiring applications, notifications and other communications with the Commissioners in connection with registration to be made electronically.

Offences

50Fraudulent evasion

(1)A person commits an offence if the person is knowingly concerned in, or in the taking of steps with a view to, the fraudulent evasion (by that person or any other person) of soft drinks industry levy.

(2)The references in subsection (1) to the evasion of soft drinks industry levy include references to obtaining, in circumstances where there is no entitlement to it—

(a)a tax credit under regulations under section 39;

(b)a repayment of soft drinks industry levy under Schedule 8.

(3)A person guilty of an offence under this section is liable—

(a)on summary conviction in England and Wales—

(i)to imprisonment for a term not exceeding 12 months, or

(ii)to a fine not exceeding £20,000 or (if greater) 3 times the total of the amounts of soft drinks industry levy that were, or were intended to be, evaded, or

(iii)to both;

(b)on summary conviction in Scotland—

(i)to imprisonment for a term not exceeding 12 months, or

(ii)to a fine not exceeding the statutory maximum or (if greater) 3 times the total of the amounts of soft drinks industry levy that were, or were intended to be, evaded, or

(iii)to both;

(c)on summary conviction in Northern Ireland—

(i)to imprisonment for a term not exceeding 6 months, or

(ii)to a fine not exceeding the statutory maximum or (if greater) 3 times the total of the amounts of soft drinks industry levy that were, or were intended to be, evaded, or

(iii)to both;

(d)on conviction on indictment—

(i)to imprisonment for a term not exceeding 7 years,

(ii)to a fine, or

(iii)to both.

(4)For the purposes of subsection (3), the amounts of soft drinks industry levy that were, or were intended to be, evaded are to be taken as including—

(a)the amount of any tax credit under regulations under section 39, and

(b)the amount of any repayment of soft drinks industry levy under Schedule 8,

which was, or was intended to be, obtained in circumstances where there was no entitlement to it.

(5)In determining for the purposes of subsection (3) the amounts of soft drinks industry levy that were, or were intended to be, evaded, no account is to be taken of the extent to which any liability to levy of a person would be, or would have been, reduced by the amount of any tax credit or repayment of soft drinks industry levy to which the person was, or would have been, entitled.

(6)In relation to an offence committed before the commencement of section 154(1) of the Criminal Justice Act 2003 the reference in subsection (3)(a)(i) to 12 months is to be read as a reference to 6 months.

51Failure to notify registration liability

(1)A person who fails to comply with section 44(1) (obligation to notify the Commissioners of liability to be registered) commits an offence.

(2)In proceedings against a person (P) for an offence under subsection (1), it is a defence for P to prove that P had a reasonable excuse for the failure to comply.

(3)For the purposes of subsection (2)—

(a)where P relies on any other person to do anything, that is not a reasonable excuse unless P took reasonable care to avoid the failure;

(b)where P had a reasonable excuse for the failure but the excuse has ceased, P is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased.

(4)A person guilty of an offence under this section is liable—

(a)on summary conviction in England and Wales—

(i)to imprisonment for a term not exceeding 12 months, or

(ii)to a fine not exceeding £20,000 or (if greater) 3 times the amount of the potential lost revenue, or

(iii)to both;

(b)on summary conviction in Scotland—

(i)to imprisonment for a term not exceeding 12 months, or

(ii)to a fine not exceeding the statutory maximum or (if greater) 3 times the amount of the potential lost revenue, or

(iii)to both;

(c)on summary conviction in Northern Ireland—

(i)to imprisonment for a term not exceeding 6 months, or

(ii)to a fine not exceeding the statutory maximum or (if greater) 3 times the amount of the potential lost revenue, or

(iii)to both;

(d)on conviction on indictment—

(i)to imprisonment for a term not exceeding 3 years,

(ii)to a fine, or

(iii)to both.

(5)For the purposes of subsection (4), the “potential lost revenue” is the amount of soft drinks industry levy (if any) for which the person who committed the offence is liable for the period—

(a)beginning with the date with effect from which the person is liable to be registered under this Part, and

(b)ending with the date on which the Commissioners received notification of, or otherwise were satisfied as to, the person’s liability to be registered under this Part.

(6)In calculating potential lost revenue for the purposes of subsection (4), no account is to be taken of the fact that a potential loss of revenue from the person is or may be balanced by a potential over-payment by another person.

(7)In relation to an offence committed before the commencement of section 154(1) of the Criminal Justice Act 2003 the reference in subsection (4)(a)(i) to 12 months is to be read as a reference to 6 months.

Administration and enforcement

52Payment, collection and recovery

(1)The Commissioners may by regulations make provision about the payment, collection and recovery of soft drinks industry levy.

(2)Regulations under subsection (1) may—

(a)require persons who are or are liable to be registered under this Part to keep accounts for the purposes of the levy in the specified form and manner;

(b)require persons who are or are liable to be registered under this Part to make returns for the purposes of the levy;

(c)make provision for determining the periods (“accounting periods”) by reference to which payments of the levy are to be made;

(d)make provision about the times at which payments of the levy are to be made and methods of payment;

(e)require the amounts payable by reference to accounting periods to be calculated by or under the regulations;

(f)make provision for the correction of errors made in accounting for the levy.

(3)Provision may be made by or under regulations under subsection (2)(b) about—

(a)the periods by reference to which returns are to be made,

(b)the information to be included in returns,

(c)timing, and

(d)the form of, and method of, making returns.

(4)Schedule 8 contains provision about recovery and overpayments.

53Records

(1)The Commissioners may by regulations require persons—

(a)to keep, for purposes connected with soft drinks industry levy, records of specified matters, and

(b)to preserve records for a specified period.

(2)A duty under regulations under this section to preserve records may be discharged—

(a)by preserving them in any form and by any means, or

(b)by preserving the information contained in them in any form and by any means, subject to any specified conditions or exceptions.

(3)The Commissioners may direct a person who is, or is liable to be, registered under this Part—

(a)to keep such records as are specified in the direction;

(b)to preserve those records for a specified period.

(4)The period specified in a direction under subsection (3)(b) may not exceed 6 years.

(5)The Commissioners may not give a direction under subsection (3) unless they have reasonable grounds for believing that the records specified in the direction might assist in identifying chargeable soft drinks in respect of which soft drinks industry levy might not be paid.

(6)A direction under subsection (3)—

(a)must be given in writing,

(b)must specify the consequences under Schedule 9 of failure to comply with a requirement imposed under subsection (3), and

(c)may be revoked or replaced by a further direction.

(7)Schedule 9 makes provision about penalties for failure to comply with requirements imposed by regulations or directions under this section.

54Power to make further provision about enforcement

(1)The Commissioners may by regulations make further provision about enforcement of soft drinks industry levy, including provision conferring powers of entry, search or seizure.

(2)Regulations under this section may include provision—

(a)conferring powers to enter and inspect premises that are used, or are reasonably believed to be used, in connection with the production, packaging, sale, import or export of chargeable soft drinks;

(b)conferring powers to stop, board and search ships, aircraft and other vehicles entering, leaving or situated on premises referred to in paragraph (a);

(c)conferring powers to inspect and take copies of business documents on premises referred to in paragraph (a);

(d)conferring powers to examine and take samples of soft drinks found on premises referred to in paragraph (a);

(e)for the detention and seizure of chargeable soft drinks in respect of which a specified requirement of this Part has been contravened;

(f)requiring a person to provide such facilities as are reasonably necessary for an officer of Revenue and Customs to carry out an examination or search or exercise other powers conferred by the regulations;

(g)about reviews of, and appeals against, decisions made for the purposes of the regulations.

(3)Regulations under this section may, in particular, make provision by applying any provision of the Customs and Excise Management Act 1979.

55Appeals etc

Schedule 10 makes provision about appeals and reviews.

56Supplementary amendments

Schedule 11 contains supplementary amendments relating to administration and enforcement of soft drinks industry levy.

Miscellaneous

57Regulations: death, incapacity or insolvency of person carrying on a business

(1)The Commissioners may by regulations make provision for the purposes of soft drinks industry levy in relation to cases where a person carries on a business of—

(a)an individual who has died or become incapacitated;

(b)a person (whether or not an individual) who is subject to an insolvency procedure (as defined in the regulations).

(2)Regulations under this section may include—

(a)provision requiring the person who is carrying on the business (P) to notify the Commissioners that P is carrying on the business and of the event that led to P carrying it on;

(b)provision allowing P to be treated for a limited time as if P and the person who has died, become incapacitated or is subject to an insolvency procedure were the same person;

(c)such other provision as the Commissioners think fit for securing continuity in the application of this Part in cases to which the regulations apply.

58Provisional collection of soft drinks industry levy

In section 1 of the Provisional Collection of Taxes Act 1968 (temporary statutory effect of House of Commons resolutions), in subsection (1), after “aggregates levy,” insert “soft drinks industry levy,”.

General

59Interpretation of Part 2

(1)In this Part—

• “accounting period” is to be construed in accordance with section 52(2)(c);

• “chargeable soft drink” has the meaning given by section 28;

• “the Commissioners” means the Commissioners for Her Majesty’s Revenue and Customs;

• “compliant warehouse” is to be construed in accordance with section 32(5);

• “first recipient” and “first receipt”, in relation to imported chargeable soft drinks, have the meaning given by section 33(2) and (4);

• “first seller”, in relation to imported chargeable soft drinks, has the meaning given by section 33(9);

• “HMRC” means Her Majesty’s Revenue and Customs;

• “package” and “packaged” are to be construed in accordance with section 26(3);

• “person who is already registrable” has the meaning given by section 41(4);

• “prepared drink” has the meaning given by section 27(1);

• “produce”, in relation to chargeable soft drinks, is to be construed in accordance with section 37(2);

• “relevant person” has the meaning given by section 33(5);

• “secondary warehousing condition” has the meaning given by section 32(4);

• “small producer” has the meaning given by section 38;

• “small producer threshold” has the meaning given by section 38(7);

• “soft drink” has the meaning given by section 26(1);

• “sugars” means anything that is required to be described as “sugars” for the purposes of a designated food labelling obligation (see subsection (3)).

(2)In sections 30, 34, 52, 53(1) and (2) and 54 and in paragraph 11 of Schedule 8, “specified” means specified in regulations made by the Commissioners for the purposes of this Part.

(3)In the definition of “sugars” in subsection (1), “designated food labelling obligation” means an obligation that—

(a)relates to the provision of nutritional information on the packaging of food or drinks,

(b)is imposed by an enactment, an EU instrument or subordinate legislation, and

(c)is designated by regulations made by the Commissioners for the purposes of this Part.

(4)Section 1122 of CTA 2010 (meaning of connected person) applies for the purposes of this Part.

(5)For the purposes of this Part, a person “packages” chargeable soft drinks if—

(a)the person packages soft drinks, and

(b)the packaged soft drinks are chargeable soft drinks.

60Regulations

(1)Regulations under this Part—

(a)may make different provision for different purposes;

(b)may include incidental, consequential, supplementary or transitional provision.

(2)Regulations under this Part are to be made by statutory instrument.

(3)A statutory instrument containing regulations under section 54 may not be made unless a draft of the instrument has been laid before and approved by a resolution of the House of Commons.

(4)Any other statutory instrument containing regulations under this Part is subject to annulment in pursuance of a resolution of the House of Commons.

(5)But subsection (4) does not apply to a statutory instrument containing only regulations under section 61 (commencement of this Part).

61Commencement

(1)Subject to subsection (2), this Part comes into force on such day as the Commissioners may by regulations appoint.

(2)The amendment made by paragraph 3 of Schedule 11 comes into force in accordance with provision made by the Treasury by regulations.

(3)Regulations under this section may appoint different days for different purposes.

Part 3Final

62Interpretation

In this Act the following abbreviations are references to the following Acts.

63Short title

This Act may be cited as the Finance Act 2017.

