Finance Act 2009

2009 c. 10

An Act to grant certain duties, to alter other duties, and to amend the law relating to the National Debt and the Public Revenue, and to make further provision in connection with finance.

Enacted[21st July 2009]

Most Gracious Sovereign

We, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom in Parliament assembled, towards raising the necessary supplies to defray Your Majesty's public expenses, and making an addition to the public revenue, have freely and voluntarily resolved to give and to grant unto Your Majesty the several duties hereinafter mentioned; and do therefore most humbly beseech Your Majesty that it may be enacted, and be it enacted by the Queen's most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—

Part 1 Charges, rates, allowances, etc¶

Income tax¶

1 Charge and main rates for 2009-10¶

1 Income tax is charged for the tax year 2009-10.

2 For that tax year—

a the basic rate is 20%, and

b the higher rate is 40%.

2 Basic rate limit for 2009-10¶

1 For the tax year 2009-10 the amount specified in section 10(5) of ITA 2007 (basic rate limit) is replaced with “£37,400”.

2 Accordingly, section 21 of that Act (indexation of limits), so far as relating to the basic rate limit, does not apply for that tax year.

3 Personal allowance for 2009-10 for those aged under 65¶

1 For the tax year 2009-10 the amount specified in—

a section 35 of ITA 2007, ^F86...

^F86b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(personal allowance for those aged under 65) is replaced with “£6,475”.

2 Accordingly—

a section 57 of ITA 2007, so far as relating to the amount specified in section 35 of that Act, ^F25...

^F25b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(indexation) do not apply for the tax year 2009-10.

4 Reduction of personal allowance for those with income exceeding £100,000¶

1 In section 35 of ITA 2007 (personal allowances for those aged under 65), the existing provision becomes subsection (1) of that section; and after that subsection insert—

2 In sections 36(2)(b) and 37(2)(b) of ITA 2007 (limit on reduction of personal allowances for those aged 65 to 74 or 75 and over), for “the amount of a personal allowance under section 35” substitute “ the amount of any allowance to which the individual would be entitled under section 35 if under the age of 65 throughout the tax year ”.

3 In section 57(1)(a) and (3)(a) of ITA 2007 (indexation of allowances), for “35” substitute “ 35(1) ”.

4 The amendments made by subsections (1) and (2) have effect for the tax year 2010-11 and subsequent tax years.

5 The amendment made by subsection (3) has effect for finding allowances for the tax year 2011-12 and subsequent tax years.

5 Abolition of personal reliefs for non-residents¶

Schedule 1 contains provision abolishing personal reliefs for non-residents.

6 Additional rate, dividend additional rate, trust rates and pension tax rates¶

1 Section 6 of ITA 2007 (rates of income tax) is amended as follows.

2 In subsection (1), omit the “and” at the end of paragraph (b) and insert at the end

3 In subsection (3)(b), for “and dividend upper rate” substitute “ , dividend upper rate and dividend additional rate ”.

4 In section 9 (trust rate and dividend trust rate)—

a in subsection (1), for “40%” substitute “ 50% ”, and

b in subsection (2), for “32.5%” substitute “ 42.5% ”.

5 Schedule 2 contains provision supplementing this section (including provision about rates under Part 4 of FA 2004).

6 The amendments made by this section have effect for the tax year 2010-11 and subsequent tax years.

Corporation tax¶

7 Charge and main rates for financial year 2010¶

1 Corporation tax is charged for the financial year 2010.

2 For that year the rate of corporation tax is—

a 28% on profits of companies other than ring fence profits, and

b 30% on ring fence profits of companies.

3 In subsection (2) “ring fence profits” has the meaning given by section 276 of CTA 2010.

8 Small companies' rates and fractions for financial year 2009¶

1 For the financial year 2009 the small companies' rate is—

a 21% on profits of companies other than ring fence profits, and

b 19% on ring fence profits of companies.

2 For the financial year 2009 the fraction mentioned in section 13(2) of ICTA is—

a 7/400ths in relation to profits of companies other than ring fence profits (“the standard fraction”), and

b 11/400ths in relation to ring fence profits of companies (“the ring fence fraction”).

3 See section 7(3) of FA 2008 for provision applying section 3(3) to (7) of FA 2007 in relation to profits for an accounting period any part of which falls in the financial year 2009.

4 In this section “ring fence profits” has the meaning given by section 276 of CTA 2010.

Value added tax¶

9 Extension of reduced standard rate and anti-avoidance provision¶

1 The Value Added Tax (Change of Rate) Order 2008 (S.I. 2008/3020) (reducing standard rate of value added tax to 15 per cent) is to cease to be in force on 1 January 2010 (rather than ceasing to be in force on 1 December 2009 in accordance with section 2(2) of VATA 1994).

2 Schedule 3 contains—

a provision for a supplementary charge to value added tax on supplies spanning the date of the VAT change (see Parts 1 to 5), and

b minor amendments of provisions about orders changing the standard rate of value added tax (see Part 6).

