Taxation (International and Other Provisions) Act 2010

Schemes and arrangements designed to increase relief: anti-avoidance

81Giving a counteraction notice

(1)Subsection (2) applies if an officer of Revenue and Customs considers, on reasonable grounds, that each of conditions A to D of section 82 is or may be met in relation to a person.

(2)The officer may give the person a notice which—

(a)informs the person of the officer’s view under subsection (1),

(b)specifies the chargeable period in relation to which the officer formed that view,

(c)specifies, if the amount of foreign tax considered by the officer to meet condition B of section 82 is an amount of underlying tax, the body corporate whose payment of foreign tax is relevant to that underlying tax, and

(d)informs the person that, as a result of the giving of the notice, section 90(2) will apply in relation to the person’s tax return for the chargeable period specified if each of conditions A to D of section 82 is met in relation to that period.

(3)Section 92 (when notice may be given after tax return made) imposes limits on when the power under subsection (2) is exercisable.

(4)In this section “foreign tax” includes any tax which for the purpose of allowing credit under the arrangements against corporation tax is treated by section 63(5) as if it were tax payable under the law of the non-UK territory.

(5)In this section so far as it relates to capital gains tax—

• “chargeable period” means tax year (see section 288(1ZA) of TCGA 1992), and

• “notice” means notice in writing.

82Conditions for the purposes of section 81(1)

(1)Conditions A to D are the conditions mentioned in section 81(1).

(2)Condition A is that, in respect of any income or chargeable gain—

(a)taken into account for the purposes of determining a person’s liability to UK tax in a chargeable period, or

(b)to be taken into account for the purposes of determining a person’s liability to UK tax in a chargeable period,

there is an amount of foreign tax for which, under the arrangements, credit is allowable against UK tax for the period.

(3)Condition B is that there is a scheme or arrangement the main purpose of which, or one of the main purposes of which, is to cause an amount of foreign tax to be taken into account in the person’s case for the period.

(4)Condition C is that the scheme or arrangement is within section 83.

(5)Condition D is that T is more than a minimal amount, where T is the sum of—

(a)the total amount of the claims for credit that the person has made, or is in a position to make, for the period (“the counteraction period”), and

(b)the total amount of all connected-person claims.

(6)In subsection (5) “connected-person claim” means a claim that any person connected to the person has made, or is in a position to make, for any chargeable period that overlaps the counteraction period by at least one day.

(7)In this section—

• “chargeable period”, in relation to capital gains tax, means tax year (see section 288(1ZA) of TCGA 1992),

• “foreign tax” includes any tax which for the purpose of allowing credit under the arrangements against corporation tax is treated by section 63(5) as if it were tax payable under the law of the non-UK territory, and

• “UK tax” means income tax, corporation tax or capital gains tax.

(8)Section 286 of TCGA 1992 (meaning of “connected”) applies for the purposes of subsection (6) so far as applying in relation to capital gains tax.

83Schemes and arrangements referred to in section 82(4)

(1)For the purposes of section 82(4), a scheme or arrangement is within this section if it is within subsection (2) or (4).

(2)A scheme or arrangement is within this subsection if—

(a)it is not an underlying-tax scheme or arrangement, and

(b)one or more of sections 84 to 88 apply to it.

(3)For the purposes of this section, a scheme or arrangement is an “underlying-tax” scheme or arrangement if its main purpose, or one of its main purposes, is to cause an amount of underlying tax allowable in respect of a dividend paid by an overseas-resident body corporate to be taken into account in a person’s case.

(4)A scheme or arrangement is within this subsection if—

(a)it is an underlying-tax scheme or arrangement, and

(b)one or more of sections 84 to 88 would, on the assumption in subsection (5), apply to it.

(5)The assumption is that the body corporate is resident in the United Kingdom.

(6)Nothing in subsection (5) requires it to be assumed that there is any change in the place or places at which the body corporate carries on its activities.

(7)In subsection (3) “overseas-resident” means resident in a territory outside the United Kingdom.

84Section 83(2) and (4): schemes enabling attribution of foreign tax

(1)This section applies to a scheme or arrangement if—

(a)the scheme or arrangement enables a participant to pay, in respect of a source of income or chargeable gain, an amount of foreign tax, and

(b)all or part of that amount of foreign tax is properly attributable to another source of income or chargeable gain.