SCHEDULES

Section 6

SCHEDULE 1Workers’ services provided to public sector through intermediaries

Part 1Preliminary amendments

1ITEPA 2003 is amended as follows.

2In section 48 (scope of Chapter 8 of Part 2: workers’ services provided through intermediaries)—

(a)in subsection (1), after “through an intermediary” insert “, but not where the services are provided to a public authority”, and

(b)after subsection (2) insert—

“(3)In this Chapter “public authority” has the same meaning as in Chapter 10 of this Part (see section 61L).”

3In section 49(1) (engagements to which Chapter applies), after paragraph (a) insert—

“(aa)the client is not a public authority,”.

4In section 52(2)(b) and (c) (conditions of liability under Chapter 8 where intermediary is a partnership), for “this Chapter” substitute “one or other of this Chapter and Chapter 10”.

5In section 61(1) (interpretation of Chapter 8), before the definition of “engagement to which this Chapter applies” insert—

• ““engagement to which Chapter 10 applies” has the meaning given by section 61M(5);”.

6In section 61A (scope of Chapter 9 of Part 2: workers’ services provided by managed service companies), after subsection (2) insert—

“(3)See also section 61D(4A) (disapplication of this Chapter if Chapter 10 applies).”

7In section 61D (deemed earnings where worker’s services provided by managed service company), after subsection (4) insert—

“(4A)This section does not apply where the provision of the relevant services gives rise (directly or indirectly) to an engagement to which Chapter 10 applies, and for this purpose it does not matter whether the client is also “the client” for the purposes of section 61M(1).”

8In section 61J(1) (interpretation of Chapter 9), before the definition of “managed service company” insert—

• ““engagement to which Chapter 10 applies” has the meaning given by section 61M(5),”.

Part 2New Chapter 10 of Part 2 of ITEPA 2003

9In Part 2 of ITEPA 2003 (employment income: charge to tax), after Chapter 9 insert—

“CHAPTER 10Workers’ services provided to public sector through intermediaries

61KScope of this Chapter

(1)This Chapter has effect with respect to the provision of services to a public authority through an intermediary.

(2)Nothing in this Chapter—

(a)affects the operation of Chapter 7 of this Part (agency workers), or

(b)applies to payments or transfers to which section 966(3) or (4) of ITA 2007 applies (visiting performers: duty to deduct and account for sums representing income tax).

61LMeaning of “public authority”

(1)In this Chapter “public authority” means—

(a)a public authority as defined by the Freedom of Information Act 2000,

(b)a Scottish public authority as defined by the Freedom of Information (Scotland) Act 2002 (asp 13),

(c)the Corporate Officer of the House of Commons,

(d)the Corporate Officer of the House of Lords,

(e)the National Assembly for Wales Commission, or

(f)the Northern Ireland Assembly Commission.

(2)An authority within paragraph (a) or (b) of subsection (1) is a public authority for the purposes of this Chapter in relation to all its activities even if provisions of the Act mentioned in that paragraph do not apply to all information held by the authority.

(3)Subsection (1) is subject to subsection (4).

(4)A primary-healthcare provider is a public authority for the purposes of this Chapter only if the primary-healthcare provider—

(a)has a registered patient list for the purposes of relevant medical-services regulations,

(b)is within paragraph 43A in Part 3 of Schedule 1 to the Freedom of Information Act 2000 (providers of primary healthcare services in England and Wales) by reason of being a person providing primary dental services,

(c)is within paragraph 51 in that Part of that Schedule (providers of healthcare services in Northern Ireland) by reason of being a person providing general dental services, or

(d)is within paragraph 33 in Part 4 of Schedule 1 to the Freedom of Information (Scotland) Act 2002 (providers of healthcare services in Scotland) by reason of being a person providing general dental services.

(5)In this section—

• “primary-healthcare provider” means an authority that is within subsection (1)(a) or (b) only because it is within a relevant paragraph,

• “relevant paragraph” means—

  (a)

  any of paragraphs 43A to 45A and 51 in Part 3 of Schedule 1 to the Freedom of Information Act 2000, or

  (b)

  any of paragraphs 33 to 35 in Part 4 of Schedule 1 to the Freedom of Information (Scotland) Act 2002, and

• “relevant medical-services regulations” means any of the following—

  (a)

  the Primary Medical Services (Sale of Goodwill and Restrictions on Sub-contracting) Regulations 2004 (S.I. 2004/906),

  (b)

  the Primary Medical Services (Sale of Goodwill and Restrictions on Sub-contracting) (Wales) Regulations 2004 (S.I. 2004/1017),

  (c)

  the Primary Medical Services (Sale of Goodwill and Restrictions on Sub-contracting) (Scotland) Regulations 2004 (S.S.I. 2004/162), and

  (d)

  the Primary Medical Services (Sale of Goodwill and Restrictions on Sub-contracting) Regulations (Northern Ireland) 2004 (S.R. (N.I.) 2004 No. 477).

(6)The Commissioners for Her Majesty’s Revenue and Customs may by regulations amend this section in consequence of—

(a)any amendment or revocation of any regulations for the time being referred to in this section,

(b)any amendment in Part 3 of Schedule 1 to the Freedom of Information Act 2000, or

(c)any amendment in Part 4 of Schedule 1 to the Freedom of Information (Scotland) Act 2002.

61MEngagements to which Chapter applies

(1)Sections 61N to 61R apply where—

(a)an individual (“the worker”) personally performs, or is under an obligation personally to perform, services for another person (“the client”),

(b)the client is a public authority,

(c)the services are provided not under a contract directly between the client and the worker but under arrangements involving a third party (“the intermediary”), and

(d)the circumstances are such that—

(i)if the services were provided under a contract directly between the client and the worker, the worker would be regarded for income tax purposes as an employee of the client or the holder of an office under the client, or

(ii)the worker is an office-holder who holds that office under the client and the services relate to the office.

(2)The reference in subsection (1)(c) to a “third party” includes a partnership or unincorporated association of which the worker is a member.

(3)The circumstances referred to in subsection (1)(d) include the terms on which the services are provided, having regard to the terms of the contracts forming part of the arrangements under which the services are provided.

(4)Holding office as statutory auditor of the client does not count as holding office under the client for the purposes of subsection (1)(d), and here “statutory auditor” means a statutory auditor within the meaning of Part 42 of the Companies Act 2006 (see section 1210 of that Act).

(5)In this Chapter “engagement to which this Chapter applies” means any such provision of services as is mentioned in subsection (1).

61NWorker treated as receiving earnings from employment

(1)If one of Conditions A to C is met, identify the chain of two or more persons where—

(a)the highest person in the chain is the client,

(b)the lowest person in the chain is the intermediary, and

(c)each person in the chain above the lowest makes a chain payment to the person immediately below them in the chain.

(See section 61U for cases where one of Conditions A to C is treated as being met.)

(2)In this section and sections 61O to 61S—

• “chain payment” means a payment, or money’s worth or any other benefit, that can reasonably be taken to be for the worker’s services to the client,

• “make”—

  (a)

  in relation to a chain payment that is money’s worth, means transfer, and

  (b)

  in relation to a chain payment that is a benefit other than a payment or money’s worth, means provide, and

• “the fee-payer” means the person in the chain immediately above the lowest.

(3)The fee-payer is treated as making to the worker, and the worker is treated as receiving, a payment which is to be treated as earnings from an employment (“the deemed direct payment”), but this is subject to subsections (5) to (7) and sections 61T and 61V.

(4)The deemed direct payment is treated as made at the same time as the chain payment made by the fee-payer.

(5)Subsections (6) and (7) apply, subject to sections 61T and 61V, if the fee-payer—

(a)is not the client, and

(b)is not a qualifying person.

(6)If there is no person in the chain below the highest and above the lowest who is a qualifying person, subsections (3) and (4) have effect as if for any reference to the fee-payer there were substituted a reference to the client.

(7)Otherwise, subsections (3) and (4) have effect as if for any reference to the fee-payer there were substituted a reference to the person in the chain who—

(a)is above the lowest,

(b)is a qualifying person, and

(c)is lower in the chain than any other person in the chain who—

(i)is above the lowest, and

(ii)is a qualifying person.

(8)In subsections (5) to (7) a “qualifying person” is a person who—

(a)is resident in the United Kingdom or has a place of business in the United Kingdom,

(b)is not a person who is controlled by—

(i)the worker, alone or with one or more associates of the worker, or

(ii)an associate of the worker, with or without other associates of the worker, and

(c)if a company, is not one in which—

(i)the worker, alone or with one or more associates of the worker, or

(ii)an associate of the worker, with or without other associates of the worker,

has a material interest (within the meaning given by section 51(4) and (5)).

(9)Condition A is that—

(a)the intermediary is a company, and

(b)the conditions in section 61O are met in relation to the intermediary.

(10)Condition B is that—

(a)the intermediary is a partnership,

(b)the worker is a member of the partnership,

(c)the provision of the services is by the worker as a member of the partnership, and

(d)the condition in section 61P is met in relation to the intermediary.

(11)Condition C is that the intermediary is an individual.

(12)Where a payment, money’s worth or any other benefit can reasonably be taken to be for both—

(a)the worker’s services to the client, and

(b)anything else,

then, for the purposes of this Chapter, so much of it as can, on a just and reasonable apportionment, be taken to be for the worker’s services is to be treated as (and the rest is to be treated as not being) a payment, or money’s worth or another benefit, that can reasonably be taken to be for the worker’s services.

61OConditions where intermediary is a company

(1)The conditions mentioned in section 61N(9)(b) are that—

(a)the intermediary is not an associated company of the client that falls within subsection (2), and

(b)the worker has a material interest in the intermediary.

(2)An associated company of the client falls within this subsection if it is such a company by reason of the intermediary and the client being under the control—

(a)of the worker, or

(b)of the worker and other persons.

(3)The worker is treated as having a material interest in the intermediary if—

(a)the worker, alone or with one or more associates of the worker, or

(b)an associate of the worker, with or without other associates of the worker,

has a material interest in the intermediary.

(4)For this purpose “material interest” has the meaning given by section 51(4) and (5).

(5)In this section “associated company” has the meaning given by section 449 of CTA 2010.

61PConditions where intermediary is a partnership

(1)The condition mentioned in section 61N(10)(d) is—

(a)that the worker, alone or with one or more relatives, is entitled to 60% or more of the profits of the partnership, or

(b)that most of the profits of the partnership derive from the provision of services under engagements to which one or other of this Chapter and Chapter 8 applies—

(i)to a single client, or

(ii)to a single client together with associates of that client, or

(c)that under the profit sharing arrangements the income of any of the partners is based on the amount of income generated by that partner by the provision of services under engagements to which one or other of this Chapter and Chapter 8 applies.

(2)In subsection (1)(a) “relative” means spouse or civil partner, parent or child or remoter relation in the direct line, or brother or sister.

(3)Section 61(4) and (5) apply for the purposes of this section as they apply for the purposes of Chapter 8.

61QCalculation of deemed direct payment

(1)The amount of the deemed direct payment is the amount resulting from the following steps—

• Step 1

  Identify the amount or value of the chain payment made by the person who is treated as making the deemed direct payment, and deduct from that amount so much of it (if any) as is in respect of value added tax.

• Step 2

  Deduct, from the amount resulting from Step 1, so much of that amount as represents the direct cost to the intermediary of materials used, or to be used, in the performance of the services.

• Step 3

  Deduct, at the option of the person treated as making the deemed direct payment, from the amount resulting from Step 2, so much of that amount as represents expenses met by the intermediary that would have been deductible from the taxable earnings from the employment if—

  (a)

  the worker had been employed by the client, and

  (b)

  the expenses had been met by the worker out of those earnings.

• Step 4

  If the amount resulting from the preceding Steps is nil or negative, there is no deemed direct payment. Otherwise, that amount is the amount of the deemed direct payment.

(2)For the purposes of Step 1 of subsection (1), any part of the amount or value of the chain payment which is employment income of the worker by virtue of section 863G(4) of ITTOIA 2005 (salaried members of limited liability partnerships: anti-avoidance) is to be ignored.