Stamp duty land tax¶

10 Thresholds for residential property¶

1 Part 4 of FA 2003 (stamp duty land tax) has effect in relation to transactions with an effective date on or after 22 April 2009 but before 1 January 2010 as if—

a in section 55(2) (amount of tax chargeable: general), in Table A (bands and percentages for residential property), for “£125,000” (in both places) there were substituted “ £175,000 ”, and

b in paragraph 2(3) of Schedule 5 (amount of tax chargeable: rent), in Table A (bands and percentages for residential property), for “£125,000” (in both places) there were substituted “ £175,000 ”.

2 The following are revoked—

a the Stamp Duty Land Tax (Variation of Part 4 of the Finance Act 2003) Regulations 2008 (S.I. 2008/2338), and

b the Stamp Duty Land Tax (Exemption of Certain Acquisitions of Residential Property) Regulations 2008 (S.I. 2008/2339).

3 The revocations made by subsection (2) have effect in relation to transactions with an effective date on or after 22 April 2009.

Alcohol and tobacco duties¶

11 Rates of alcoholic liquor duty¶

1 ALDA 1979 is amended as follows.

2 In section 5 (rate of duty on spirits), for “£21.35” substitute “ £22.64 ”.

3 In section 36(1AA)(a) (standard rate of duty on beer), for “£14.96” substitute “ £16.47 ”.

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

a in paragraph (a) (rate of duty per hectolitre in the case of sparkling cider of a strength exceeding 5.5 per cent), for “£188.10” substitute “ £207.20 ”,

b in paragraph (b) (rate of duty per hectolitre in the case of cider of a strength exceeding 7.5 per cent which is not sparkling cider), for “£43.37” substitute “ £47.77 ”, and

c in paragraph (c) (rate of duty per hectolitre in any other case), for “£28.90” substitute “ £31.83 ”.

5 For the table in Schedule 1 substitute—

Table of rates of duty on wine and made-wine

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

Description of wine or made-wine	Rates of duty per hectolitre
	£
Wine or made-wine of a strength not exceeding 4 per cent	65.94
Wine or made-wine of a strength exceeding 4 per cent but not exceeding 5.5 per cent	90.68
Wine or made-wine of a strength exceeding 5.5 per cent but not exceeding 15 per cent and not being sparkling	214.02
Sparkling wine or sparkling made-wine of a strength exceeding 5.5 per cent but less than 8.5 per cent	207.20
Sparkling wine or sparkling made-wine of a strength of 8.5 per cent or of a strength exceeding 8.5 per cent but not exceeding 15 per cent	274.13
Wine or made-wine of a strength exceeding 15 per cent but not exceeding 22 per cent	285.33

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

Description of wine or made-wine	Rates of duty per litre of alcohol in wine or made-wine
	£
Wine or made-wine of a strength exceeding 22 per cent	22.64.

6 The following are revoked—

a the Alcoholic Liquor Duties (Surcharges) and Tobacco Products Duty Order 2008 (S.I. 2008/3026), so far as relating to excise duty on alcoholic liquors, and

b the Alcoholic Liquor (Surcharge on Spirits Duty) Order 2008 (S.I. 2008/3062).

7 The amendments made by this section are treated as having come into force on 23 April 2009.

12 Rates of tobacco products duty¶

1 For the table in Schedule 1 to TPDA 1979 substitute—

2 The Alcoholic Liquor Duties (Surcharges) and Tobacco Products Duty Order 2008 (S.I. 2008/3026), so far as relating to excise duty on tobacco products, is revoked.

3 The amendments made by this section are treated as having come into force at 6 pm on 22 April 2009.

Vehicle excise duty¶

13 Rates for 2009-10¶

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

2 In paragraph 1 (general)—

a in sub-paragraph (2) (vehicle not covered elsewhere in Schedule otherwise than with engine cylinder capacity not exceeding 1,549cc), for “£185” substitute “ £190 ”, and

b in sub-paragraph (2A) (vehicle not covered elsewhere in Schedule with engine cylinder capacity not exceeding 1,549cc), for “£120” substitute “ £125 ”.

3 In paragraph 1B (graduated rates for light passenger vehicles), for the table substitute—

Table

CO₂ emissions figure		Rate
(1)	(2)	(3)	(4)
Exceeding	Not exceeding	Reduced rate	Standard rate
g/km	g/km	£	£
100	120	15	35
120	140	100	120
140	150	105	125
150	165	130	150
165	185	155	175
185	225	200	215
225		390	405

The table has effect in relation to vehicles first registered under this Act before 23 March 2006 as if—

a in column (3), in the last row, “200” were substituted for “ 390 ”, and

b in column (4), in the last row, “215” were substituted for “ 405 ”.

4 In paragraph 1J (light goods vehicles)—

a in sub-paragraph (a) (vehicle which is not lower-emission van), for “£180” substitute “ £185 ”, and

b in sub-paragraph (b) (lower-emission van), for “£120” substitute “ £125 ”.

5 The amendments made by this section have effect in relation to licences taken out on or after 1 May 2009.

14 Rates from April 2010¶

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

2 In paragraph 1(2) (vehicle not covered elsewhere in Schedule otherwise than with engine cylinder capacity not exceeding 1,549cc), for “£190” substitute “ £205 ”.

