Office of Public Sector Information
SCHEDULE 21 continued
(5) Condition C is that—
(a) the pension scheme holds the interest in the property indirectly through more than one vehicle (a “chain” of vehicles), and
(b) each vehicle in the chain is wholly owned by another vehicle in the chain or by the pension scheme.
(6) Where—
(a) the pension scheme holds the interest in the property indirectly through one vehicle, and
(b) the vehicle is not wholly owned by the pension scheme,
the amount of the unauthorised payment is a proportion of the total taxable amount determined by reference to the extent of the pension scheme’s interest in the vehicle.
(7) Where—
(a) the pension scheme holds the interest in the property indirectly through one or more chains of vehicles, and
(b) one or more vehicles in such a chain is not wholly owned by another vehicle in the chain or by the pension scheme,
the amount of the unauthorised payment is the amount or the total of all the amounts found under sub-paragraph (8) for each chain through which the pension scheme owns the interest in the property.
(8) The amount is a proportion of the total taxable amount determined by reference to the extent of the interest held directly by the pension scheme or another vehicle in the chain in each vehicle in the chain—
(a) starting with the vehicle which holds the interest in the property directly, and
(b) ending with the vehicle in which the pension scheme directly holds an interest.
(9) For the purposes of this paragraph a vehicle is wholly owned by a person if no other person directly holds an interest in the vehicle.
(10) This paragraph is subject to paragraph 44.
42 (1) References in this Schedule to the extent of an interest held directly by a person in a vehicle are references to the proportion of the interests of everyone who directly holds an interest in the vehicle which on a just and reasonable apportionment is represented by that interest.
(2) Sub-paragraph (1) is subject to paragraph 43, which explains how to determine the extent of a person’s interest in a vehicle for the purposes of the taxable property provisions where the vehicle is a company.
(3) The Treasury may by regulations—
(a) amend paragraph 43, or
(b) amend this Part of this Schedule for the purposes of explaining how to determine the extent of a person’s interest in a vehicle in other cases.
(4) Regulations under sub-paragraph (3) may include provision having effect in relation to times before they are made.
43 (1) For the purposes of this Schedule, and except in a case to which sub-paragraph (3) applies, the extent of a person’s interest in a company is determined by reference to whichever of the following gives the person the greatest interest in the company—
(a) the percentage of the share capital or issued share capital of the company owned by the person;
(b) the percentage of the voting rights in the company owned by the person;
(c) the percentage of all the income of the company to which the person has a right;
(d) the percentage of the amounts distributed on a distribution in relation to the company to which the person has a right;
(e) the percentage of the assets of the company to which the person has a right on a winding-up or in any other circumstances;
(f) where the person has a right to a percentage of a particular asset or description of assets of the company, or of the income or gains from such an asset or description (either generally or in particular circumstances), that percentage or the highest of all the percentages found under this paragraph.
(2) For the purposes of sub-paragraph (1) a person is treated as owning or having a right to anything which the person will only acquire—
(a) at some future date,
(b) if the person exercises a right to acquire it, or
(c) if some other uncertain future event occurs or does not occur.
(3) Where—
(a) a person has an interest in a company as a result of lending the company money to fund the acquisition of an interest in taxable property, and
(b) this sub-paragraph gives the person a greater interest in the company than any interest given by sub-paragraph (1),
for the purposes of this Schedule the extent of the person’s interest in the company is determined by the proportion that the value of the loan bears to the total value of the assets held directly by the company.
(4) For the purposes of sub-paragraph (3)—
(a) assets must be valued in accordance with generally accepted accounting practice,
(b) no account is to be taken of liabilities secured against or otherwise relating to assets (whether generally or specifically), and
(c) where generally accepted accounting practice offers a choice of valuation between cost basis and fair value, fair value must be used.
44 (1) This paragraph applies where an investment-regulated pension scheme is treated as acquiring an interest in taxable property by virtue of paragraph 28 (increase in extent of interest in vehicle).