(3)In subsection (1), the reference to the amount or value of the chain payment means the amount or value of that payment before the deduction (if any) permitted under section 61S.

(4)If the actual amount or value of the chain payment mentioned in Step 1 of subsection (1) is such that its recipient bears the cost of amounts due under PAYE regulations or contributions regulations in respect of the deemed direct payment, that Step applies as if the amount or value of that chain payment were what it would be if the burden of that cost were not being passed on through the setting of the level of the payment.

(5)In Step 3 of subsection (1), the reference to expenses met by the intermediary includes—

(a)expenses met by the worker and reimbursed by the intermediary, and

(b)where the intermediary is a partnership and the worker is a member of the partnership, expenses met by the worker for and on behalf of the partnership.

(6)In subsection (4) “contributions regulations” means regulations under the Contributions and Benefits Act providing for primary Class 1 contributions to be paid in a similar manner to income tax in relation to which PAYE regulations have effect (see, in particular, paragraph 6(1) of Schedule 1 to the Act); and here “primary Class 1 contribution” means a primary Class 1 contribution within the meaning of Part 1 of the Contributions and Benefits Act.

61RApplication of Income Tax Acts in relation to deemed employment

(1)The Income Tax Acts (in particular, Part 11 and PAYE regulations) apply in relation to the deemed direct payment as follows.

(2)They apply as if—

(a)the worker were employed by the person treated as making the deemed direct payment, and

(b)the services were performed, or to be performed, by the worker in the course of performing the duties of that employment.

(3)The deemed direct payment is treated in particular—

(a)as taxable earnings from the employment for the purpose of securing that any deductions under Chapters 2 to 6 of Part 5 do not exceed the deemed direct payment, and

(b)as taxable earnings from the employment for the purposes of section 232.

(4)The worker is not chargeable to tax in respect of the deemed direct payment if, or to the extent that, by reason of any combination of the factors mentioned in subsection (5), the worker would not be chargeable to tax if—

(a)the client employed the worker,

(b)the worker performed the services in the course of that employment, and

(c)the deemed direct payment were a payment by the client of earnings from that employment.

(5)The factors are—

(a)the worker being resident or domiciled outside the United Kingdom or meeting the requirement of section 26A,

(b)the client being resident outside, or not resident in, the United Kingdom, and

(c)the services being provided outside the United Kingdom.

(6)Where the intermediary is a partnership or unincorporated association, the deemed direct payment is treated as received by the worker in the worker’s personal capacity and not as income of the partnership or association.

(7)Where—

(a)the client is the person treated as making the deemed direct payment,

(b)the worker is resident in the United Kingdom,

(c)the services are provided in the United Kingdom,

(d)the client is not resident in the United Kingdom, and

(e)the client does not have a place of business in the United Kingdom,

the client is treated as resident in the United Kingdom.

61SDeductions from chain payments

(1)This section applies if, as a result of section 61R, a person who is treated as making a deemed direct payment is required under PAYE Regulations to pay an amount to the Commissioners for Her Majesty’s Revenue and Customs (“the Commissioners”) in respect of the payment.

(But see subsection (4)).

(2)The person may deduct from the underlying chain payment an amount which is equal to the amount payable to the Commissioners, but where the amount or value of the underlying chain payment is treated by section 61Q(4) as increased by the cost of any amount due under PAYE Regulations, the amount that may be deducted is limited to the difference (if any) between the amount payable to the Commissioners and the amount of that increase.

(3)Where a person in the chain other than the intermediary receives a chain payment from which an amount has been deducted in reliance on subsection (2) or this subsection, that person may deduct the same amount from the chain payment made by them.

(4)This section does not apply in a case to which 61V(2) applies (services-provider treated as making deemed direct payment).

(5)In subsection (2) “the underlying chain payment” means the chain payment whose amount is used at Step 1 of section 61Q(1) as the starting point for calculating the amount of the deemed direct payment.

61TInformation to be provided by clients and consequences of failure

(1)If the conditions in section 61M(1)(a) to (c) are met in any case, and a person as part of the arrangements mentioned in section 61M(1)(c) enters into a contract with the client, the client must inform that person (in the contract or otherwise) of which one of the following is applicable—

(a)the client has concluded that the condition in section 61M(1)(d) is met in the case;

(b)the client has concluded that the condition in section 61M(1)(d) is not met in the case.

(2)If the contract is entered into on or after 6 April 2017, the duty under subsection (1) must be complied with—

(a)on or before the time of entry into the contract, or

(b)if the services begin to be performed at a later time, before that later time.

(3)If the contract is entered into before 6 April 2017, the duty under subsection (1) must be complied with on or before the date of the first payment made under the contract on or after 6 April 2017.

(4)If the information which subsection (1) requires the client to give to a person has been given (whether in the contract, as required by subsection (2) or (3) or otherwise), the client must, on a written request by the person, provide the person with a written response to any questions raised by the person about the client’s reasons for reaching the conclusion identified in the information.

(5)A response required by subsection (4) must be provided before the end of 31 days beginning with the day the request for it is received by the client.

(6)If—

(a)the client fails to comply with the duty under subsection (1) within the time allowed by subsection (2) or (3),

(b)the client fails to provide a response required by subsection (4) within the time allowed by subsection (5), or

(c)the client complies with the duty under subsection (1) but fails to take reasonable care in coming to its conclusion as to whether the condition in section 61M(1)(d) is met in the case,

section 61N(3) and (4) have effect in the case as if for any reference to the fee-payer there were substituted a reference to the client, but this is subject to section 61V.

61UInformation to be provided by worker and consequences of failure

(1)In the case of an engagement to which this Chapter applies, the worker must inform the potential deemed employer of which one of the following is applicable—

(a)that one of conditions A to C in section 61N is met in the case;

(b)that none of conditions A to C in section 61N is met in the case.

(2)If the worker has not complied with subsection (1) then, for the purposes of section 61N(1), one of conditions A to C in section 61N is to be treated as met.

(3)In this section “the potential deemed employer” is the person who, if one of conditions A to C in section 61N were met, would be treated as making a deemed direct payment to the worker under section 61N(3).

61VConsequences of providing fraudulent information

(1)Subsection (2) applies if in any case—

(a)a person (“the deemed employer”) would, but for this section, be treated by section 61N(3) as making a payment to another person (“the services-provider”), and

(b)the fraudulent documentation condition is met.

(2)Section 61N(3) has effect in the case as if the reference to the fee-payer were a reference to the services-provider, but—

(a)section 61N(4) continues to have effect as if the reference to the fee-payer were a reference to the deemed employer, and

(b)Step 1 of section 61Q(1) continues to have effect as referring to the chain payment made by the deemed employer.

(3)Subsection (2) has effect even though that involves the services-provider being treated as both employer and employee in relation to the deemed employment under section 61N(3).

(4)“The fraudulent documentation condition” is that a relevant person provided any person with a fraudulent document intended to constitute evidence—

(a)that the case is not an engagement to which this Chapter applies, or

(b)that none of conditions A to C in section 61N is met in the case.

(5)A “relevant person” is—

(a)the services-provider;

(b)a person connected with the services-provider;

(c)if the intermediary in the case is a company, an office-holder in that company.

61WPrevention of double charge to tax and allowance of certain deductions

(1)Subsection (2) applies where—

(a)a person (“the payee”) receives a payment or benefit (“the end-of-line remuneration”) from another person (“the paying intermediary”),

(b)the end-of-line remuneration can reasonably be taken to represent remuneration for services of the payee to a public authority,

(c)a payment (“the deemed payment”) has been treated by section 61N(3) as made to the payee,

(d)the underlying chain payment can reasonably be taken to be for the same services of the payee to that public authority, and

(e)the recipient of the underlying chain payment has (whether by deduction from that payment or otherwise) borne the cost of any amounts due, under PAYE regulations and contributions regulations in respect of the deemed payment, from the person treated by section 61N(3) as making the deemed payment.

(2)For income tax purposes, the paying intermediary and the payee may treat the amount of the end-of-line remuneration as reduced (but not below nil) by any one or more of the following—

(a)the amount (see section 61Q) of the deemed payment;

(b)the amount of any capital allowances in respect of expenditure incurred by the paying intermediary that could have been deducted from employment income under section 262 of CAA 2001 if the payee had been employed by the public authority and had incurred the expenditure;

(c)the amount of any contributions made, in the same tax year as the end-of-line remuneration, for the benefit of the payee by the paying intermediary to a registered pension scheme that if made by an employer for the benefit of an employee would not be chargeable to income tax as income of the employee.

(3)Subsection (2)(c)does not apply to—

(a)excess contributions paid and later repaid,

(b)contributions set under subsection (2) against another payment by the paying intermediary, or

(c)contributions deductible at Step 5 of section 54(1) in calculating the amount of the payment (if any) treated by section 50 as made in the tax year concerned by the paying intermediary to the payee.

(4)For the purposes of subsection (3)(c), the contributions to which Step 5 of section 54(1) applies in the case of the particular calculation are “deductible” at that Step so far as their amount does not exceed the result after Step 4 in that calculation.

(5)In subsection (1)(d) “the underlying chain payment” means the chain payment whose amount is used at Step 1 of section 61Q(1) as the starting point for calculating the amount of the deemed payment.

(6)Subsection (2) applies whether the end-of-line remuneration—

(a)is earnings of the payee,

(b)is a distribution of the paying intermediary, or

(c)takes some other form.

61XInterpretation

In this Chapter—

• “associate” has the meaning given by section 60;

• “company” means a body corporate or unincorporated association, and does not include a partnership;

• “engagement to which Chapter 8 applies” has the meaning given by section 49(5).”

Part 3Consequential amendments

10In section 7(5)(a) of ITEPA 2003 (amounts treated as earnings by Chapters 7 to 9 of Part 2 are “employment income” and “general earnings”), for “9” substitute “10”.

11In section 49 of ITEPA 2003 (engagements to which Chapter 8 of Part 2 applies), after subsection (4) insert—

“(4A)Holding office as statutory auditor of the client does not count as holding office under the client for the purposes of subsection (1)(c), and here “statutory auditor” means a statutory auditor within the meaning of Part 42 of the Companies Act 2006 (see section 1210 of that Act).”

12In section 339A of ITEPA 2003 (travel for employment involving intermediaries), after subsection (6) insert—

“(6A)Subsection (3) does not apply in relation to an engagement if—

(a)sections 61N to 61R in Chapter 10 of Part 2 apply in relation to the engagement,

(b)one of Conditions A to C in section 61N is met in relation to the employment intermediary, and

(c)the employment intermediary is not a managed service company.

(6B)This section does not apply in relation to an engagement if—

(a)sections 61N to 61R in Chapter 10 of Part 2 do not apply in relation to the engagement because the circumstances in section 61M(1)(d) are not met,

(b)assuming those circumstances were met, one of Conditions A to C in section 61N would be met in relation to the employment intermediary, and

(c)the employment intermediary is not a managed service company.

(6C)In determining for the purposes of subsection (6A) or (6B) whether one of Conditions A to C in section 61N is or would be met in relation to the employment intermediary, read references to the intermediary as references to the employment intermediary.”

13In Chapter 11 of Part 2 of ITTOIA 2005 (trade profits: specific trades), after section 164A insert—

“Worker’s services provided to public sector through intermediary

164BIntermediaries providing worker’s services to public sector

(1)This section applies for the purposes of calculating the trading profits of a person where—

(a)the person is the intermediary in a chain identified under section 61N of ITEPA 2003 (see section 61N(1)(b)),

(b)a deemed direct payment is treated as made under subsection (3) of that section, and

(c)the person receives a payment which can reasonably be taken to be in respect of the same services as those in respect of which the underlying chain payment is made.

(2)The payment mentioned in subsection (1)(c) is not required to be brought into account in calculating the profits of the trade.