3 Paragraph 1B (graduated rates for light passenger vehicles) is amended as follows.

4 For “table” substitute “ tables ”.

5 Omit the “and” at the end of paragraph (a).

6 Insert at the end of paragraph (b)

7 For the table substitute—

Table 1 Rates payable on first vehicle licence for vehicle

CO₂ emissions figure		Rate
(1)	(2)	(3)	(4)
Exceeding	Not exceeding	Reduced rate	Standard rate
g/km	g/km	£	£
130	140	100	110
140	150	115	125
150	165	145	155
165	175	240	250
175	185	290	300
185	200	415	425
200	225	540	550
225	255	740	750
255		940	950

Table 2 Rates payable on any other vehicle licence for vehicle

CO₂ emissions figure		Rate
(1)	(2)	(3)	(4)
Exceeding	Not exceeding	Reduced rate	Standard rate
g/km	g/km	£	£
100	110	10	20
110	120	20	30
120	130	80	90
130	140	100	110
140	150	115	125
150	165	145	155
165	175	170	180
175	185	190	200
185	200	225	235
200	225	235	245
225	255	415	425
255		425	435

Table 2 has effect in relation to vehicles first registered, under this Act or under the law of a country or territory outside the United Kingdom, before 23 March 2006 as if—

a in column (3), in the last two rows, “235” were substituted for “ 415 ” and “425”, and

b in column (4), in the last two rows, “245” were substituted for “ 425 ” and “435”.

8 In paragraph 1J(a) (light goods vehicle which is not lower-emission van), for “£185” substitute “ £200 ”.

9 Schedule 4 contains further provision about rates of vehicle excise duty etc.

10 The amendments made by this section have effect in relation to licences taken out on or after 1 April 2010.

Fuel duties¶

15 Rates and rebates from Spring 2009¶

1 HODA 1979 is amended as follows.

2 In section 6(1A) (main rates)—

a in paragraph (a) (unleaded petrol), for “£0.5235” substitute “ £0.5419 ”,

b in paragraph (aa) (aviation gasoline), for “£0.3103” substitute “ £0.3334 ”,

c in paragraph (b) (light oil other than unleaded petrol or aviation gasoline), for “£0.6207” substitute “ £0.6391 ”, and

d in paragraph (c) (heavy oil), for “£0.5235” substitute “ £0.5419 ”.

3 In section 6AA(3) (rate of duty on biodiesel), for “£0.3235” substitute “ £0.3419 ”.

4 In section 6AD(3) (rate of duty on bioethanol), for “£0.3235” substitute “ £0.3419 ”.

5 In section 8(3) (road fuel gas)—

a in paragraph (a) (natural road fuel gas), for “£0.1660” substitute “ £0.1926 ”, and

b in paragraph (b) (other road fuel gas), for “£0.2077” substitute “ £0.2482 ”.

6 In section 11(1) (rebate on heavy oil)—

a in paragraph (a) (fuel oil), for “£0.0966” substitute “ £0.1 ”, and

b in paragraph (b) (gas oil), for “£0.1007” substitute “ £0.1042 ”.

7 In section 14(1) (rebate on light oil for use as furnace fuel), for “£0.0966” substitute “ £0.1 ”.

8 In section 14A(2) (rebate on certain biodiesel), for “£0.1007” substitute “ £0.1042 ”.

9 The amendments made by subsection (2)(b) and (c) are treated as having come into force on 1 May 2009.

10 The other amendments made by this section are treated as having come into force on 1 April 2009.

16 Rates and rebates from September 2009¶

1 HODA 1979 is amended as follows.

2 In section 6(1A) (main rates)—

a in paragraph (a) (unleaded petrol), for “£0.5419” substitute “ £0.5619 ”,

b in paragraph (aa) (aviation gasoline), for “£0.3334” substitute “ £0.3457 ”,

c in paragraph (b) (light oil other than unleaded petrol or aviation gasoline), for “£0.6391” substitute “ £0.6591 ”, and

d in paragraph (c) (heavy oil), for “£0.5419” substitute “ £0.5619 ”.

3 In section 6AA(3) (rate of duty on biodiesel), for “£0.3419” substitute “ £0.3619 ”.

4 In section 6AD(3) (rate of duty on bioethanol), for “£0.3419” substitute “ £0.3619 ”.

5 In section 8(3) (road fuel gas)—

a in paragraph (a) (natural road fuel gas), for “£0.1926” substitute “ £0.2216 ”, and

b in paragraph (b) (other road fuel gas), for “£0.2482” substitute “ £0.2767 ”.

6 In section 11(1) (rebate on heavy oil)—

a in paragraph (a) (fuel oil), for “£0.1” substitute “ £0.1037 ”, and

b in paragraph (b) (gas oil), for “£0.1042” substitute “ £0.1080 ”.

7 In section 14(1) (rebate on light oil for use as furnace fuel), for “£0.1” substitute “ £0.1037 ”.

8 In section 14A(2) (rebate on certain biodiesel), for “£0.1042” substitute “ £0.1080 ”.

9 The amendments made by this section come into force on 1 September 2009.

Other environmental taxes and duties¶

17 Rates of air passenger duty¶

1 In section 30 of FA 1994 (air passenger duty: rates), for subsections (1) to (4) substitute—

1 Air passenger duty is chargeable on the carriage of each chargeable passenger at the rate determined as follows.

2 If the passenger's journey ends at a place in the United Kingdom or a territory specified in Part 1 of Schedule 5A—

a if the passenger's agreement for carriage provides for standard class travel in relation to every flight on the passenger's journey, the rate is £11, and

b in any other case, the rate is £22.