(2)In subsection (1) “participant” means a person who is party to, or concerned in, the scheme or arrangement.

85Section 83(2) and (4): schemes about effect of paying foreign tax

(1)This section applies to a scheme or arrangement if, under the scheme or arrangement, the condition in subsection (2) is met in relation to a person (“C”) who for a chargeable period has claimed, or is in a position to claim, any credit that under the arrangements is to be allowed for foreign tax.

(2)The condition is that—

(a)C pays an amount of foreign tax (“the FT amount”), and

(b)when C entered into the scheme or arrangement, it could reasonably be expected that the effect of the payment of the FT amount on the foreign-tax total would be to increase that total by less than amount X.

(3)In subsection (2)(b)—

• “the foreign-tax total” means the amount found by—

  (a)

  totalling the amounts of foreign tax paid or payable by the participants in respect of the transaction or transactions forming part of the scheme or arrangement, and

  (b)

  taking into account any reliefs that arise to the participants, including any reliefs arising to any one or more of the participants as a consequence of the payment by C of the FT amount, and

• “amount X” means the amount allowable to C as a credit in respect of the payment of the FT amount.

(4)In subsection (3)—

• “participant” means a person who is party to, or concerned in, the scheme or arrangement, and

• “reliefs” means reliefs, deductions, reductions or allowances against or in respect of any tax.

(5)In subsection (1) so far as it relates to capital gains tax “chargeable period” means tax year (see section 288(1ZA) of TCGA 1992).

86Section 83(2) and (4): schemes about claims or elections etc

(1)This section applies to a scheme or arrangement if under the scheme or arrangement—

(a)a step is taken by a participant, or

(b)a step that could have been taken by a participant is not taken,

and that action or failure to act has the effect of increasing, or giving rise to, a claim by a participant for an allowance by way of credit under this Part.

(2)The steps mentioned in subsection (1) are steps that may be taken—

(a)under the law of any territory, or

(b)under double taxation arrangements made in relation to any territory.

(3)The steps mentioned in subsection (1) include—

(a)claiming, or otherwise securing the benefit of, reliefs, deductions, reductions or allowances, and

(b)making elections for tax purposes.

(4)In subsection (1) “participant” means a person who is party to, or concerned in, the scheme or arrangement.

87Section 83(2) and (4): schemes that would reduce a person’s tax liability

(1)This section applies to a scheme or arrangement if, under the scheme or arrangement, the condition in subsection (2) is met in relation to a person who for a chargeable period has claimed, or is in a position to claim, any credit that under the arrangements is to be allowed for foreign tax.

(2)The condition is that amount A is less than amount B.

(3)Amount A is the amount of UK tax payable by the person in respect of income and chargeable gains arising in the chargeable period.

(4)Amount B is the amount of UK tax that would be payable by the person in respect of income and chargeable gains arising in the chargeable period if, in determining that amount, the transactions forming part of the scheme or arrangement were disregarded.

(5)In this section “UK tax” means income tax, corporation tax and capital gains tax.

(6)In this section so far as it relates to capital gains tax “chargeable period” means tax year (see section 288(1ZA) of TCGA 1992).

88Section 83(2) and (4): schemes involving tax-deductible payments

(1)This section applies to a scheme or arrangement if the scheme or arrangement includes—

(a)the making by a person (“P”) of a relevant payment or payments, and

(b)the giving, in respect of the payment or payments, of qualifying consideration.

(2)For the purposes of subsection (1), a payment is a “relevant payment” if all or part of it may be brought into account—

(a)in calculating P’s income for the purposes of income tax or corporation tax, or

(b)in calculating P’s chargeable gains for the purposes of capital gains tax.

(3)For the purposes of subsection (1), consideration is “qualifying consideration” if—

(a)all or part of it consists of a payment made to P or a person connected with P, and

(b)tax is chargeable in respect of the payment under the law of a territory outside the United Kingdom.

(4)In this section “payment” includes a transfer of money’s worth.

(5)For the purposes of this section, whether a person is connected with another is determined in accordance with section 1122 of CTA 2010.

89Contents of counteraction notice

(1)Subsections (2) and (3) apply if an officer of Revenue and Customs gives a person a counteraction notice.