(3)In this section “underlying chain payment” means the payment whose amount is used at Step 1 of section 61Q(1) of ITEPA 2003 as the starting point for calculating the amount of the deemed direct payment mentioned in subsection (1)(b).”

14In Chapter 9 of Part 3 of CTA 2009 (trade profits: specific trades), after section 141 insert—

“Worker’s services provided to public sector through intermediary

141AIntermediaries providing worker’s services to public sector

(1)This section applies for the purposes of calculating the trading profits of a person where—

(a)the person is the intermediary in a chain identified under section 61N of ITEPA 2003 (see section 61N(1)(b)),

(b)a deemed direct payment is treated as made under subsection (3) of that section, and

(c)the person receives a payment which can reasonably be taken to be in respect of the same services as those in respect of which the underlying chain payment is made.

(2)The payment mentioned in subsection (1)(c) is not required to be brought into account in calculating the profits of the trade.

(3)In this section “underlying chain payment” means the payment whose amount is used at Step 1 of section 61Q(1) of ITEPA 2003 as the starting point for calculating the amount of the deemed direct payment mentioned in subsection (1)(b).”

Part 4Commencement

15The amendments made in ITEPA 2003 by Parts 1 and 3 of this Schedule have effect for the tax year 2017-18 and subsequent tax years.

16The amendment made by Part 2 of this Schedule has effect in relation to deemed direct payments treated as made on or after 6 April 2017, and does so even if relating to services provided before that date.

17The payments to which the amendments made in ITTOIA 2005 and CTA 2009 by Part 3 of this Schedule apply include payments made before the passing of this Act.

Section 7

SCHEDULE 2Optional remuneration arrangements

Optional remuneration arrangements

1In Part 3 of ITEPA 2003 (employment income: earnings and benefits etc treated as earnings), in Chapter 2 (taxable benefits: the benefits code), after section 69 insert—

“69AOptional remuneration arrangements

(1)Subsections (2) to (7) have effect for the purposes of the benefits code.

(2)A benefit provided for an employee is provided under “optional remuneration arrangements” so far as it is provided under arrangements of type A or B (regardless of whether those arrangements are made before or after the beginning of the person’s employment).

(3)“Type A arrangements” are arrangements under which, in return for the benefit, the employee gives up the right (or a future right) to receive an amount of earnings within Chapter 1 of Part 3.

(4)“Type B arrangements” are arrangements (other than type A arrangements) under which the employee agrees to be provided with the benefit rather than an amount of earnings within Chapter 1 of Part 3.

(5)A benefit provided for an employee is to be regarded as provided under optional remuneration arrangements (whether of type A or type B) so far as it is just and reasonable to attribute the provision of the benefit to the arrangements in question.

(6)Where a benefit is provided for an employee under any arrangements, the mere fact that under the arrangements the employee makes good, or is required to make good, any part of the cost of provision is not to be taken to show that the benefit is (to any extent) provided otherwise than under optional remuneration arrangements.

(7)Where a benefit is provided for an employee partly under optional remuneration arrangements and partly otherwise than under such arrangements, the benefits code is to apply with any modifications (including provision for just and reasonable apportionments) that may be required for ensuring that the benefit is treated—

(a)in accordance with the relevant provision in the column 2 of the table so far as it is provided under optional remuneration arrangements, and

(b)in accordance with the relevant provision in column 1 of the table so far as it is provided otherwise than under such arrangements.

69BOptional remuneration arrangements: supplementary

(1)For the purposes of the benefits code “the amount foregone”—

(a)in relation to a benefit provided for an employee under type A arrangements means the amount of earnings mentioned in section 69A(3);

(b)in relation to a benefit provided for an employee under type B arrangements means the amount of earnings mentioned in section 69A(4);

(c)in relation to a benefit provided for an employee partly under type A arrangements and partly under type B arrangements, means the sum of the amounts foregone under the arrangements of each type.

(2)Subsection (3) applies where, in order to determine the amount foregone with respect to a particular benefit mentioned in section 69A(3) or (4), it is necessary to apportion an amount of earnings to the benefit.

(3)The apportionment is to be made on a just and reasonable basis.

(4)In this section and section 69A references to a benefit provided for an employee include a benefit provided for a member of an employee’s family or household.

(5)In this section and section 69A—

• “benefit” includes any benefit or facility, regardless of its form and the manner of providing it;

• “earnings” means earnings within Chapter 1 of Part 3 (and includes a reference to amounts which would have been such earnings if the employee had received them).”

Benefits in kind: amount treated as earnings

2Part 3 of ITEPA 2003 (employment income: earnings and benefits in kind etc treated as earnings) is amended as follows.

3(1)Section 81 (benefit of cash voucher treated as earnings) is amended as follows.

(2)After subsection (1) insert—

“(1A)Where a cash voucher to which this Chapter applies is provided pursuant to optional remuneration arrangements—

(a)subsection (1) does not apply, and

(b)the relevant amount is to be treated as earnings from the employment for the tax year in which the voucher is received by the employee.

(1B)In this section “the relevant amount” means—

(a)the cash equivalent, or

(b)if greater, the amount foregone with respect to the benefit of the voucher (see section 69B).”

(3)At the end insert—

“(3)For the purposes of subsection (1B), assume that the cash equivalent is zero if the condition in subsection (4) is met.

(4)The condition is that the benefit of the voucher would be exempt from income tax but for section 228A (exclusion of certain exemptions).”

4After section 87 insert—

“87ABenefit of non-cash voucher treated as earnings: optional remuneration arrangements

(1)Where a non-cash voucher to which this Chapter applies is provided pursuant to optional remuneration arrangements—

(a)the relevant amount is to be treated as earnings from the employment for the tax year in which the voucher is received by the employee, and

(b)section 87(1) does not apply.

(2)To find the relevant amount, first determine which (if any) is the greater of—

(a)the cost of provision (see section 87(3)), and

(b)the amount foregone with respect to the benefit of the voucher (see section 69B).

(3)If the cost of provision is greater than or equal to the amount foregone, the “relevant amount” is the cash equivalent of the benefit of the non-cash voucher (see section 87(2)).

(4)Otherwise, the “relevant amount” is the difference between—

(a)the amount foregone, and

(b)any part of the cost of provision that is made good by the employee, to the person incurring it, on or before 6 July following the relevant tax year.

(5)If the voucher is a non-cash voucher other than a cheque voucher, the relevant tax year is—

(a)the tax year in which the cost of provision is incurred, or

(b)if later, the tax year in which the employee receives the voucher.

(6)If the voucher is a cheque voucher, the relevant tax year is the tax year in which the voucher is handed over in exchange for money, goods or services.

(7)For the purposes of subsections (2) and (3), assume that the cost of provision is zero if the condition in subsection (8) is met.

(8)The condition is that the non-cash voucher would be exempt from income tax but for section 228A (exclusion of certain exemptions).”

5In section 88 (year in which earnings treated as received)—

(a)in subsection (1), after “87” insert “or 87A”;

(b)in subsection (2), after “87” insert “or 87A”.

6After section 94 insert—

“94ABenefit of credit-token treated as earnings: optional remuneration arrangements

(1)If the conditions in subsections (2) and (3) are met in relation to any occasions on which a credit-token to which this Chapter applies is used by the employee in a tax year to obtain money, goods or services—

(a)the relevant amount is to be treated as earnings from the employment for that year, and

(b)section 94(1) does not apply in relation to the use of the credit-token on those occasions.

(2)The condition in this subsection is that the credit-token is used pursuant to optional remuneration arrangements.

(3)The condition in this subsection is that AF is greater than the relevant cost of provision for the tax year.

In this section “AF” means so much of the amount foregone (see section 69B) as is attributable on a just and reasonable basis to the use of the credit-token by the employee in the tax year pursuant to the optional remuneration arrangements to obtain money, goods or services.

(4)The “relevant amount” is the difference between—

(a)AF, and

(b)any part of the relevant cost of provision for the tax year that is made good by the employee, to the person incurring it, on or before 6 July following the tax year which contains the occasion of use of the credit-token to which the making good relates.

(5)But the relevant amount is taken to be zero if the amount given by paragraph (b) of subsection (4) exceeds AF.

(6)For the purposes of this section the “relevant cost of provision for the tax year” is determined as follows—

• Step 1

  Find the cost of provision with respect to each occasion of use of the credit-token by the employee in the tax year pursuant to the optional remuneration arrangements to obtain money, goods or services.

• Step 2

  The total of those amounts is the relevant cost of provision for the tax year.

(7)But the relevant cost of provision for the tax year is to be taken to be zero if the condition in subsection (8) is met.

(8)The condition is that use of the credit token by the employee in the tax year pursuant to the optional remuneration arrangements to obtain money, goods or services would be exempt from income tax but for section 228A (exclusion of certain exemptions).

(9)In this section “cost of provision” has the same meaning as in section 94.”

7In section 97 (living accommodation to which Chapter 5 applies), in subsection (1A)(b), for “the cash equivalent of” substitute “an amount in respect of”.

8In section 98 (accommodation provided by local authority), in the words before paragraph (a), for “This Chapter” substitute “In section 102 (benefit of accommodation treated as earnings) subsection (1A) (accommodation provided otherwise than pursuant to optional remuneration arrangements)”.

9(1)Section 99 (accommodation provided for performance of duties) is amended as follows.

(2)In subsection (1), for “This Chapter” substitute “In section 102 (benefit of accommodation treated as earnings) subsection (1A) (accommodation provided otherwise than pursuant to optional remuneration arrangements)”.

(3)In subsection (2), for “This Chapter” substitute “In section 102 (benefit of accommodation treated as earnings) subsection (1A)”.

10In section 100 (accommodation provided as result of security threat), in the words before paragraph (a), for “This Chapter” substitute “In section 102 (benefit of accommodation treated as earnings) subsection (1A) (accommodation provided otherwise than pursuant to optional remuneration arrangements)”.

11In section 100A (homes outside UK owned by company etc), in subsection (1), for “This Chapter” substitute “In section 102 (benefit of accommodation treated as earnings) subsection (1A) (accommodation provided otherwise than pursuant to optional remuneration arrangements)”.

12In section 101 (Chevening House), in the words before paragraph (a), for “This Chapter” substitute “In section 102 (benefit of accommodation treated as earnings) subsection (1A) (accommodation provided otherwise than pursuant to optional remuneration arrangements)”.

13(1)Section 102 (benefit of living accommodation treated as earnings) is amended as follows.

(2)In subsection (1), for the words before paragraph (a) substitute “This section applies if living accommodation to which this Chapter applies is provided in any period (“the taxable period”)—”.

(3)The words in subsection (1) from “the cash equivalent” to the end become subsection (1A).

(4)After subsection (1A) insert—

“(1B)If the benefit of the accommodation is provided pursuant to optional remuneration arrangements—

(a)subsection (1A) does not apply, and

(b)the relevant amount is to be treated as earnings from the employment for that tax year.”

(5)Omit subsection (2).

(6)At the end insert—

“(4)Section 103A indicates how the relevant amount is determined.”

14In section 103 (method of calculating cash equivalent), in subsection (3), for “102(2)” substitute “102(1)”.

15After section 103 insert—

“103AAccommodation provided pursuant to optional remuneration arrangements: relevant amount

(1)To find the relevant amount, first determine which (if any) is the greater of—

(a)the modified cash equivalent of the benefit of the accommodation (see sections 105(2A) and 106(2A)), and

(b)the amount foregone with respect to the benefit of the accommodation (see section 69B).

(2)If the amount mentioned in subsection (1)(a) is greater than or equal to the amount mentioned in subsection (1)(b), the “relevant amount” is the cash equivalent of the benefit of the accommodation (see section 103).

(3)Otherwise, the “relevant amount” is the difference between—

(a)the amount foregone with respect to the benefit of the accommodation, and

(b)the deductible amount (see subsections (7) and (8)).