3 If the passenger's journey ends at a place in a territory specified in Part 2 of Schedule 5A—

a if the passenger's agreement for carriage provides for standard class travel in relation to every flight on the passenger's journey, the rate is £45, and

b in any other case, the rate is £90.

4 If the passenger's journey ends at a place in a territory specified in Part 3 of Schedule 5A—

a if the passenger's agreement for carriage provides for standard class travel in relation to every flight on the passenger's journey, the rate is £50, and

b in any other case, the rate is £100.

4A If the passenger's journey ends at any other place—

a if the passenger's agreement for carriage provides for standard class travel in relation to every flight on the passenger's journey, the rate is £55, and

b in any other case, the rate is £110.

2 Schedule 5 contains further provision about air passenger duty.

3 The amendment made by subsection (1) has effect in relation to the carriage of passengers beginning on or after 1 November 2009.

18 Standard rate of landfill tax¶

1 In section 42(1)(a) and (2) of FA 1996 (amount of landfill tax), for “£40” substitute “ £48 ”.

2 The amendments made by subsection (1) have effect in relation to disposals made (or treated as made) on or after 1 April 2010.

Gambling duties¶

19 Rates of gaming duty¶

1 In section 11(2) of FA 1997 (rates of gaming duty), for the table substitute—

2 The amendment made by subsection (1) has effect in relation to accounting periods beginning on or after 1 April 2009.

^F41420 Bingo duty¶

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21 Amounts of duty on amusement machine licences¶

1 In section 23(2) of BGDA 1981 (amount of duty payable on amusement machine licence), for the table substitute—

Table

Months for which licence granted	Category A	Category B1	Category B2	Category B3	Category B4	Category C
	£	£	£	£	£	£
1	500	255	200	200	180	80
2	985	490	385	385	350	45
3	1475	735	585	585	530	220
4	1965	985	775	775	705	290
5	2465	1230	970	970	875	365
6	2955	1475	1160	1160	1050	435
7	3445	1720	1355	1355	1225	505
8	3935	1965	1550	1550	1405	580
9	4430	2215	1745	1745	1580	655
10	4920	2465	1935	1935	1755	725
11	5410	2710	2130	2130	1930	795
12	5625	2815	2215	2215	2010	830.

2 The amendment made by subsection (1) has effect in relation to cases where the application for the amusement machine licence is received by the Commissioners for Her Majesty's Revenue and Customs after 4 pm on 22 April 2009.

22 Provisions affecting amount of amusement machine licence duty¶

1 BGDA 1981 is amended as follows.

2 Section 21 (gaming machine licences) is amended as follows.

3 Subsection (5) (excepted machines) is amended as follows.

4 In paragraph (c) (machines in case of which cost of single game does not exceed 10p and maximum value of prize for winning single game does not exceed £5)—

a in sub-paragraph (i), omit the “and” at the end,

b in sub-paragraph (ii), for “£5” substitute “ £15 ”, and

c after that sub-paragraph insert—

5 After that paragraph insert—

6 After that subsection insert—

7 In section 22(2) (machine in respect of which benefits for winning single game do not exceed £8 to be “small-prize machine”), for “£8” substitute “ £10 ”.

8 Section 23 (amount of duty) is amended as follows.

9 In subsection (3) (categories of machines), in the definition of Category C gaming machine, in paragraph (ii)—

a for “50p” substitute “ £1 ”, and

b for “£35” substitute “ £70 ”.

10 Omit subsection (5) (which is superseded by the amendment made by subsection (6)).

11 In consequence of the amendments made by the preceding provisions of this section, omit—

a in FA 2000, in Schedule 2, paragraph 3(1)(b), and

b in FA 2007, section 9(2) and (4).

12 The amendments made by this section are treated as having come into force on 1 June 2009.

Part 2 Income tax, corporation tax and capital gains tax¶

Support for business¶

23 Temporary extension of loss carry back provisions¶

Schedule 6 contains provision for a temporary extension of provisions allowing the carrying back of losses.

24 First-year capital allowances for expenditure in 2009-2010¶

1 Part 2 of CAA 2001 (plant and machinery allowances) has effect as if—

a in section 39 (first-year qualifying expenditure), a reference to this section were included in the list of provisions describing first-year qualifying expenditure, and

b in the Table in section 52(3) (amount of first-year allowances), there were inserted at the end—

2 Expenditure is first-year qualifying expenditure under this section if—

a it is incurred in 2009-2010,

b it is not within any of the general exclusions in section 46(2) of CAA 2001 (subject to subsection (4)),

c it is not special rate expenditure (as defined by section 104A of CAA 2001), and

d it is not first-year qualifying expenditure under a provision of Chapter 4 of Part 2 of CAA 2001.