(2) The amount of the unauthorised payment treated as made by the pension scheme is—
UP - UPB
Where—
UP is the amount that would have been the amount of the unauthorised payment apart from this paragraph; and
UPB is the amount that would have been the amount of any unauthorised payment treated as made by the pension scheme if it had acquired the interest in the property immediately before the increase in the extent of the interest in the vehicle (assuming the total taxable amount in relation to the unauthorised payment to be that given under paragraph 32(5)).
45 (1) This paragraph has effect for determining—
(a) whether the whole of an unauthorised payment treated as made by a pension scheme is to be treated as made to a member of the scheme, and
(b) if not, how much of the unauthorised payment is to be treated as made to the member.
(2) If the interest in the taxable property which gives rise to the unauthorised payment is held by the pension scheme for the purposes of—
(a) the arrangement under the pension scheme relating to the member, and
(b) at least one other arrangement under the pension scheme,
the unauthorised payment is to be apportioned on a just and reasonable basis between all of the arrangements for the purposes of which the interest in the property is held.
(3) Otherwise, the whole of the unauthorised payment is to be treated as made to the member.”
14 (1) Schedule 34 (non-UK schemes: application of certain charges) is amended as follows.
(2) In paragraph 1 (member payment charges)—
(a) in sub-paragraph (3)(a), after “charge” insert “(except as imposed by virtue of section 174A (taxable property held by investment-regulated pension schemes))”, and
(b) in sub-paragraph (4), after “Part” insert “(apart from the taxable property provisions)”.
(3) After paragraph 7 insert—
7A (1) The Commissioners for Her Majesty’s Revenue and Customs may by regulations make provision for a transfer member of a relevant non-UK scheme to be liable to the unauthorised payment charge in the same or similar circumstances to those in which—
(a) a member of a registered pension scheme is liable to that charge by virtue of section 174A and Schedule 29A (taxable property held by investment-regulated pension scheme),
(b) the scheme administrator of such a scheme is liable to the scheme sanction charge by virtue of section 185A (income from taxable property) or 185F (gains from taxable property), or
(c) a member of such a scheme is liable to the scheme sanction charge by virtue of those provisions in consequence of provision made by regulations under section 273ZA.
(2) The regulations may—
(a) make provision for the application of any or all of the taxable property provisions in relation to a transfer member of a relevant non-UK scheme subject to any omissions, additions and other modifications contained in the regulations,
(b) include provision having effect in relation to times before they are made,
(c) contain transitional provisions and savings, and
(d) make different provision for different cases.”
15 In Schedule 36 (transitional provisions and savings), after paragraph 37 insert—
37A (1) This paragraph applies in relation to an investment-regulated pension scheme if—
(a) on 6th April 2006 the pension scheme holds an interest in taxable property which it acquired before that date, and
(b) immediately before that date the pension scheme was not prohibited from holding the interest in the property,
and, in a case where immediately before that date the interest in the property was held directly by a person other than the pension scheme, if the pension scheme was not prohibited from holding the interest it held in that person at that time.
(2) This paragraph also applies in relation to an investment-regulated pension scheme if—
(a) before 6th April 2006 a contract to acquire an interest in property was entered into by the pension scheme or a person in whom the pension scheme directly or indirectly held an interest when the contract was entered into,
(b) the pension scheme does not acquire the interest in the property before that date,
(c) the property is taxable property on that date, and
(d) immediately before that date the pension scheme would not have been prohibited from holding the interest in the property,
and, in a case where the contract to acquire the interest in the property was entered into by a person in whom the pension scheme directly or indirectly held an interest, if the pension scheme was not prohibited from holding the interest it held in that person immediately before that date.
(3) The taxable property provisions (apart from this paragraph and paragraphs 37B to 37E) do not apply in relation to the pension scheme and the interest in the property.