(2)The notice may specify the adjustments that, in the view of the officer, section 90 requires the person to make.

(3)If the notice specifies under section 81(2)(c) a body corporate resident outside the United Kingdom, the adjustments specified may include treating the body as having paid, or being liable to pay, only so much foreign tax as would have been allowed to it as a credit if—

(a)it were resident in the United Kingdom, and

(b)a counteraction notice had been given to it as regards an amount of foreign tax.

(4)In this section “foreign tax” includes any tax which for the purpose of allowing credit under the arrangements against corporation tax is treated by section 63(5) as if it were tax payable under the law of the non-UK territory.

90Consequences of counteraction notices

(1)If—

(a)a counteraction notice has been given to a person in respect of a chargeable period specified in the notice, and

(b)that chargeable period is a chargeable period in relation to which each of conditions A to D of section 82 is met,

subsection (2) applies to the person’s tax return for the period.

(2)The person must in the return make, or must amend the return so as to make, such adjustments as are necessary for counteracting the effects of the scheme or arrangement in that period that are referable to the purpose referred to in condition B of section 82.

91Counteraction notices given before tax return made

(1)Subsection (2) applies if—

(a)an officer of Revenue and Customs gives a counteraction notice to a person before the person has made the person’s tax return for the chargeable period specified in the notice, and

(b)the person makes a tax return for that period before the end of the 90 days beginning with the day on which the notice is given.

(2)The person may—

(a)make a tax return that disregards the notice, and

(b)at any time after making the return and before the end of the 90 days, amend the return for the purpose of complying with the provision referred to in the notice.

(3)Subsection (2)(b) does not prevent the return becoming incorrect if the return—

(a)is not amended in accordance with subsection (2)(b) for the purpose of complying with the provision referred to in the notice, but

(b)ought to have been so amended.

92Counteraction notices given after tax return made

(1)This section applies if—

(a)a person has made a tax return for a chargeable period, and

(b)ignoring the restrictions imposed by this section, an officer of Revenue and Customs has power to give the person a counteraction notice in relation to the period.

(2)The officer may give the person a counteraction notice in relation to the period only if a notice of enquiry has been given to the person in respect of the return.

(3)After any enquiries into the return have been completed, the officer may give the person a counteraction notice in relation to the period only if conditions E and F are met.

(4)Condition E is that, at the time the enquiries were completed, no officer of Revenue and Customs could have been reasonably expected, on the basis of the information made available to Her Majesty’s Revenue and Customs before that time, to have been aware that the circumstances were such that a counteraction notice could have been given to the person in relation to the period.

(5)Condition F is that—

(a)the person was requested to provide information during an enquiry into the return, and

(b)if the person had duly complied with the request, an officer of Revenue and Customs could have been reasonably expected to give the person a counteraction notice in relation to the period.

(6)Section 94 sets out the circumstances in which, for the purposes of condition E, information is made available.

93Amendment, closure notices and discovery assessments in section 92 cases

(1)This section applies if a person is given a counteraction notice in relation to a chargeable period after having made a tax return for the period.

(2)The person may amend the return for the purpose of complying with the provision referred to in the notice at any time before the end of the 90 days beginning with the day on which the notice is given.

(3)If the counteraction notice is given after the person has been given a notice of enquiry in relation to the return, no closure notice may be given in relation to the return before the deadline.

(4)If the counteraction notice is given after any enquiries into the return are completed, no discovery assessment may be made as regards the income or chargeable gain to which the counteraction notice relates before the deadline.

(5)In subsections (3) and (4) “the deadline” means—

(a)the end of the 90 days beginning with the day on which the counteraction notice is given, or

(b)if earlier, the amendment of the return for the purpose of complying with the provision referred to in the counteraction notice.

(6)Subsection (2) does not prevent the return becoming incorrect if the return—

(a)is not amended in accordance with subsection (2) for the purpose of complying with the provision referred to in the counteraction notice, but

(b)ought to have been so amended.

94Information made available for the purposes of section 92(4)

(1)This section applies for the purposes of section 92(4), and in this section—

• “the period”,

• “the person”, and

• “the return”,

mean (respectively) the chargeable period, the person and the tax return mentioned in section 92(1).