3 For the purposes of this section expenditure is incurred in 2009-2010—

a in the case of expenditure incurred by a person within the charge to corporation tax, if it is incurred on or after 1 April 2009 but before 1 April 2010, and

b in the case of expenditure incurred by a person within the charge to income tax, if it is incurred on or after 6 April 2009 but before 6 April 2010.

4 General exclusion 6 in section 46(2) of CAA 2001 (expenditure on provision of plant or machinery for leasing) does not prevent expenditure being first-year qualifying expenditure under this section if the plant or machinery is provided for leasing under an excluded lease of background plant or machinery for a building (as defined by section 70R of that Act).

5 Expressions used in this section and in Part 2 of CAA 2001 have the same meaning here as in that Part of that Act, subject to subsection (6).

6 In determining whether expenditure is incurred in 2009-2010, any effect of section 12 of CAA 2001 (expenditure incurred before qualifying activity carried on) on the time at which it is to be treated as incurred is to be disregarded.

25 Agreements to forgo tax reliefs¶

1 If—

a a person (“P”) makes arrangements under which P agrees (in whatever terms) to forgo (to any extent) tax relief or a right to tax relief (whenever arising), and

b the Treasury designates the arrangements for the purposes of this section,

all relevant enactments are to have effect with such modifications as are necessary or expedient to give effect to the agreement.

2 The Treasury may not designate arrangements for the purposes of this section unless—

a the arrangements have been made with the Treasury, another government department or another public body, and

b under the arrangements, or under other arrangements, the Treasury, another government department or another public body—

i guarantees or assumes a loss or other liability of P or another person,

ii insures or indemnifies P or another person against a loss or other liability,

iii agrees to make a payment to P or another person in respect of a loss or other liability of any person (whether or not the person to whom the payment is to be made), or

iv gives other financial support or assistance to P or another person (whether in money or otherwise).

3 If P forgoes (to any extent) tax relief or a right to tax relief under subsection (1)—

a no tax relief is to be given to P or any other person by virtue of what is forgone or anything resulting from or representing what is forgone, and

b all relevant enactments are to have effect with such modifications as are necessary or expedient to give effect to paragraph (a).

4 In this section—

“relevant enactments” means—
1. the Corporation Tax Acts, and
2. the enactments relating to petroleum revenue tax;
“tax relief” means—
1. a reduction (by any means) of P's liability to any tax, or
2. a payable tax credit.

5 This section has effect in relation to arrangements made on or after 22 April 2009; but that does not prevent subsections (1) and (3) from having effect in relation to times before 22 April 2009.

26 Contaminated and derelict land¶

Schedule 7 contains provision extending Part 14 of CTA 2009 (remediation of contaminated land) to derelict land and other provision amending that Part of that Act.

27 Venture capital schemes¶

Schedule 8 contains provision about venture capital schemes.

^F2428 Group relief: preference shares¶

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^F15029 Sale of lessor companies etc: reforms¶

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30 Tax relief for business expenditure on cars and motor cycles¶

Schedule 11 contains provision about tax relief for business expenditure on cars and motor cycles.

31 Reallocation of chargeable gain or loss within a group¶

Schedule 12 contains provision about the reallocation of chargeable gains and allowable losses between companies that are members of a group.

32 Stock lending: chargeable gains in event of insolvency etc of borrower¶

Schedule 13 contains provision amending TCGA 1992 in respect of stock lending arrangements in the event of the insolvency of the borrower.

33 FSCS payments representing interest¶

1 Chapter 2 of Part 4 of ITTOIA 2005 (interest) is amended as follows.

2 In section 369(2) (list of provisions extending what is treated as interest for certain purposes), after “bonds),” insert— “ section 380A (FSCS payments representing interest), ”.

3 After section 380 insert—

380A FSCS payments representing interest

1 Any payment representing interest which is made under the FSCS is treated as interest for the purposes of this Act.

2 “Payment representing interest” means a payment calculated in the same way as interest which would have been paid to the recipient but for the circumstances giving rise to the making of payments under the FSCS.

3 Where a payment representing interest is made net of an amount equal to a sum representing income tax that would have been deducted on the payment of interest, the amount treated as interest by this section is the aggregate of the payment representing interest and that sum.

4 This section applies to payments made under the FSCS whether or not they are made (in whole or in part) on behalf of the Treasury or any other person.

5 In this section “the FSCS” means the Financial Services Compensation Scheme (established under Part 15 of the Financial Services and Markets Act 2000).

4 In ITA 2007, after section 979 insert—

979A FSCS payments representing interest

1 This section applies where a payment is made under the FSCS representing interest net of an amount equal to a sum representing income tax that would have been deducted on the payment of interest but for the circumstances giving rise to the making of payments under the FSCS.

2 A payment of the relevant gross amount is treated as having been made under the FSCS after there has been deducted from it a sum representing income tax of that amount.

3 That sum is accordingly taken into account under section 59B of TMA 1970 in determining the income tax payable by, or repayable to, the recipient.

4 “The relevant gross amount” means the aggregate of the amount of the payment representing interest which is made and that sum.

5 If the recipient requests it in writing, the scheme manager of the FSCS must provide the recipient with a statement showing—

a the relevant gross amount,

b the amount of the sum treated as deducted, and

c the amount of the payment representing interest.

