4(1)This paragraph applies to any company, other than a company that is subject to special measures, that was associated, at any point during the disqualifying period, with a company (“the principal taxpayer”) that is liable to public interest business protection tax as a result of paragraph 1.
(2)A company is associated with another if—
(a)one of the two has control of the other, or
(b)both are under the control of the same person or persons.
(3)A company to which this paragraph applies is, together with the principal taxpayer, jointly and severally liable to public interest business protection tax.
(4)In this Schedule the “disqualifying period” means the period commencing with the day on which the first disqualifying step was taken and ending with the last day of the period in which the principal taxpayer must make a return under paragraph 8(1).
5(1)This paragraph applies to a person (“R”) and any person connected to R if—
(a)R or a person connected to R receives the proceeds (whether directly or indirectly) of any consideration paid directly or indirectly in connection with, or otherwise in consequence of, the taking of disqualifying steps by a person liable to public interest business protection tax as a result of paragraph 1 (“the principal taxpayer”), and
(b)the sum of amounts received by R and persons connected to R is equal to or exceeds 5% of the adjusted value of the asset.
(2)This paragraph also applies to a person (“S”) and any person connected to S if—
(a)S or a person connected to S had a qualifying interest in a company, partnership or unincorporated association liable to public interest business protection tax as a result of paragraph 1 (“the principal taxpayer”) during the disqualifying period, and
(b)the sum of qualifying interests S and persons connected to S had in the principal taxpayer during that period was equal to or exceeded 5% (see paragraph 6(1) which defines “qualifying interest” as a proportion).
(3)This paragraph does not apply to a person if the person is liable to tax as a result of paragraph 4 in relation to the same asset.
(4)A person to whom this paragraph applies is, together with the principal taxpayer, jointly and severally liable to public interest business protection tax.
(5)But the liability of a person liable to tax as a result of this paragraph is limited to—
(a)in the case of a person to whom this paragraph applies only as a result of sub-paragraph (1), the amount equal to the sum of the proceeds of consideration received (directly or indirectly) by R and persons connected to R,
(b)in the case of a person to whom this paragraph applies only as a result of sub-paragraph (2), the amount equal to the proportion of the principal taxpayer’s liability that is the same as the sum of qualifying interests S and persons connected to S had during the disqualifying period, and
(c)in the case of a person to whom this paragraph applies as a result of both sub-paragraphs (1) and (2), the greater of the amounts described in paragraphs (a) and (b).
(6)References in this paragraph to the receipt of the proceeds of consideration do not include the receipt of any amount pursuant to a loan if—
(a)the parties to that loan are not connected,
(b)the creditor carries on a business of lending money,
(c)the loan was made by the creditor in the ordinary course of that business, and
(d)the terms of the loan were agreed between parties dealing at arm’s length.
6(1)A person (“the qualifying person”) had a qualifying interest in a company, partnership or unincorporated association liable to tax (“the taxed entity”) during the disqualifying period if at any point during the period—
(a)the qualifying person was beneficially entitled to a proportion of the profits available for distribution to equity holders of the taxed entity, or
(b)the qualifying person was beneficially entitled to a proportion of the assets of the taxed entity for distribution to its equity holders on a winding up,
and the qualifying interest of the person is, for the purposes of paragraph 5(2)(b) and (5)(b), to be treated as the greatest of the proportions that applied at any point during the period.
(2)Chapter 6 of Part 5 of CTA 2010 applies for the purposes of determining the proportions of profits or assets of the taxed entity that the qualifying person is beneficially entitled to as it applies for the purposes of determining the proportions of profits or assets of a company that another company is beneficially entitled to (see, in particular, sections 165 and 166 of that Act).
(3)That Chapter has effect for the purposes of sub-paragraph (1) as if—
(a)in sections 170(3) and 172(3) (shares or securities with limited or temporary rights), for “less than” there were substituted “more than”,
(b)in section 174 (option arrangements)—
(i)in subsection (1), in Step 4, for “lowest proportion” there were substituted “highest proportion”, and
(ii)in subsection (2), for “less than” there were substituted “more than”,
(c)in sections 175(3), 176(3), 177(3) and 178(3) (cases in which more than one of sections 170, 172, and 174 apply), for “lowest proportion” there were substituted “highest proportion”, and
(d)sections 179 to 182 were omitted.
(4)That Chapter is to be read, for those purposes, with all modifications necessary to ensure that—
(a)it applies to a company which does not have share capital or to a partnership or unincorporated association, and to holders of corresponding ordinary holdings in such a company, partnership or unincorporated association, in a way which corresponds to the way they apply to companies with ordinary share capital and holders of ordinary shares in such companies,
(b)it applies in relation to ownership through any trust or other arrangement, in a way which corresponds to the way it applies to ownership through a company, and
(c)for the purposes of achieving paragraphs (a) and (b), profits or assets are attributed to holders of corresponding ordinary holdings in partnerships, unincorporated associations, trusts or other arrangements in a manner which corresponds to the way profits or assets are attributed to holders of ordinary shares in a company which is a body corporate.
(5)In this paragraph “corresponding ordinary holding” means a holding or interest which provides the holder with economic rights corresponding to those provided by a holding of ordinary shares.
7(1)This paragraph applies to a person who is liable to tax as a result of paragraph 5 if the person can demonstrate that the potential benefit to the person in connection with the taking of disqualifying steps is less than the amount to which the person would otherwise be liable to tax.
(2)References in this paragraph to the potential benefit to the person are to the maximum amount or value by which the person has or could have benefitted, or could benefit, in connection with the taking of those steps, which may (for example) include by—
(a)receiving, or being entitled (whether absolutely or conditionally) to receive, any amount in connection with the taking of the steps;
(b)being entitled (whether absolutely or conditionally) to any assets, or distribution out of assets, whose value is affected by the taking of the steps;
(c)being a person in respect of whom a power or other discretion may be exercised resulting in the receipt of any such amount, assets or distribution;
(d)disposing of, or being able to dispose of, any such assets.
(3)A person to whom this paragraph applies may make a claim to an officer of Revenue and Customs for relief by way of a reduction of the amount to which the person is liable to secure that the amount does not exceed the potential benefit to the person.
(4)No account is to be taken in a claim under this paragraph of—
(a)any amount of costs that may be incurred in connection with the realisation of a potential benefit unless that amount has been paid before making the claim, or
(b)any losses associated with the taking of the disqualifying steps (as the underlying tax has already been reduced as a result of the application of step 2 in paragraph 3(1)).
(5)An officer of Revenue and Customs to whom a claim is made under this paragraph must determine the claim and make so much (if any) of the reduction claimed as the officer considers is just and reasonable.
(6)A reduction may be made by way of an assessment or the modification of an assessment, or otherwise.
(7)The officer must notify their determination of the claim to the person making it.
(8)A person who has made a claim under this paragraph that has not been determined by an officer of Revenue and Customs may apply to the tribunal for a direction requiring an officer of Revenue and Customs to make that determination within a specified period.
(9)Any such application is subject to the relevant provisions of Part 5 of TMA 1970 (see, in particular, section 48(2)(b) of that Act).
(10)The tribunal must give the direction applied for unless satisfied that there are reasonable grounds for not determining the claim within a specified period.