(4)If the amount foregone with respect to the benefit of the accommodation does not exceed the deductible amount, the relevant amount is taken to be zero.

(5)For the purposes of subsections (1) and (2), assume that the modified cash equivalent of the benefit of the accommodation is zero if the condition in subsection (6) is met.

(6)The condition is that the benefit of the accommodation would be exempt from income tax but for section 228A (exclusion of certain exemptions).

(7)If the cost of providing the living accommodation does not exceed £75,000, the “deductible amount” means any sum made good, on or before 6 July following the tax year which contains the taxable period, by the employee to the person at whose cost the accommodation is provided that is properly attributable to its provision.

(8)If the cost of providing the living accommodation exceeds £75,000, the “deductible amount” means the total of amounts A and B where—

• A is equal to so much of MG as does not exceed RV;

• B is the amount of any excess rent paid by the employee in respect of the taxable period;

• MG is the total of any sums made good, on or before 6 July following the tax year which contains the taxable period, by the employee to the person at whose cost the accommodation is provided that are properly attributable to its provision (in the taxable period);

• RV is the rental value of the accommodation for the taxable period as set out in section 105(3) or (4A)(b) (as applicable).

(9)In subsection (8) “excess rent” means so much of the rent in respect of the taxable period paid—

(a)by the employee,

(b)in respect of the accommodation,

(c)to the person providing it, and

(d)on or before 6 July following the tax year which contains the taxable period,

as exceeds the rental value of the accommodation.

(10)Where it is necessary for the purposes of subsection (1)(b) and (3)(a) to apportion an amount of earnings to the benefit of the accommodation in the taxable period, the apportionment is to be made on a just and reasonable basis.

In this subsection “earnings” is to be interpreted in accordance with section 69B(5).”

16(1)Section 105 (cash equivalent: cost of accommodation not over £75,000) is amended as follows.

(2)In subsection (1), after “equivalent” insert “or modified cash equivalent”.

(3)After subsection (2) insert—

“(2A)The modified cash equivalent is equal to the rental value of the accommodation for the taxable period.”

17(1)Section 106 (cash equivalent: cost of accommodation over £75,000) is amended as follows.

(2)In subsection (1), after “equivalent” insert “or modified cash equivalent”.

(3)After subsection (2) insert—

“(2A)To calculate the modified cash equivalent—

(a)apply steps 1 to 3 in subsection (2), as if the words “cash equivalent” in step 1 were “modified cash equivalent (for the purposes of section 105)”;

(b)calculate the modified cash equivalent by adding together the amounts calculated under steps 1 and 3 as applied by paragraph (a).”

18(1)Section 109 (priority of Chapter 5 over Chapter 1 of Part 3 of the Act) is amended as follows.

(2)In subsection (1)(a), for “the cash equivalent of the benefit of living accommodation” substitute “an amount”.

(3)In subsection (2), for “of the cash equivalent” substitute “mentioned in subsection (1)(a)”.

(4)In subsection (4), in the words before paragraph (a), for “cash equivalent of the benefit of the living accommodation” substitute “amount mentioned in subsection (1)(a)”.

19In section 114 (cars, vans and related benefits), in subsection (2)—

(a)in paragraph (a), for “the cash equivalent of” substitute “an amount in respect of”;

(b)in paragraph (b), for “the cash equivalent of” substitute “an amount in respect of”;

(c)in paragraph (c), for “the cash equivalent of” substitute “an amount in respect of”;

(d)in paragraph (d), for “the cash equivalent of” substitute “an amount in respect of”.

20(1)Section 119 (where alternative to benefit of car or van offered) is amended as follows.

(2)For subsection (1) substitute—

“(1)This section applies where in a tax year—

(a)a car is made available as mentioned in section 114(1),

(b)the car’s CO₂ emissions figure (see sections 133 to 138) does not exceed 75 grams per kilometre, and

(c)an alternative to the benefit of the car is offered.”

(3)In the heading, before “car” insert “low emission”.

21In section 120 (benefit of car treated as earnings), after subsection (3) insert—

“(4)This section is subject to section 120A.”

22After section 120 insert—

“120ABenefit of car treated as earnings: optional remuneration arrangements

(1)Where this Chapter applies to a car in relation to a particular tax year and the conditions in subsection (3) are met—

(a)the relevant amount (see section 121A) is to be treated as earnings from the employment for that tax year, and

(b)section 120(1) does not apply.

(2)In such a case (including a case where the relevant amount is nil) the employee is referred to in this Chapter as being chargeable to tax in respect of the car in the tax year.

(3)The conditions are that—

(a)the car is made available to the employee or member of the employee’s household pursuant to optional remuneration arrangements,

(b)the amount foregone (see section 69B) with respect to the benefit of the car for the tax year is greater than the modified cash equivalent of the benefit of the car for the tax year (see section 121B), and

(c)the car’s CO₂ emissions figure (see sections 133 to 138) exceeds 75 grams per kilometre.”

23After section 121 insert—

“121AOptional remuneration arrangements: method of calculating relevant amount

(1)To find the relevant amount for the purposes of section 120A, take the following steps—

• Step 1

  Take the amount foregone with respect to the benefit of the car for the tax year.

• Step 2

  Make any deduction under section 132A in respect of capital contributions made by the employee to the cost of the car or accessories.

  The resulting amount is the provisional sum.

• Step 3

  Make any deduction from the provisional sum under section 144 in respect of payments by the employee for the private use of the car.

  The result is the “relevant amount” for the purposes of section 120A.

(2)Where it is necessary, for the purpose of determining the “amount foregone” under step 1 of subsection (1), to apportion an amount of earnings to the benefit of the car for the tax year, the apportionment is to be made on a just and reasonable basis.

In this subsection “earnings” is to be interpreted in accordance with section 69B(5).

121BMeaning of “modified cash equivalent”

(1)The “modified cash equivalent” of the benefit of a car for a tax year is calculated in accordance with the following steps (which must be read with subsections (2) to (4))—

• Step 1

  Find the price of the car in accordance with sections 122 to 124A.

• Step 2

  Add the price of any accessories which fall to be taken into account in accordance with sections 125 to 131.

  The resulting amount is the interim sum.

• Step 3

  Find the appropriate percentage for the car for the year in accordance with sections 133 to 142.

• Step 4

  Multiply the interim sum by the appropriate percentage for the car for the year.

• Step 5

  Make any deduction under section 143 for any periods when the car was unavailable.

  The resulting amount is the modified cash equivalent of the benefit of the car for the year.

(2)Where the car is shared the modified cash equivalent is calculated under this section in accordance with section 148.

(3)The modified cash equivalent of the benefit of a car for a tax year is to be taken to be zero if the condition in subsection (4) is met.

(4)The condition is that the benefit of the car for the tax year would be exempt from income tax but for section 228A (exclusion of certain exemptions).

(5)The method of calculation set out in subsection (1) is modified in the special cases dealt with in—

(a)section 146 (cars that run on road fuel gas), and

(b)section 147A (classic cars: optional remuneration arrangements).”

24In section 126 (amounts taken into account in respect of accessories), in subsection (1), in the words before paragraph (a), after “121(1)” insert “and step 2 of section 121B(1)”.

25(1)Section 131 (replacement accessories) is amended as follows.

(2)In subsection (1), in the words before paragraph (a), after “applies” insert “for the purposes of sections 121(1) and 121B(1)”.

(3)After subsection (1) insert—

“(1A)In the application of this section for the purposes of section 121B(1)—

(a)references to the cash equivalent of the benefit of the car for the tax year are to be read as references to the modified cash equivalent of the benefit of the car for the tax year, and

(b)references to step 2 of section 121(1) are to be read as references to step 2 of section 121B(1).”

26In section 132 (capital contributions by employee), in subsection (1), in the words before paragraph (a), after “applies” insert “for the purposes of section 121(1)”.

27After section 132 insert—

“132ACapital contributions by employee: optional remuneration arrangements

(1)This section applies for the purposes of section 121A(1) if the employee contributes a capital sum to expenditure on the provision of—

(a)the car, or

(b)any qualifying accessory which is taken into account in calculating under section 121B the modified cash equivalent of the benefit of the car.

(2)A deduction is to be made from the amount carried forward from step 1 of section 121A(1)—

(a)for the tax year in which the contribution is made, and

(b)for all subsequent tax years in which the employee is chargeable to tax in respect of the car by virtue of section 120A.

(3)The amount of the deduction allowed in any tax year is found by multiplying the capped amount by the appropriate percentage.

(4)In subsection (3) the reference to “the appropriate percentage” is to the appropriate percentage for the car for the tax year (determined in accordance with sections 133 to 142).

(5)In this section “the capped amount” means the lesser of—

(a)the total of the capital sums contributed by the employee in that year and any earlier years to expenditure on the provision of—

(i)the car, or

(ii)any qualifying accessory which is taken into account in calculating under section 121B the modified cash equivalent of the benefit of the car for the tax year in question, and

(b)£5,000.

(6)This section is modified by section 147A (classic cars: optional remuneration arrangements).”

28(1)Section 143 (deduction for periods when car unavailable) is amended as follows.

(2)Before subsection (1) insert—

“(A1)This section has effect for the purposes of—

(a)section 121(1) (method of calculating the cash equivalent of the benefit of a car), and

(b)section 121B(1) (optional remuneration arrangements: meaning of “modified cash equivalent”).”

(3)In subsection (1), after “121(1)” insert “or (as the case may be) step 4 of section 121B(1)”.

(4)In subsection (3), in the definition of “A”, at the end insert “of section 121(1) or (as the case may be) step 4 of section 121B(1)”.

29(1)Section 144 (deduction for payments for private use) is amended as follows.

(2)In subsection (1), for “calculated under step 7 of section 121(1)” substitute “(see subsection (1A))”.

(3)After subsection (1) insert

“(1A)In this section “the provisional sum” means the provisional sum calculated under—

(a)step 7 of section 121(1) (method of calculating the cash equivalent of the benefit of a car), or

(b)step 2 of section 121A(1) (optional remuneration arrangements: method of calculating relevant amount).”

(4)In subsection (2), for the words from “so that” to the end substitute “so that—

(a)in a case within subsection (1A)(a), the cash equivalent of the benefit of the car for the year is nil, or

(b)in a case within subsection (1A)(b), the relevant amount for the purposes of section 120A is nil.”

(5)In subsection (3)—

(a)for “In any other case” substitute “Where subsection (2) does not apply,” and

(b)for the words from “give” to the end substitute “give—

(a)in a case within subsection (1A)(a), the cash equivalent of the benefit of the car for the year, or

(b)in a case within subsection (1A)(b), the relevant amount for the purposes of section 120A.”

30(1)Section 145 (modification of provisions where car temporarily replaced) is amended as follows.

(2)In subsection (1), for paragraph (c) substitute—

“(c)the employee is chargeable to tax—

(i)in respect of both the normal car and the replacement car by virtue of section 120, or

(ii)in respect of both the normal car and the replacement car by virtue of section 120A, and”.”

(3)After subsection (5) insert—

“(6)Where this section applies by virtue of subsection (1)(c)(ii), the condition in subsection (5)(b) is to be taken to be met if it would be met on the assumption that the cash equivalent of the benefit of the cars in question is to be calculated under section 121(1).”

31(1)Section 146 (cars that run on road fuel gas) is amended as follows.

(2)In subsection (1), in the words before paragraph (a), after “applies” insert “for the purposes of sections 121 and 121B”.

(3)In subsection (2), after “121(1)” insert “or (as the case may be) step 1 of section 121B(1)”.

32After section 147 insert—

“147AClassic cars: optional remuneration arrangements

(1)This section applies in calculating the relevant amount in respect of a car for a tax year for the purposes of section 120A (benefit of car treated as earnings: optional remuneration arrangements) if—

(a)the age of the car at the end of the year is 15 years or more,

(b)the market value of the car for the year is £15,000 or more, and

(c)that market value exceeds the specified amount (see subsection (4)).