6 The duty to comply with a request under subsection (5) is enforceable by the recipient.

7 In this section—

“the FSCS” means the Financial Services Compensation Scheme (established under Part 15 of the Financial Services and Markets Act 2000);
“payment representing interest” has the same meaning as in section 380A of ITTOIA 2005.

5 The amendments made by this section have effect in relation to payments made on or after 6 October 2008.

Foreign profits etc¶

34 Corporation tax treatment of company distributions received¶

Schedule 14 contains provision about the treatment for the purposes of corporation tax of dividends and other distributions.

^F20635 Tax treatment of financing costs and income¶

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36 Controlled foreign companies¶

Schedule 16 contains provision about controlled foreign companies.

37 International movement of capital¶

Schedule 17 contains provision—

a removing the existing requirements in relation to the international movement of capital in sections 765 to 767 of ICTA, and

b imposing new reporting requirements on certain bodies corporate in relation to the international movement of capital.

^F16238 Corporation tax: foreign currency accounting¶

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39 Certain distributions of offshore funds taxed as interest¶

1 Chapter 2 of Part 4 of ITTOIA 2005 (interest) is amended as follows.

2 In section 369(2) (list of provisions extending what is treated as interest for certain purposes), after the entry relating to section 376 insert— “ section 378A (offshore fund distributions), ”.

3 After section 378 insert—

378A Offshore fund distributions

1 This section applies where—

a a dividend is paid by an offshore fund, and

b the offshore fund fails to meet the qualifying investments test at any time in the relevant period.

2 The dividend is treated as interest for income tax purposes.

3 For the purposes of this section, an offshore fund fails to meet the qualifying investments test if the market value of the fund's qualifying investments exceeds 60% of the market value of all of the assets of the fund (excluding cash awaiting investment).

4 “The relevant period” means—

a the relevant period of account of the offshore fund, or

b if longer, the period of 12 months ending on the last day of that period.

5 “The relevant period of account” means—

a the last period of account ending before the dividend is paid, in a case in which the profits available for distribution at the end of that period (and not used since then by distribution or otherwise) equal or exceed the amount of the dividend (aggregated with any other distribution made by the offshore fund at the same time), and

b the period of account in which the dividend is paid, in any other case.

6 This section applies to a manufactured overseas dividend if, and only if, it is representative of a distribution to which this section would apply.

7 In this section—

“dividend” includes any distribution that (but for this section) would be treated as a dividend for income tax purposes;
“manufactured overseas dividend” has the same meaning as in Chapter 2 of Part 11 of ITA 2007 (manufactured payments);
“offshore fund” has the same meaning as in Chapter 5 of Part 17 of ICTA (see sections 756A to 756C of that Act);
“qualifying investments” has the meaning given in section 494 of CTA 2009.

4 Accordingly, in section 367 of ITTOIA 2005 (priority between Chapters within Part 4), in subsection (3)—

a in paragraph (a), after “dividends)” insert “ , 378A (offshore fund distributions) ”, and

b in paragraph (b), insert at the end “or Chapter 4 (or both)”.

5 The amendments made by this section have effect in relation to—

a distributions arising on or after 22 April 2009, and

b manufactured overseas dividends that are representative of a distribution arising on or after that date.

40 Income tax credits for foreign distributions¶

Schedule 19 contains provision about income tax credits for foreign distributions.

Loan relationships and derivatives¶

41 Loan relationships involving connected parties¶

Schedule 20 contains provision about loan relationships involving connected parties.

42 Release of trade etc debts¶

1 CTA 2009 is amended as follows.

2 In section 353 (introduction to Chapter 6 of Part 5)—

a omit subsection (3), and

b in subsection (6), after “loss”” insert “ and release debit ”.

3 In section 476(1) (definitions for purposes of Parts 5 and 6), after the definition of “profit sharing arrangements” insert—

4 Section 479 (relevant non-lending relationships not involving discounts) is amended as follows.

5 In subsection (2)—

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

b in paragraph (c), after “loss)” insert “ or release debit ”, and

c insert at the end

6 In subsection (3), for “(2)” substitute “ (2)(c) ”.

7 After that subsection insert—

8 Section 481 (application of Part 5 to relevant non-lending relationships) is amended as follows

9 In subsection (3)—

a in paragraph (d), after “loss” insert “ or release debit ” and for “impairment, and” substitute “ impairment or release, ”, and

b insert at the end

10 In subsection (4), for “(3)” substitute “ (3)(d) and (e) ”.

11 After that subsection insert—

12 The amendments made by this section are treated as having come into force on 22 April 2009.

43 Foreign exchange matching: anti-avoidance¶

Schedule 21 contains anti-avoidance provisions relating to exchange gains and losses arising from loan relationships and derivative contracts.

Collective investment¶

44 Tax treatment of participants in offshore funds¶

In Schedule 22—

^F106...
Part 2 contains provision about the treatment of participants in certain offshore funds under TCGA 1992.

45 Power to enable dividends of investment trusts to be taxed as interest¶

1 The Treasury may by regulations make provision for and in connection with—

a the designation by a company that is an investment trust or a prospective investment trust of dividends made by the company, and

b the treatment of a designated dividend for the purposes of the Tax Acts, in specified circumstances and in the case of specified persons—

i as a payment of yearly interest, or

ii as interest under a loan relationship.