(2)Information is made available to Her Majesty’s Revenue and Customs if the return is under section 8 or 8A of TMA 1970 (personal or trustee’s return) and the information—

(a)is contained in the return,

(b)is contained in the person’s return under that section for either of the two immediately preceding tax years,

(c)is contained in documents accompanying a return within paragraph (a) or (b), or

(d)is, or is contained in documents which are, produced or provided by or on behalf of the person to an officer of Revenue and Customs for the purposes of any enquiries into a return within paragraph (a) or (b).

(3)Information is made available to Her Majesty’s Revenue and Customs if the return is under section 8 of TMA 1970 (personal return), the person carries on a trade, profession or business in partnership and the information—

(a)is contained in a return under section 12AA of TMA 1970 (partnership return) with respect to the partnership for the period,

(b)is contained in a return under section 12AA of TMA 1970 with respect to the partnership for either of the two immediately preceding tax years,

(c)is contained in documents accompanying a return within paragraph (a) or (b), or

(d)is, or is contained in documents which are, produced or provided by or on behalf of the person to an officer of Revenue and Customs for the purposes of any enquiries into a return within paragraph (a) or (b).

(4)Information is made available to Her Majesty’s Revenue and Customs if the return is a company tax return and the information—

(a)is contained in the return,

(b)is contained in the person’s company tax return for either of the two immediately preceding accounting periods,

(c)is contained in documents accompanying a return within paragraph (a) or (b), or

(d)is, or is contained in documents which are, produced or provided by the person to an officer of Revenue and Customs for the purposes of any enquiries into a return within paragraph (a) or (b).

(5)Information is made available to Her Majesty’s Revenue and Customs if the return is under section 8 or 8A of TMA 1970 and the information —

(a)is contained in any claim made as regards the period by, or on behalf of, the person acting in the same capacity as that in which the person made the return,

(b)is contained in any documents accompanying such a claim, or

(c)is, or is contained in documents which are, produced or provided by or on behalf of the person to an officer of Revenue and Customs for the purposes of any enquiries into such a claim.

(6)Information is made available to Her Majesty’s Revenue and Customs if the return is a company tax return and the information—

(a)is contained in a claim made by or on behalf of the person as regards the period,

(b)is contained in an application under section 751A of ICTA (applications relating to controlled foreign companies) made by or on behalf of the person which affects the return,

(c)is contained in any documents accompanying such a claim or application, or

(d)is, or is contained in documents which are, produced or provided by the person to an officer of Revenue and Customs for the purposes of any enquiries into such a claim or application.

(7)Information is made available to Her Majesty’s Revenue and Customs if the existence of the information, and the relevance of the information as regards exercise of power to give the person a counteraction notice in relation to the period—

(a)could reasonably be expected to be inferred by an officer of Revenue and Customs from information falling within subsections (2) to (6), or

(b)are notified in writing by or on behalf of the person to an officer of Revenue and Customs.

95Interpretation of sections 89 to 94

(1)This section applies for the purposes of sections 89 to 94, and subsection (4) applies also for the purposes of subsection (8).

(2)“Chargeable period”, in relation to capital gains tax, means tax year (see section 288(1ZA) of TCGA 1992).

(3)“Closure notice” means a notice under—

(a)section 28A or 28B of TMA 1970 (completion of enquiry into personal, trustee’s or partnership return), or

(b)paragraph 32 of Schedule 18 to FA 1998 (completion of enquiry into company return).

(4)“Company tax return” means the return required to be delivered pursuant to a notice under paragraph 3 of Schedule 18 to FA 1998, as read with paragraph 4 of that Schedule (company returns).

(5)“Counteraction notice” means a notice under section 81(2).

(6)“Discovery assessment” means an assessment under—

(a)section 29 of TMA 1970 (assessment to income tax or capital gains tax), or

(b)paragraph 41 of Schedule 18 to FA 1998 (assessment on company).

(7)“Notice of enquiry” means a notice under—

(a)section 9A or 12AC of TMA 1970 (enquiry into personal, trustee’s or partnership return), or

(b)paragraph 24 of Schedule 18 to FA 1998 (enquiry into company return).

(8)“Tax return” means—

(a)a return under section 8, 8A or 12AA of TMA 1970 (personal return, trustee’s return or partnership return), or

(b)a company tax return.