(2)In calculating the modified cash equivalent of the benefit of the car, for the interim sum calculated under step 2 of section 121B(1) substitute the market value of the car for the tax year in question.

(3)Section 132A (capital contributions by employee: optional remuneration arrangements) has effect as if—

(a)in subsection (1)(b) the reference to calculating under section 121B the modified cash equivalent of the benefit of the car were to determining the market value of the car, and

(b)in subsection (5)(a)(ii) the reference to calculating under section 121B the modified cash equivalent of the benefit of the car for the tax year in question were to determining the market value of the car for the tax year in question.

(4)The “specified amount” is found as follows.

• Step 1

  Find what would be the interim sum under step 2 of section 121B(1) (if subsection (2) of this section did not have effect).

• Step 2

  (Assuming for this purpose that the reference in section 132(2) to step 2 of section 121(1) includes a reference to step 1 of this subsection) make any deduction under section 132 for capital contributions made by the employee to the cost of the car or accessories.

  The resulting amount is the specified amount.

(5)The market value of a car for a tax year is to be determined in accordance with section 147(3) and (4).”

33(1)Section 148 (reduction of cash equivalent where car is shared) is amended as follows.

(2)In subsection (1)—

(a)in the words before paragraph (a), after “applies” insert “for the purposes of sections 121 and 121B”;

(b)in the words after paragraph (c), for “section 120” substitute “sections 120 and 120A”.

(3)For subsection (2) substitute—

“(2)The amount to be treated as earnings in respect of the benefit of the car is to be calculated separately for each of those employees for that tax year (whether under section 120 or section 120A).”

(4)In subsection (2A), at the beginning insert “In the case of an employee chargeable to tax in respect of the car by virtue of section 120”.

(5)After subsection (2A) insert—

“(2B)In the case of an employee chargeable to tax in respect of the car by virtue of section 120A, the modified cash equivalent (as determined under section 121B(1)) is to be reduced on a just and reasonable basis.”

34In section 149 (benefit of car fuel treated as earnings), in subsection (1)(b), at the end insert “or 120A”.

35After section 149 insert—

“149ABenefit of car fuel treated as earnings: optional remuneration arrangements

(1)This section applies if—

(a)fuel is provided for a car in a tax year by reason of an employee’s employment,

(b)the employee is chargeable to tax in respect of the car in the tax year by virtue of section 120 or 120A, and

(c)the fuel is provided pursuant to optional remuneration arrangements.

(2)If the condition in subsection (3) is met—

(a)the amount foregone with respect to the benefit of the fuel (see section 69B) is to be treated as earnings from the employment for the tax year, and

(b)section 149(1) does not apply.

(3)The condition mentioned in subsection (2) is that the amount foregone with respect to the benefit of the fuel is greater than the cash equivalent of the benefit of the fuel.

(4)For the purposes of subsection (3), assume that the cash equivalent of the benefit of the fuel is zero if the condition in subsection (5) is met.

(5)The condition mentioned in subsection (4) is that the benefit of the fuel would be exempt from income tax but for section 228A (exclusion of certain exemptions).

(6)References in this section to fuel do not include any facility or means for supplying electrical energy or any energy for a car which cannot in any circumstances emit CO₂ by being driven.

(7)Where it is necessary for the purposes of subsections (2)(a) and (3) to apportion an amount of earnings to the benefit of the fuel in the tax year, the apportionment is to be made on a just and reasonable basis.

In this subsection “earnings” is to be interpreted in accordance with section 69B(5).”

36In section 154 (benefit of van treated as earnings), after subsection (3) insert—

“(4)This section is subject to section 154A.”

37After section 154 insert—

“154ABenefit of van treated as earnings: optional remuneration arrangements

(1)Where this Chapter applies to a van in relation to a particular tax year and the conditions in subsection (2) are met—

(a)the relevant amount is to be treated as earnings from the employment for that tax year, and

(b)section 154(1) does not apply.

In such a case (including a case where the relevant amount is nil) the employee is referred to in this Chapter as being chargeable to tax in respect of the van in the tax year.

(2)The conditions are that—

(a)the van is made available to the employee or member of the employee’s household pursuant to optional remuneration arrangements, and

(b)the amount foregone with respect to the benefit of the van (see section 69B) is greater than the modified cash equivalent of the benefit of the van.

(3)To find the relevant amount for the purposes of this section take the following steps—

• Step 1

  Take the amount foregone with respect to the benefit of the van for the tax year.

• Step 2

  Make any deduction under section 158A in respect of payments by the employee for the private use of the van.

  The result is the “relevant amount”.

(4)In subsection (2) the reference to the “modified cash equivalent” is to the amount which would be the cash equivalent of the benefit of the van (after any reductions under section 156 or 157) if this Chapter had effect the following modifications—

(a)omit paragraph (c) of section 155(8);

(b)omit section 158;

(c)in section 159(2)(b), for “155, 157 and 158” substitute “155 and 157”.

(5)For the purposes of subsection (2) assume that the modified cash equivalent of the benefit of the van is zero if the condition in subsection (6) is met.

(6)The condition is that the benefit of the van would be exempt from income tax but for section 228A (exclusion of certain exemptions).

(7)Where it is necessary for the purposes of subsection (2)(b) and step 1 of subsection (3) to apportion an amount of earnings to the benefit of the van in the tax year, the apportionment is to be made on a just and reasonable basis.

In this subsection “earnings” is to be interpreted in accordance with section 69B(5).”

38After section 158 insert—

“158AVan provided pursuant to optional remuneration arrangements: private use

(1)In calculating the relevant amount under section 154A in relation to a van and a tax year, a deduction is to be made under step 2 of subsection (3) of that section if, as a condition of the van being available for the employee’s private use, the employee—

(a)is required in that year to pay (whether by way of deduction from earnings or otherwise) an amount of money for that use, and

(b)pays that amount on or before 6 July following that year.

(2)The amount of the deduction is—

(a)the amount paid as mentioned in subsection (1)(b) by the employee in respect of the year, or

(b)if less, the amount that would reduce the relevant amount to nil.

(3)In this section the reference to the van being available for the employee’s private use includes a reference to the van being available for the private use of a member of the employee’s family or household.”

39(1)Section 160 (benefit of van fuel treated as earnings) is amended as follows.

(2)In subsection (1)(b), after “154” insert “or 154A”.

(3)At the end insert—

“(5)This section is subject to section 160A.”

40After section 160 insert—

“160ABenefit of van fuel treated as earnings: optional remuneration arrangements

(1)This section applies if—

(a)fuel is provided for a van in a tax year by reason of an employee’s employment,

(b)the benefit of the fuel is provided pursuant to optional remuneration arrangements, and

(c)the employee is chargeable to tax in respect of the van in the tax year by virtue of section 154 or 154A.

(2)If the condition in subsection (3) is met—

(a)the amount foregone with respect to the benefit of the fuel (see section 69B) is to be treated as earnings from the employment for that year, and

(b)section 160(1) does not apply.

(3)The condition mentioned in subsection (2) is that the amount foregone with respect to the benefit of the fuel is greater than the cash equivalent of the benefit of the fuel.

(4)For the purposes of subsection (3), assume that the cash equivalent of the benefit of the fuel is zero if the condition mentioned in subsection (5) is met.

(5)The condition mentioned in subsection (4) is that the benefit of the fuel would be exempt from income tax but for section 228A (exclusion of certain exemptions).

(6)Where it is necessary for the purposes of subsections (2)(a) and (3) to apportion an amount of earnings to the benefit of the fuel in the tax year, the apportionment is to be made on a just and reasonable basis.

In this subsection “earnings” is to be interpreted in accordance with section 69B(5).”

41In section 170 (orders etc relating to Chapter 6 of Part 3), in subsection (1)—

(a)after paragraph (c) insert—

“(ca)section 132A(5)(b) (corresponding provision with respect to optional remuneration arrangements),”;

(b)omit “or” at the end of paragraph (d);

(c)after paragraph (e) insert “, or

(f)section 147A(1)(b) (classic car: minimum value: optional remuneration arrangements).”

42In section 173 (loans to which Chapter 7 applies), in subsection (1A)(b), for the words from “provide” to the end substitute “make provision about amounts which, in the case of a taxable cheap loan, are to be treated as earnings in certain circumstances”.

43In section 175 (benefit of taxable cheap loan treated as earnings), for subsection (1) substitute—

“(A1)This section applies where an employment-related loan is a taxable cheap loan in relation to a tax year.

(1)The cash equivalent of the benefit of the loan is to be treated as earnings from the employee’s employment for the tax year.

(1A)If the benefit of the loan is provided pursuant to optional remuneration arrangements and the condition in subsection (1B) is met—

(a)subsection (1) does not apply, and

(b)the relevant amount (see section 175A) is to be treated as earnings from the employee’s employment for the tax year.

(1B)The condition is that the amount foregone with respect to the benefit of the loan for the tax year (see section 69B) is greater than the modified cash equivalent of the benefit of the loan for the tax year (see section 175A).”

44(1)After section 175 insert—

“175AOptional remuneration arrangements: “relevant amount” and “modified cash equivalent”

(1)In section 175(1A) “the relevant amount”, in relation to a loan the benefit of which is provided pursuant to optional remuneration arrangements, means the difference between—

(a)the amount foregone (see section 69B) with respect to the benefit of the loan, and

(b)the amount of interest (if any) actually paid on the loan for the tax year.

(2)For the purposes of section 175 the “modified cash equivalent” of the benefit of an employment-related loan for a tax year is the amount which would be the cash equivalent if section 175(3) had effect with the following modifications—

(a)in the opening words, omit “the difference between”;

(b)omit paragraph (b) and the “and” before it.

(3)But the modified cash equivalent of the benefit of the loan is to be taken to be zero if the condition in subsection (4) is met.

(4)The condition is that the benefit of the loan for the tax year would be exempt from income tax but for section 228A (exclusion of certain exemptions).

(5)For the purpose of calculating the modified cash equivalent of the benefit of an employment-related loan, assume that section 186(2) (replacement loans: aggregation) and section 187(3) (aggregation of loans by close company to a director) do not have effect.

(6)Where it is necessary for the purposes of section 175(1B) and subsection (1) of this section to apportion an amount of earnings to the benefit of the loan for the tax year, the apportionment is to be made on a just and reasonable basis.

In this subsection “earnings” is to be interpreted in accordance with section 69B(5).”

45In section 180 (threshold for benefit of loan to be treated as earnings), in subsection (1), for the words before paragraph (a) substitute “Section 175 does not have effect in relation to an employee and a tax year—”.

46In section 184 (interest treated as paid), in subsection (1), for the words from “the cash equivalent” to the end substitute “—

(a)the cash equivalent of the benefit of a taxable cheap loan is treated as earnings from an employee’s employment for a tax year under section 175(1), or

(b)the relevant amount in respect of the benefit of a taxable cheap loan is treated as earnings from an employee’s employment for a tax year under section 175(1A).”

47In section 202 (excluded benefits), after subsection (1) insert—

“(1A)But a benefit provided to an employee or member of an employee’s family or household is to be taken not to be an excluded benefit by virtue of subsection (1)(c) so far as it is provided under optional remuneration arrangements.”

48After section 203 insert—

“203AEmployment-related benefit provided under optional remuneration arrangements

(1)Where an employment-related benefit is provided pursuant to optional remuneration arrangements—

(a)the relevant amount is to be treated as earnings from the employment for the tax year in which the benefit is provided, and

(b)section 203(1) does not apply.

(2)To find the relevant amount, first determine which (if any) is the greater of—

(a)the cost of the employment-related benefit, and

(b)the amount foregone with respect to the benefit (see section 69B).

(3)If the cost of the employment-related benefit is greater than or equal to the amount foregone, the “relevant amount” is the cash equivalent (see section 203(2)).

(4)Otherwise, the “relevant amount” is—

(a)the amount foregone with respect to the employment-related benefit, less

(b)any part of the cost of the benefit made good by the employee, to the persons providing the benefit, on or before 6 July following the tax year in which it is provided.