2 Regulations under this section may, in particular, make provision—

a about the circumstances in which a dividend may, or may not, be designated,

b about limits on the amounts that may be designated or treated as a payment of yearly interest or as interest under a loan relationship,

^F198c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

d about the preparation of accounts and the keeping of records by investment trusts and prospective investment trusts, and

e about the provision by investment trusts and prospective investment trusts of information, whether to recipients of designated dividends or to other persons, including provision imposing a penalty not exceeding £3,000.

3 Regulations under this section may, in particular—

a make provision applying enactments and instruments (with or without modification),

b make different provision for different cases or different purposes, and

c make incidental, consequential, supplementary or transitional provision.

4 Regulations under this section are to be made by statutory instrument.

5 A statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of the House of Commons.

6 In this section—

“company” has the same meaning as in Chapter 4 of Part 24 of CTA 2010 (see section 1165(1) of that Act) (investment trusts);
“investment trust” means an investment trust within the meaning of section 1158 of CTA 2010;
“loan relationship” has the same meaning as in the Corporation Tax Acts (see section 302(1) and (2) of CTA 2009);
“prospective investment trust” means a company that—
1. intends to seek approval under section 1158 of CTA 2010 (meaning of “investment trust”), and
2. has a reasonable belief that such approval will be obtained;
“specified” means specified in regulations under this section.

Insurance etc¶

^F8846 Insurance companies¶

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

47 Equalisation reserves for Lloyd's corporate and partnership members¶

1 The Treasury may by regulations provide for section 444BA of ICTA (equalisation reserves) to have effect, in such cases and subject to such modifications as may be specified in the regulations, in relation to equivalent Lloyd's reserves as it has effect in relation to equalisation reserves maintained by virtue of equalisation reserves rules.

2 For this purpose a reserve is an equivalent Lloyd's reserve if it is maintained by a corporate or partnership member for purposes, or in a manner, such as to make it equivalent to an equalisation reserve maintained by virtue of equalisation reserves rules.

3 The regulations may include—

a provision having effect in relation to periods before they are made, and

b supplementary, incidental, consequential and transitional provision.

4 In this section—

“corporate member” means a body corporate which is a member of Lloyd's;
“equalisation reserves rules” has the same meaning as in section 444BA of ICTA (see subsection (11) of that section);
“member” means underwriting member;
“partnership member” means a limited partnership formed under the law of Scotland, or a limited liability partnership formed under the law of any part of the United Kingdom, which is a member of Lloyd's.

Simplification¶

48 Disguised interest¶

Schedule 24 contains provision about the corporation tax treatment of disguised interest.

49 Transfer of income streams¶

Schedule 25 contains provision about transfers of income streams.

50 SAYE schemes¶

1 Schedule 26 contains provision amending Chapter 4 of Part 6 of ITTOIA 2005 (SAYE interest).

2 The amendments made by that Schedule are treated as having come into force on 29 April 2009.

Residence and domicile¶

51 Remittance basis¶

Schedule 27 contains amendments about the remittance basis.

52 Exemption for certain non-domiciled persons¶

1 In Part 14 of ITA 2007 (income tax: miscellaneous rules), after Chapter 1 insert—

Chapter 1A Exemption for persons not domiciled in United Kingdom

828A Introduction

This Chapter provides for an exemption from liability to income tax for an individual for a tax year if—

a the individual is UK resident in the tax year but not domiciled in the United Kingdom in the tax year,

b section 809B does not apply to the individual for the tax year, and

c conditions A to F in section 828B are met.

828B Conditions to be met

1 Condition A is that in the tax year the individual has income from an employment the duties of which are performed wholly or partly in the United Kingdom.

2 Condition B is that, if the individual's income for the tax year consists of or includes relevant foreign earnings—

a the amount of the relevant foreign earnings does not exceed £10,000, and

b all of that amount is subject to a foreign tax.

3 Condition C is that, if the individual's income for the tax year consists of or includes income that is relevant foreign income by virtue of section 830(2)(e) of ITTOIA 2005—

a the amount of that income does not exceed £100, and

b all of that amount is subject to a foreign tax.

4 Condition D is that the individual has no other foreign income and gains for the tax year.

5 Condition E is that the individual would not for the tax year be liable to income tax at a rate other than the basic rate or the starting rate for savings if this Chapter did not apply to the individual for the tax year.

6 Condition F is that the individual does not make a return under section 8 of TMA 1970 for the tax year.

828C The exemption

1 The exemption is given by deducting the relevant amount from what would otherwise be the amount of the individual's liability to income tax for the tax year under section 23.

2 “The relevant amount” is so much of the amount of the individual's liability to income tax as is attributable to the individual's foreign income or gains for the tax year.

3 But if for the tax year the individual's total income is reduced by any deductions which fall to be made at Step 3 of the calculation in section 23 from the individual's foreign income or gains for the tax year, subsection (2) has effect as if the individual's foreign income or gains for the tax year were reduced by the amount of the deductions.