(4) For the purposes of this Schedule a pension scheme is to be treated as having been prohibited from holding an interest in property, or in a person, immediately before 6th April 2006 if approval could have been withdrawn under section 591B, 620(7) or 650 of ICTA on the basis of the holding of the interest at that time.
(5) This paragraph is subject to paragraphs 37B to 37E.
37B (1) Paragraph 37A ceases to apply to an investment-regulated pension scheme and an interest in taxable property on the relevant date if Condition A, B or C is met.
(2) Condition A is that there is a change in the occupation or use of the property such that, if the change had occurred immediately before 6th April 2006, the pension scheme would have been prohibited from holding the interest in the property at that time.
(3) Condition B is that—
(a) the taxable property is residential property on 6th April 2006, and
(b) improvement works on the property are begun on or after that date.
(4) Condition C is that there is a change in the pension scheme’s interest in—
(a) any person who holds the interest in the property directly, or
(b) any person who has entered into a contract to acquire the interest in the property,
such that, if the change had occurred immediately before 6th April 2006, the pension scheme would have been prohibited from holding the interest in the person at that time.
(5) For the purposes of this paragraph the relevant date is—
(a) where Condition A is met, the date on which the change in the occupation or use of the taxable property takes place,
(b) where Condition B is met, the date on which the improvement works are substantially completed, or
(c) where Condition C is met, the date on which the change in the pension scheme’s interest in the person takes place,
but where the pension scheme has not acquired the interest in the property by what would otherwise be the relevant date, the relevant date is the date on which it acquires the interest.
(6) Where Condition A, B or C is met the pension scheme is to be treated for the purposes of the taxable property provisions as acquiring the interest in the property on the relevant date.
(7) For the purposes of Schedule 29A the total taxable amount in relation to any unauthorised payment which the pension scheme is treated as having made by reason of the acquisition is—
(a) the market value on the relevant date of the interest in the property held by the person who holds it directly, or
(b) if the interest in the property is a lease at a rent, the amount of consideration that would be treated as given by the person for the lease by virtue of paragraph 34 of Schedule 29A if it were assigned to the person on that date.
(8) Where—
(a) the pension scheme holds the interest in the property directly, and
(b) the interest is not a lease at a rent,
for the purposes of section 185G (gains from taxable property: disposal by person holding directly) the pension scheme is to be treated as having acquired the interest for a consideration equal to its market value on 6th April 2006.
(9) For the purposes of sub-paragraph (3)(b) improvement works are to be taken to have been begun before 6th April 2006 only if—
(a) a binding contract for the works was entered into before that date, or
(b) a substantial amount of the works has been carried out before that date.
(10) For the purposes of this Schedule “improvement works” means, in relation to a property, works which—
(a) materially improve the property, and
(b) are not carried out wholly for the purposes of complying with a statutory requirement or a requirement imposed by a government department, a statutory body or a person holding a statutory office.
(11) For the purposes of sub-paragraph (10)(a) a property is materially improved by works only if—
(a) its market value on the date the works are substantially completed (“MVW”) exceeds what would have been its market value on that date if the works had not been carried out (“MV”), and
(b) the amount by which MVW exceeds MV is greater than 20% of MV.
(12) For the purposes of sub-paragraph (10)(b)—
“statutory body” means a body set up by or under an enactment (including an enactment comprised in, or an instrument made under, an Act of the Scottish Parliament);
“statutory office” means a body set up by or under such an enactment; and
“statutory requirement” means a requirement imposed by provision made by or under such an enactment.
(13) This paragraph is subject to paragraph 37D.
37C (1) This paragraph applies where—
(a) on 6th April 2006 an investment-regulated pension scheme holds an interest in taxable property which it acquired before that date, and
(b) immediately before that date the pension scheme was prohibited from holding the interest.
