Capital Gains Tax Citation, commencement and effect 1 1 These Regulations may be cited as the Tax Avoidance Schemes (Prescribed Descriptions of Arrangements) (Amendment) Regulations 2016 and come into force on 23rd February 2016. 2 These Regulations do not have effect— a for the purposes of section 308(1) of the Finance Act 2004 (duties of promoter relating to any notifiable proposal) , if the relevant date falls before 23rd February 2016; b for the purposes of section 308(3) of the Finance Act 2004 (duties of promoter relating to any notifiable arrangements), if the date on which the promoter first becomes aware of any transaction forming part of notifiable arrangements falls before 23rd February 2016; c for the purposes of section 309(1) of the Finance Act 2004 (duty of person dealing with promoter outside United Kingdom), and of section 310 of that Act (duty of parties to notifiable arrangements not involving promoter), if the date on which any transaction forming part of notifiable arrangements is entered into falls before 23rd February 2016. Amendment of the Tax Avoidance Schemes (Prescribed Description of Arrangements) Regulations 2006 2 The Tax Avoidance Schemes (Prescribed Description of Arrangements) Regulations 2006 are amended as provided for in regulations 3 to 9. 3 1 Regulation 2 (interpretation: general) is amended as follows. 2 In paragraph (1) insert the following definitions in the appropriate places— “CTA 2009” means the Corporation Tax Act 2009 ; , “CTA 2010” means the Corporation Tax Act 2010 ; , and “ITA 2007” means the Income Tax Act 2007 ; . 3 In paragraph (2) after the definition of “business” insert— “generally accepted accounting practice” has the meaning given by section 1127 of CTA 2010; . 4 1 Regulation 5 (prescribed descriptions of arrangements) is amended as follows. 2 For paragraph (1) substitute— 1 The following arrangements are prescribed for the purposes of Part 7 of the FA 2004 (disclosure of tax avoidance schemes)— a in relation to income tax, corporation tax and capital gains tax, any arrangements which fall within any description specified in a provision of these Regulations listed in paragraph (2); b in relation to inheritance tax, any arrangements which fall within any description specified in a provision of these Regulations listed in paragraph (2)(a) or (c). 3 In paragraph (2)— a omit the “and” after sub-paragraph (g); b after sub-paragraph (h) insert— and i regulation 19 (description 9: financial products). 5 In regulation 7(1)(e)(iii)(bb) (Description 2: Confidentiality where no promoter is involved) for “Income Tax Act 2007” substitute “ITA 2007”. 6 For regulation 10 (Description 5: standardised tax products) substitute— Description 5: standardised tax products 10 1 Subject to regulation 11, arrangements are prescribed if a promoter makes the arrangements available for implementation by more than one person and the conditions in paragraph (2) are met. 2 The conditions are that an informed observer (having studied the arrangements and having regard to all relevant circumstances) could reasonably be expected to conclude that— a the arrangements have standardised, or substantially standardised, documentation— i the purpose of which is to enable a person to implement the arrangements; ii the form of which is determined by the promoter; and iii the substance of which does not need to be tailored, to any material extent, to enable a person to implement the arrangements; b a person implementing the arrangements must enter into a specific transaction or series of specific transactions; c the transaction or series of transactions is standardised, or substantially standardised, in form; and d either the main purpose of the arrangements is to enable a person to obtain a tax advantage or the arrangements would be unlikely to be entered into but for the expectation of obtaining a tax advantage. 7 1 Regulation 11 (arrangements excepted from Description 5) is amended as follows. 2 Omit paragraph (1). 3 In paragraph (2)— a for “The arrangements referred to in paragraph (1)(a) are” substitute “The following arrangements are excepted from being prescribed under regulation 10”; b in sub-paragraph (b) for “Chapter 3 of Part 7 of ICTA 1988 and Schedules 5B and 5BA” substitute “Part 5 of ITA 2007 and Schedule 5B”; c in sub-paragraph (c) for “section 842AA of, and Schedule 15B to, ICTA 1988” substitute “Part 6 of ITA 2007”; d after sub–paragraph (n) insert— o arrangements which would be prescribed by regulation 19 but for regulation 21. 