(5)For the purposes of subsections (2) and (3), assume that the cost of the employment-related benefit is zero if the condition in subsection (6) is met.

(6)The condition is that the employment-related benefit would be exempt from income tax but for section 228A (exclusion of certain exemptions).

(7)Where it is necessary for the purposes of subsections (2)(b) and (4) to apportion an amount of earnings to the benefit provided in the tax year, the apportionment is to be made on a just and reasonable basis.

In this subsection “earnings” is to be interpreted in accordance with section 69B(5).”

Exemptions

49In Part 4 of ITEPA 2003 (employment income: exemptions), after section 228 insert—

“228AGeneral exclusion from exemptions: optional remuneration arrangements

(1)A relevant exemption does not apply (whether to prevent liability to income tax from arising or to reduce liability to income tax) in respect of a benefit or facility so far as the benefit or facility is provided pursuant to optional remuneration arrangements.

(2)For the purposes of subsection (1) it does not matter whether the relevant exemption would (apart from that subsection) have effect as an employment income exemption or an earnings-only exemption.

(3)For the purposes of this section an exemption conferred by this Part is a “relevant exemption” unless it is—

(a)a special case exemption (see subsection (4)), or

(b)an excluded exemption (see subsection (5)).

(4)“Special case exemption” means an exemption conferred by any of the following provisions—

(a)section 289A (exemption for paid or reimbursed expenses);

(b)section 289D (exemption for other benefits);

(c)section 308B (independent advice in respect of conversions and transfers of pension scheme benefits);

(d)section 312A (limited exemption for qualifying bonus payments);

(e)section 317 (subsidised meals);

(f)section 320C (recommended medical treatment);

(g)section 323A (trivial benefits provided by employers).

(5)“Excluded exemption” means an exemption conferred by any of the following provisions—

(a)section 239 (payments and benefits connected with taxable cars and vans and exempt heavy goods vehicles);

(b)section 244 (cycles and cyclist’s safety equipment);

(c)section 266(2)(c) (non-cash voucher regarding entitlement to exemption within section 244);

(d)section 270A (limited exemption for qualifying childcare vouchers);

(e)section 307 (death or retirement provision), so far as relating to provision made for retirement benefits;

(f)section 308 (exemption of contribution to registered pension scheme);

(g)section 308A (exemption of contributions to overseas pension scheme);

(h)section 308C (provision of pensions advice);

(i)section 309 (limited exemptions for statutory redundancy payments);

(j)section 310 (counselling and other outplacement services);

(k)section 311 (retraining courses);

(l)section 318 (childcare: exemption for employer-provided care);

(m)section 318A (childcare: limited exemption for other care).

(6)In subsection (5) “retirement benefit” has the meaning that would be given by subsection (2) of section 307 if “or death” were omitted in both places where it occurs in that subsection.

(7)In this section “benefit or facility” includes anything which constitutes employment income or in respect of which employment income is treated as arising to the employee (regardless of its form and the manner of providing it).

(8)In this section “optional remuneration arrangements” has the same meaning as in the benefits code (see section 69A).

(9)The Treasury may by order amend subsections (4) and (5) by adding or removing an exemption conferred by Part 4.”

Other amendments

50(1)Section 19 of ITEPA 2003 (receipt of non-money earnings) is amended as follows.

(2)In subsection (2), after “94” insert “or 94A”.

(3)In subsection (3), after “87” insert “or 87A”.

51In section 95 of ITEPA 2003 (disregard for money, goods or services obtained), in subsection (1), in the words before paragraph (a), after “credit-token” insert “or the relevant amount in respect of a cash voucher, a non-cash voucher or a credit-token”.

52(1)In section 236 of ITEPA 2003 (interpretation of Chapter 2 of Part 4: exemptions for mileage allowance relief etc), in subsection (2)(b)—

(a)in the words before sub-paragraph (i), for “the cash equivalent of” substitute “an amount in respect of”;

(b)in sub-paragraph (i), after “120” insert “or 120A”;

(c)in sub-paragraph (ii), after “154” insert “or 154A”;

(d)in sub-paragraph (iii), after “203” insert “or 203A”.

(2)In section 236 of ITEPA 2003 (interpretation of Chapter 2 of Part 4), in subsection (2)(c), for “the cash equivalent of” substitute “an amount in respect of”.

53(1)Section 239 of ITEPA 2003 (payments and benefits connected with taxable cars and vans etc) is amended as follows.

(2)In subsection (3)—

(a)after “149” insert “or 149A”;

(b)after “160” insert “or 160A”.

(3)In subsection (6), for “the cash equivalent of” substitute “an amount (whether the cash equivalent or the relevant amount) in respect of”.

54In section 362 of ITEPA 2003 (deductions where non-cash voucher provided), in subsection (1)(a), for “87(1) (cash equivalent” substitute “87(1) or 87A(1) (amount in respect”.

55In section 318A of ITEPA 2003 (childcare: limited exemption for other care), in subsection (1)(b), for “cash equivalent of the benefit” substitute “amount treated as earnings in respect of the benefit by virtue of section 203(1) or 203A(1) (as the case may be)”.

56In section 363 of ITEPA 2003 (deductions where credit-token provided), in subsection (1)(a), for “94(1) (cash equivalent” substitute “94(1) or 94A(1) (amount in respect”.

57In section 693 of ITEPA 2003 (cash vouchers), in subsection (1), for “section 81(2)” substitute “subsection (2) of, or (as the case may be) referred to in subsection (1A)(b) of, section 81”.

58In section 694 of ITEPA 2003 (non-cash vouchers), in subsection (1), after “87(2)” insert “or 87A(4)”.

59In section 695 of ITEPA 2003 (benefit of credit-token treated as earnings), after subsection (1) insert—

“(1A)If the credit-token is provided pursuant to optional remuneration arrangements, the reference in subsection (1) to the amount ascertained under section 94(2) is to be read as a reference to what that amount would be were the credit-token provided otherwise than pursuant to optional remuneration arrangements.

In this subsection “optional remuneration arrangements” is to be interpreted in accordance with section 69A.”

60In Part 2 of Schedule 1 to ITEPA 2003 (index of defined expressions), at the appropriate places insert—

61In Part 2 of Schedule 1 to ITEPA 2003 (index of defined expressions), in the entry relating to “the taxable period”, for “102(2)” substitute “102(1)”.

Commencement and transitional provision

62(1)The amendments made by paragraphs 1, 52(1)(a) and (2) and 60 of this Schedule have effect for the tax year 2017-18 and subsequent tax years.

(2)The amendments made by paragraphs 2 to 51, 52(1)(b) to (d), 53 to 59 and 61 of this Schedule have effect for the tax year 2017-18 and subsequent tax years.

(3)In relation to a benefit provided pursuant to pre-6 April 2017 arrangements, the amendment made by paragraph 49 has effect for the tax year 2018-19 and subsequent tax years.

(4)In relation to a benefit provided pursuant to pre-6 April 2017 arrangements, the amendments made by paragraphs 7 to 41, 52(1)(b) and (c), 53 and 61 (and paragraph 2, so far as relating to those paragraphs) have effect for the tax year 2021-22 and subsequent tax years.

(5)In relation to a benefit provided pursuant to pre-6 April 2017 arrangements, the amendments made by paragraphs 3 to 6, 42 to 48, 50, 51, 52(1)(d) and 54 to 59 (and paragraph 2, so far as relating to those paragraphs) have effect for the tax year 2018-19 and subsequent tax years (but see sub-paragraph (10)).

(6)If any terms of a pre-6 April 2017 arrangement which relate to the provision of a particular benefit are varied on or after 6 April 2017, that benefit is treated, with effect from the beginning of the day on which the variation takes effect, as not being provided pursuant to pre-6 April 2017 arrangements for the purposes of this paragraph.

(7)If pre-6 April 2017 arrangements are renewed on or after 6 April 2017, this paragraph has effect as if those arrangements were entered into at the beginning of the day on which the renewal takes effect (and are distinct from the arrangements existing immediately before that day).

(8)In sub-paragraph (6) the reference to variation does not include any variation which is required in connection with accidental damage to a benefit provided under the arrangements, or otherwise for reasons beyond the control of the parties to the arrangements.

(9)In sub-paragraph (6) the reference to variation does not include any variation which occurs in connection with a person’s entitlement to statutory sick pay, statutory maternity pay, statutory adoption pay, statutory paternity pay or statutory shared parental pay.

(10)In relation to relevant school fee arrangements which were entered into before 6 April 2017—

(a)sub-paragraph (5) is to be read as if it did not include a reference to paragraph 48;

(b)the amendment made by paragraph 48 has effect for the tax year 2021-22 and subsequent tax years.

(11)Relevant school fee arrangements to which an employee is a party (“the continuing arrangements”) are to be regarded for the purposes of this paragraph as the same arrangements as any relevant school fee arrangements to which the employee was previously a party (“the previous arrangements”) if the continuing arrangements and the previous arrangements relate—

(a)to employment with the same employer,

(b)to the same school, and

(c)to school fees in respect of the same child.

(12)Sub-paragraphs (6) and (7) do not have effect in relation to relevant school fee arrangements.

(13)If a non-cash voucher is provided under pre-6 April 2017 arrangements and is used to obtain anything (whether money, goods or services) that is provided on or after 6 April 2018 (“delayed benefits”), so much of the benefit of the voucher as it is reasonable to regard as being applied to obtain the delayed benefits is to be treated for the purposes of this paragraph as not having been provided pursuant to pre-6 April 2017 arrangements.

(14)For the purposes of this paragraph arrangements are “relevant school fee arrangements” if the benefit mentioned in section 69A(1) of ITEPA 2003 consists in the payment or reimbursement (in whole or in part) of, or a waiver or reduction of, school fees.

(15)In this paragraph—

• “arrangements” means optional remuneration arrangements (as defined in section 69A of ITEPA 2003);

• “benefit” includes any benefit or facility, regardless of the manner of providing it;

• “non-cash voucher” has the same meaning as in Chapter 4 of Part 3 of ITEPA 2003;

• “pre-6 April 2017 arrangements” means arrangements which are entered into before 6 April 2017.

Section 9

SCHEDULE 3Overseas pensions

Part 1Registered pension schemes established outside the UK

1(1)In Chapter 5A of Part 4 of FA 2004 (registered pension schemes established outside the UK), after section 242B (inserted by Schedule 4 to this Act) insert—

“242CApplication of this Part to non-UK registered schemes

(1)This Part (so far as would not otherwise be the case) is to be read—

(a)as applying in relation to UK-relieved funds of a non-UK registered scheme as it applies in relation to sums or assets held for the purposes of, or representing accrued rights under, a registered pension scheme established in the United Kingdom,

(b)as applying in relation to a non-UK registered scheme, so far as the scheme relates to the scheme’s UK-relieved funds, as it applies in relation to a registered pension scheme established in the United Kingdom,

(c)as applying in relation to members of a non-UK registered scheme, so far as their rights under the scheme are represented by UK-relieved funds of the scheme, as it applies in relation to members of a registered pension scheme established in the United Kingdom, and

(d)as applying to relevant contributions to a non-UK registered scheme as it applies in relation to contributions to a registered pension scheme established in the United Kingdom.

(2)Subsection (1) has effect subject to, and in accordance with, the following provisions of this Chapter.

(3)The Commissioners for Her Majesty’s Revenue and Customs may by regulations make—

(a)provision elucidating the application of, or supplementing, subsection (1) or other provisions of this Chapter, or

(b)where relief from tax is involved, other provision for or in connection with the application of this Part where the interpretative presumption against extra-territorial application means that it would otherwise not apply.

(4)Regulations under subsection (3) may (in particular)—

(a)amend provisions of or made under—

(i)this Part, or

(ii)any other enactment related to taxation in connection with pensions, and

(b)make consequential amendments of provisions of, or made under, any enactment.