(2) This paragraph also applies where—
(a) on 6th April 2006 an investment-regulated pension scheme holds an interest in taxable property indirectly which it acquired before that date, and
(b) immediately before that date the pension scheme was prohibited from holding the interest it held in the person that held the interest in the property directly at that time.
(3) The pension scheme is to be treated for the purposes of the taxable property provisions as acquiring the interest in the property on 6th April 2006.
(4) For the purposes of Schedule 29A the total taxable amount in relation to any unauthorised payment which the pension scheme is treated as having made by reason of the acquisition is—
(a) the market value on 6th April 2006 of the interest in the property held by the person who holds it directly, or
(b) if the interest in the property is a lease at a rent, the amount of consideration that would be treated as given by the person for the lease by virtue of paragraph 34 of Schedule 29A if it were assigned to the person on that date.
(5) Where—
(a) the pension scheme holds the interest in the property directly, and
(b) the interest is not a lease at a rent,
for the purposes of section 185G (gains from taxable property: disposal by person holding directly) the pension scheme is to be treated as having acquired the interest for a consideration equal to its market value on 6th April 2006.
37D (1) This paragraph applies where—
(a) sub-paragraph (1) or (2) of paragraph 37A applies in relation to a pension scheme and an interest in property,
(b) immediately before 6th April 2006 the pension scheme was a self-invested personal pension scheme or a small self-administered scheme,
(c) on that date the pension scheme holds the interest in the property indirectly or (if sub-paragraph (2) of paragraph 37A applies in relation to the pension scheme and the interest in the property) the pension scheme will hold the interest indirectly once it has been acquired pursuant to the contract,
(d) the property is residential property on that date, and
(e) improvement works on the property were begun after 5th December 2005.
(2) This paragraph also applies where—
(a) sub-paragraph (1) or (2) of paragraph 37A applies in relation to a pension scheme and an interest in property,
(b) immediately before 6th April 2006 the pension scheme was a small self-administered scheme,
(c) on that date the pension scheme holds the interest in the property directly,
(d) the pension scheme acquired the interest before 5th August 1991,
(e) the property is residential property on 6th April 2006, and
(f) improvement works on the property were begun after 5th December 2005.
(3) If the works are completed on or after 6th April 2006, paragraph 37B applies in relation to the pension scheme and the interest in the property as if the works were begun on or after that date.
(4) If the works are completed before that date—
(a) paragraph 37A does not apply in relation to the pension scheme and the interest in the property, and
(b) unless the pension scheme has still to acquire the interest in the property on that date, sub-paragraphs (3) to (5) of paragraph 37C apply in relation to the pension scheme and the interest.
(5) For the purposes of this paragraph improvement works are to be taken to have been begun before 6th December 2005 only if—
(a) a binding contract for the works was entered into before that date, or
(b) a substantial amount of the works has been carried out before that date.
37E (1) This paragraph applies where—
(a) paragraph 37A would otherwise apply in relation to a pension scheme and an interest in property,
(b) immediately before 6th April 2006 the pension scheme was a retirement benefits scheme approved under section 590 of ICTA, and
(c) the pension scheme was approved under that section after 5th December 2005.
(2) Paragraph 37A does not apply in relation to the pension scheme and the interest in the property.
(3) Unless the pension scheme has still to acquire the interest in the property on 6th April 2006, sub-paragraphs (3) to (5) of paragraph 37C apply in relation to the pension scheme and the interest.
37F (1) This paragraph applies where on or after 6th April 2006 an investment-regulated pension scheme acquires an interest in taxable property consisting of tangible moveable property because a person in whom the pension scheme directly or indirectly holds an interest comes to hold the interest in the property directly.
(2) The taxable property provisions (apart from this paragraph and paragraph 37G) do not apply in relation to the pension scheme and the interest in the property if the conditions in sub-paragraph (3) are met.