8 In regulation 12 (Description 6: Loss schemes) for paragraph (b) substitute— b an informed observer (having studied the arrangements and having regard to all relevant circumstances) could reasonably be expected to conclude that— i the main benefit or one of the main benefits which could be expected to accrue to some or all of the individuals participating in the arrangements is the provision of losses, and ii the arrangements (including the way they are structured) contain an element which is, or elements which are, unlikely to have been entered into by the individuals concerned were it not for the provision of those losses, and iii those individuals would be expected to use those losses to reduce their liability to income tax or capital gains tax. 9 After regulation 18 (Description 8: Employment income provided through third parties) insert— Description 9: Financial products 19 1 Subject to regulation 21, arrangements are prescribed if— a condition 1 is met, and b it would be reasonable to expect an informed observer (having studied the arrangements and having regard to all relevant circumstances) to conclude that— i condition 2 is met, and ii either condition 3 or condition 4 is met. 2 Condition 1 is that the arrangements include at least one financial product specified in regulation 20(1) (a “specified financial product”). 3 Condition 2 is that the main benefit, or one of the main benefits, of including a specified financial product in the arrangements is to give rise to a tax advantage. 4 Condition 3 is that a specified financial product included in the arrangements contains at least one term which is unlikely to have been entered into by the persons concerned were it not for the tax advantage. 5 Condition 4 is that the arrangements involve one or more contrived or abnormal steps without which the tax advantage could not be obtained. 6 For the purposes of this regulation condition 3 is treated as not having been met if— a the specified financial product includes a term requiring that it is held for a minimum period of time before it is redeemed and— i section 135 or 136 of TCGA 1992 applies to the specified financial product, and ii condition 3 is met only by virtue of that term; or b the specified financial product includes a term whereby the issuing company can secure that the date for redemption falls before the end of the permitted period and— i but for that term, the specified financial product would be an equity note, and ii condition 3 is met only by virtue of that term. 7 In paragraph (6)(b) “equity note” and “the permitted period” have the meanings given by section 1016 of CTA 2010. 8 For the purposes of condition 4 a step is not to be treated as being contrived or abnormal if— a that step involves only the transfer of an asset to which the condition in paragraph 15A(2)(b) of Schedule 7AC to TCGA 1992 applies; or b that step involves only the issue of shares and— i that step is taken to eliminate or substantially reduce the economic risk of holding a loan relationship or a derivative contract, or part of such a loan relationship or a derivative contract, which is attributable to fluctuations in exchange rates, and ii the shares are treated for accounting purposes as a liability of the company in accordance with generally accepted accounting practice. 9 For the purposes of this regulation, neither condition 3 nor condition 4 is treated as having been met if— a the specified financial product includes a term providing for conversion into, or redemption in, a currency other than sterling, and b both condition 3 and condition 4 are met only by virtue of that term. 20 1 The financial products specified in this paragraph are— a a loan, b a share, c a derivative contract within the meaning given by section 576 of CTA 2009, d a repo in respect of securities within the meaning given by section 263A(A1) of TCGA 1992 , e a creditor repo, creditor quasi-repo, debtor repo or a debtor quasi-repo (within the meanings given by sections 543, 544, 548 and 549 of CTA 2009 respectively), f a stock lending arrangement within the meaning given by section 263B(1) of TCGA 1992 , g an alternative finance arrangement within Chapter 6 of Part 6 of CTA 2009 or Part 10A of ITA 2007 , h a contract which, whether alone or in combination with one or more other contracts— i is in accordance with generally accepted accounting practice required to be treated as a loan, deposit or other financial asset or obligation, or ii would be required to be so treated by the person entering into the arrangements were that person a company to which the Companies Act 2006 applies. 2 Paragraph (1) does not specify a financial product held within an account which satisfies the conditions in regulation 4 of the Individual Savings Account Regulations 1998 . Arrangements excepted from Description 9 21 Arrangements are excepted from being prescribed under regulation 19 if— a a promoter is a participating entity, or is part of a participating group, within the meaning of section 286 of the Finance Act 2014 ; and b HMRC has confirmed, or could reasonably be expected to confirm, to the promoter that the arrangements are acceptable transactions under the Code of Practice on Taxation for Banks (as published by the Commissioners for Her Majesty’s Revenue and Customs on 31st May 2013) . George Hollingbery David Evennett Two of the Lords Commissioners of Her Majesty’s Treasury 1st February 2016