(5)See section 242B for the meaning of “UK-relieved funds” and “relevant contribution”.

242DNon-UK registered schemes: annual allowance charge

(1)This section is about the application of the provisions of this Part relating to the annual allowance charge.

(2)Pension input amounts in respect of arrangements relating to an individual under a non-UK registered scheme are to be taken into account in applying the provisions for a tax year in relation to the individual only if, in accordance with regulations made by the Commissioners for Her Majesty’s Revenue and Customs, relieved inputs are to be taken to have been made in respect of the individual under the scheme in the year.

242EInvestment-regulated non-UK registered schemes

For the purposes of the application of the taxable property provisions in relation to a non-UK registered scheme, property is taxable property in relation to the scheme if it would be taxable property in relation to the scheme were the scheme a registered pension scheme established in the United Kingdom.”

(2)The amendment made by this paragraph has effect for the tax year 2017-18 and subsequent tax years.

Part 2Income tax on pension income

UK residents to be taxed on 100%, not 90%, of foreign pension income

2(1)Omit section 575(2) of ITEPA 2003 (foreign pensions received by UK residents: taxable amount is 90% of actual amount).

(2)Omit section 613(3) of ITEPA 2003 (annuities from non-UK sources: taxable amount is 90% of actual amount).

(3)Omit section 635(3) of ITEPA 2003 (foreign voluntary annual payments: taxable amount is 90% of actual amount).

(4)In consequence—

(a)in section 575 of ITEPA 2003—

(i)in subsection (1) omit “, (2)”;

(ii)in subsection (1A), for “subsections (2) and” substitute “subsection”;

(iii)in subsection (3), for “That pension income” substitute “The full amount of the pension income arising in the tax year, or (as the case may be) the UK part of the tax year,”;

(iv)in subsection (3), for “that Act” substitute “ITTOIA 2005”;

(b)in section 613 of ITEPA 2003—

(i)in subsection (2), for “subsections (3) and” substitute “subsection”;

(ii)in subsection (4), for “that Act” substitute “ITTOIA 2005”;

(c)in section 635 of ITEPA 2003—

(i)in subsection (2), for “subsections (3) and” substitute “subsection”;

(ii)in subsection (4), for “That pension income” substitute “The full amount of the pension income arising in the tax year”;

(iii)in subsection (4), for “that Act” substitute “ITTOIA 2005”;

(d)in Schedule 45 to FA 2013 omit paragraph 72(4).

(5)In sections 613(5) and 635(5) of ITEPA 2003 (application of section 839 of ITTOIA 2005 in certain cases), for “condition B” substitute “conditions B1 and B2 (and the reference to them in subsection (1))”.

(6)The amendments made by this paragraph have effect for the tax year 2017-18 and subsequent tax years, subject to sub-paragraph (7).

(7)The amendments in section 575 of ITEPA 2003, so far as they relate to relevant withdrawals, have effect in relation to relevant withdrawals paid in or after the tax year 2017-18; and here “relevant withdrawal” has the meaning given by section 576A of ITEPA 2003.

Superannuation funds to which section 615(3) of ICTA applies

3(1)Section 615 of ICTA (trust funds for pensions in respect of employment outside UK) is amended as follows.

(2)In subsection (6)—

(a)in paragraph (b), omit the final “and”;

(b)in paragraph (c), at the end insert “and”;

(c)after paragraph (c) insert—

“(d)meets the benefit accrual condition (see subsection (6A));”.

(3)After subsection (6) insert—

“(6A)The benefit accrual condition is—

(a)that, in the case of any money purchase arrangement relating to a member of the fund that is not a cash balance arrangement, no contributions are made under the arrangement on or after 6 April 2017;

(b)that, in the case of any cash balance arrangement relating to a member of the fund, there is no increase on or after 6 April 2017 in the value of any person’s rights under the arrangement;

(c)that, in the case of any defined benefits arrangement relating to a member of the fund, there is no increase on or after 6 April 2017 in the value of any person’s rights under the arrangement; and

(d)that, in the case of any arrangement relating to a member of the fund that is neither a money purchase arrangement nor a defined benefits arrangement—

(i)no contributions are made under the arrangement on or after 6 April 2017, and

(ii)there is no increase on or after 6 April 2017 in the value of any person’s rights under the arrangement.

(6B)For the purposes of subsection (6A)(b)—

(a)whether there is an increase in the value of a person’s rights is to be determined by reference to whether there is an increase in the amount that would, on the valuation assumptions, be available for the provision of benefits under the arrangement to or in respect of the person (and, if there is, the amount of the increase), but

(b)in the case of rights that accrued to a person before 6 April 2017, ignore increases in the value of the rights if in no tax year do they exceed the relevant percentage.

(6C)For the purposes of subsection (6A)(c)—

(a)whether there is an increase in the value of a person’s rights is to be determined by reference to whether there is an increase in the benefits amount as defined by paragraph 14(7) of Schedule 18 to the Finance Act 2011, but

(b)in the case of rights that accrued to a person before 6 April 2017, ignore increases in the value of the rights if in no tax year do they exceed the relevant percentage.

(6D)For the purposes of subsection (6A)(d)(ii), regulations made by the Commissioners for Her Majesty’s Revenue and Customs may make provision—

(a)for determining whether there is an increase in the value of a person’s rights,

(b)for determining the amount of any increase, and

(c)for ignoring the whole or part of any increase;

and regulations under this subsection may make provision having effect in relation to times before the regulations are made.

(6E)In this section, “relevant percentage”, in relation to a tax year, means—

(a)where, on 20 March 2017, the rules of the fund include provision for the value of the rights of a person to increase during the tax year at an annual rate specified in those rules, that rate, or

(b)in any other case, the percentage by which the consumer prices index for September in the previous tax year is higher than it was for the September in the tax year before that (or, if greater, 0%).

(6F)The Commissioners for Her Majesty’s Revenue and Customs may by regulations make provision—

(a)so as to change, or modify the effect of, the benefit accrual condition;

(b)as to the matters to be taken into account in determining whether the benefit accrual condition is met;

(c)for a superannuation fund to be treated to any extent as meeting or not meeting the benefit accrual condition.

(6G)Provision under subsection (6D) or (6F) may be made by amending this section.”

(4)In subsection (7)—

(a)for “In this section—” substitute “For the purposes of this section—

• “arrangement”, in relation to a member of a superannuation fund, means an arrangement relating to the member under the fund;

• a money purchase arrangement relating to a member of a superannuation fund is a “cash balance arrangement” at any time if, at that time, all the benefits that may be provided to or in respect of the member under the arrangement are cash balance benefits;

• an arrangement relating to a member of a superannuation fund is a “defined benefits arrangement” at any time if, at that time, all the benefits that may be provided to or in respect of the member under the arrangement are defined benefits;

• an arrangement relating to a member of a superannuation fund is a “money purchase arrangement” at any time if, at that time, all the benefits that may be provided to or in respect of the member under the arrangement are money purchase benefits;

• “cash balance benefits”, “defined benefits” and “money purchase benefits” have the meaning given by section 152 of the Finance Act 2004, but for this purpose reading references in that section to a pension scheme as references to a superannuation fund;

• “member”, in relation to a superannuation fund, has the meaning given by section 151 of the Finance Act 2004, but for this purpose reading references in that section to a pension scheme as references to a superannuation fund;”;

(b)at the end insert—

• ““the valuation assumptions” has the meaning given by section 277 of the Finance Act 2004.”

(5)After subsection (10) insert—

“(11)Where the conditions in subsection (6)(a) to (c) are met in the case of a superannuation fund (“the actual fund”)—

(a)any disqualifying contributions made under an arrangement relating to a member of the actual fund are treated for the purposes of the Income Tax Acts as instead made under an arrangement relating to the member under a separate superannuation fund (“the shadow fund” for the actual fund),

(b)any disqualifying increase in the value of a person’s rights under an arrangement relating to a member of the actual fund is treated for the purposes of the Income Tax Acts as instead being an increase under an arrangement relating to the member under the shadow fund for the actual fund, and

(c)any reference in this or any other Act (including the reference in subsection (3) and any reference enacted after the coming into force of this subsection) to a fund, or superannuation fund, to which subsection (3) applies does not include so much of the actual fund as—

(i)represents any contribution treated as made under, or any increase in the value of any rights treated as an increase under, the shadow fund of the actual fund or the shadow fund of any other superannuation fund, or

(ii)arises, or (directly or indirectly) derives, from anything within sub-paragraph (i) or this sub-paragraph.

(12)For the purposes of subsection (11) a contribution, or an increase in the value of any rights, is “disqualifying” if it would (ignoring that subsection) cause the benefit accrual condition not to be met in the case of the actual fund.

(13)For the purposes of the provisions of this section relating to the benefit accrual condition, where there is a recognised transfer—

(a)any transfer of sums or assets to the recipient fund by the recognised transfer is to be categorised as not being “a contribution” to the recipient fund, and

(b)any increase in the value of rights under the recipient fund that occurs at the time of the recognised transfer is to be treated as not being an increase in that value if the increase is solely a result of the transfer effected by the recognised transfer.

(14)For the purposes of subsection (13), where there is a transfer such that sums or assets held for the purposes of, or representing accrued rights under, an arrangement relating to a member of a superannuation fund (“the transferor fund”) are transferred so as to become held for the purposes of, or to represent rights under, an arrangement relating to that person as a member of another superannuation fund, the transfer is a “recognised transfer” if—

(a)the conditions in subsection (6)(a) to (c) are met in the case of each of the funds, and

(b)none of the sums and assets transferred—

(i)represents any contribution treated as made under, or any increase in the value of any rights treated as an increase under, the shadow fund of the transferor fund or the shadow fund of any other superannuation fund, or

(ii)arises, or (directly or indirectly) derives, from anything within sub-paragraph (i) or this sub-paragraph.”

(6)The amendments made by this paragraph are to be treated as having come into force on 6 April 2017.

Part 3Lump sums for UK residents from foreign pension schemes

Introductory

4ITEPA 2003 is amended as follows.

Employer-financed retirement benefit schemes: ending of foreign-service relief

5(1)Section 395B (exemption or reduction for foreign service) is amended as follows.

(2)In subsection (1) (conditions for entitlement to exemption or reduction), after paragraph (c) insert—

“(ca)the recipient is not resident in the United Kingdom in the tax year in which the lump sum is received,”.

(3)In subsection (8) (meaning of “foreign service”), for “413(2)” substitute “395C”.

(4)The amendments made by this paragraph have effect for the tax year 2017-18 and subsequent tax years.

6After section 395B insert—

“395CMeaning of “foreign service” in section 395B

(1)In section 395B “foreign service” means service to which subsection (2), (3), (6) or (8) applies.

(2)This subsection applies to service in or after the tax year 2013–14—

(a)to the extent that it consists of duties performed outside the United Kingdom in respect of which earnings would not be relevant earnings, or

(b)if a deduction equal to the whole amount of the earnings from the employment was or would have been allowable under Chapter 6 of Part 5 (deductions from seafarers’ earnings).

(3)This subsection applies to service in or after the tax year 2003–04 but before the tax year 2013–14 such that—

(a)any earnings from the employment would not be relevant earnings, or

(b)a deduction equal to the whole amount of the earnings from the employment was or would have been allowable under Chapter 6 of Part 5 (deductions from seafarers’ earnings).

(4)In subsection (2) “relevant earnings” means earnings for a tax year that are earnings to which section 15 applies and to which that section would apply even if the employee made a claim under section 809B of ITA 2007 (claim for remittance basis) for that year.

(5)In subsection (3) “relevant earnings” means—

(a)for service in or after the tax year 2008–09, earnings—

(i)which are for a tax year in which the employee is ordinarily UK resident,

(ii)to which section 15 applies, and

(iii)to which that section would apply even if the employee made a claim under section 809B of ITA 2007 (claim for remittance basis) for that year, and