(3) Those conditions are that—
(a) on 6th April 2006 the pension scheme held the interest in the person by virtue of acquiring it before that date,
(b) immediately before that date the pension scheme was not prohibited from holding the interest in the person,
(c) at no time during the period beginning with that date and ending immediately before the acquisition of the interest in the property has the pension scheme’s interest in the person been such that, if it had held that interest in the person immediately before 6th April 2006, it would have been prohibited from holding that interest at that time, and
(d) the person acquires the interest in the property so that the property may be used for the purposes of a trade, profession or vocation carried on by the person or for the purposes of its administration or management.
(4) This paragraph is subject to paragraph 37G.
37G (1) Where Condition A or B is met in relation to the pension scheme and an interest in property to which paragraph 37F has applied, the pension scheme is to be treated for the purposes of the taxable property provisions as acquiring the interest in the property on the date on which the Condition is met.
(2) Condition A is that there is a change in the pension scheme’s interest in the person who holds the interest in the property directly such that, if the change had occurred immediately before 6th April 2006, the pension scheme would have been prohibited from holding the interest in the person at that time.
(3) Condition B is that the property ceases to be used for the purposes of—
(a) a trade, profession or vocation carried on by the person, or
(b) its administration or management.
(4) For the purposes of Schedule 29A the total taxable amount in relation to any unauthorised payment which the pension scheme is treated as having made by reason of the acquisition is the market value on the relevant date of the interest in the property held by the person.
37H (1) This paragraph applies where on or after 6th April 2006 an investment-regulated pension scheme acquires an interest in taxable property consisting of residential property because a person in whom the pension scheme directly or indirectly holds an interest comes to hold the interest in the property directly.
(2) The taxable property provisions (apart from this paragraph and paragraph 37I) do not apply in relation to the pension scheme and the interest in the property if the conditions in sub-paragraph (3) are met.
(3) Those conditions are that—
(a) on 6th April 2006 the pension scheme held the interest in the person by virtue of acquiring it before that date,
(b) immediately before that date the pension scheme was not prohibited from holding the interest in the person,
(c) immediately before that date the person had a business involving the holding and letting of residential property and held directly five or more assets consisting of interests in residential property for the purposes of that business,
(d) at no time during the period beginning with that date and ending immediately before the acquisition of the interest in the property has the pension scheme’s interest in the person been such that, if it had held that interest in the person immediately before 6th April 2006, it would have been prohibited from holding that interest at that time,
(e) the person acquires the interest in the property for the purposes of its property rental business, and
(f) after the acquisition of the interest in the property, the property is not occupied or used by a member of the pension scheme or a person connected with such a member.
(4) This paragraph is subject to paragraph 37I.
(5) Section 839 of ICTA (connected persons) applies for the purposes of this paragraph.
37I (1) Where Condition A, B or C is met in relation to the pension scheme and an interest in property to which paragraph 37H has applied, the pension scheme is to be treated for the purposes of the taxable property provisions as acquiring, on the date on which the Condition is met, each interest in property—
(a) which it holds on that date, and
(b) to which paragraph 37H has applied before that date.
(2) Condition A is that there is a change in the pension scheme’s interest in the person who holds the interest in the property directly such that, if the change had occurred immediately before 6th April 2006, the pension scheme would have been prohibited from holding the interest in the person at that time.
(3) Condition B is that the property ceases to be used for the purposes of the person’s property rental business.
(4) Condition C is that the property is occupied or used by a member of the pension scheme or a person connected with such a member.
(5) For the purposes of Schedule 29A the total taxable amount in relation to any unauthorised payment which the pension scheme is treated as having made by reason of an acquisition of an interest in property treated as made by virtue of this paragraph is—
(a) the market value on the relevant date of the interest in the property held by the person who holds it directly, or
(b) if the interest in the property is a lease at a rent, the amount of consideration that would be treated as given by the person for the lease by virtue of paragraph 34 of Schedule 29A if it were assigned to the person on that date.”
Finance Act 2006