4 And if the individual is entitled under—

a section 788 of ICTA (double taxation arrangements: relief by agreement), or

b section 790(1) of that Act (relief for foreign tax where no double taxation arrangements),

to a tax reduction in respect of the individual's foreign income or gains for the tax year, what would otherwise be the relevant amount is reduced by the amount of that reduction.

828D Interpretation of Chapter

1 This section applies for the purposes of this Chapter.

2 “Employed” and “employment” have the same meaning as in the employment income Parts of ITEPA 2003: see Chapter 1 of Part 2 of that Act.

3 “Foreign income and gains”, in relation to an individual, means what would be the individual's foreign income and gains for the purposes of Chapter A1 of this Part if section 809B applied to the individual (see section 809Z7(2)).

4 “Foreign tax” means any tax chargeable under the law of a territory outside the United Kingdom.

5 “Relevant foreign earnings”, in relation to an individual, means what would be the individual's relevant foreign earnings for the purposes of Chapter A1 of this Part if section 809B applied to the individual (see section 809Z7(3)).

2 In section 2(14) of ITA 2007 (overview), after paragraph (a) insert—

3 The amendments made by this section have effect for the tax year 2008-09 and subsequent tax years.

Employment income¶

53 Taxable benefits: cars¶

Schedule 28 contains provision about taxable benefits arising from cars made available to employees etc by reason of employment.

54 Taxable benefit of cars: price of automatic car for disabled employee¶

1 Chapter 6 of Part 3 of ITEPA 2003 (taxable benefits: cars etc) is amended as follows.

2 In section 116(3) (meaning of when car is available), after “to section” insert “ 124A or ”.

3 In section 121(1) (method of calculating cash equivalent of benefit of car), in step 1, for “124” substitute “ 124A ”.

4 In section 122 (price of car), the existing provision becomes subsection (1) of that section and after that subsection insert—

5 After section 124 insert—

124A Automatic car for a disabled employee

1 This section applies where—

a a car has automatic transmission (“the automatic car”),

b at any time in the year when the automatic car is available to the employee (“E”), E holds a disabled person's badge, and

c by reason of E's disability, E must, in the event of wanting to drive a car, drive a car which has automatic transmission.

2 If, under section 122 to 124, the price of the automatic car is more than it would have been if the automatic car had been an equivalent manual car, the price of the automatic car is to be the price of an equivalent manual car.

3 In subsection (2) “an equivalent manual car” means a car which—

a is first registered at or about the same time as the automatic car, and

b does not have automatic transmission, but otherwise is the closest variant available of the make and model of the automatic car.

4 For the purposes of this section a car has automatic transmission if—

a the driver of the car is not provided with any means by which the driver may vary the gear ratio between the engine and the road wheels independently of the accelerator and the brakes, or

b the driver is provided with such means, but they do not include—

i a clutch pedal, or

ii a lever which the driver may operate manually.

5 For the purposes of this section a car is available to an employee at a particular time if it is then made available, by reason of the employment and without any transfer of the property in it, to the employee.

6 The amendments made by this section have effect for the tax year 2009-10 and subsequent tax years.

55 Exemption of benefit consisting of health-screening or medical check-up¶

1 Part 4 of ITEPA 2003 (employment income: exemptions) is amended as follows.

2 In section 266(3) (exemption of non-cash vouchers for exempt benefits), omit the “or” at the end of paragraph (e) and insert at the end

3 In section 267(2) (exemption of credit-tokens used for exempt benefits), omit the “and” at the end of paragraph (g) and insert at the end

4 After section 320A insert—

Health-screening and medical check-ups

320B Health-screening and medical check-ups

1 No liability to income tax arises in respect of the provision for an employee, on behalf of an employer, of a health-screening assessment or a medical check-up.

2 Subsection (1) does not apply—

a to more than one health-screening assessment provided in a tax year by any one employer or by any of a number of persons who are employers of the employee at the same time, or

b to more than one medical check-up so provided.

3 In this section—

“health-screening assessment” means an assessment to identify employees who might be at particular risk of ill-health, and
“medical check-up” means a physical examination of the employee by a health professional for (and only for) determining the employee's state of health.

5 The amendments made by this section have effect for the tax year 2009-10 and subsequent tax years.

56 MEPs' pay, allowances and pensions under European Parliament Statute¶

1 Part 2 of TIOPA 2010 (double taxation relief) has effect as if tax for the benefit of the European Union payable in respect of any income under—

a Articles 9.1 and 10 (salaries),

b Article 13 (transitional allowances), or

c Article 14, 15 or 17 (pensions for old-age, incapacity and survivors),

of the Statute for Members of the European Parliament (2005/684/EC, Euratom) were payable under the law of a territory outside the United Kingdom.

2 In section 291(2)(c) of ITEPA 2003 (termination payments under section 3 of European Parliament (Pay and Pensions) Act 1979), insert at the end “ or under Article 13 of the Statute for Members of the European Parliament (transitional allowances), ”.

3 This section has effect for the tax year 2009-10 and subsequent tax years.

Double taxation¶

^F1457 Tax underlying dividends¶

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F17258 Manufactured overseas dividends¶

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F22759 Payments by reference to foreign tax etc¶

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F26460 Anti-fragmentation¶

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Miscellaneous anti-avoidance provisions¶

61 Financial arrangements avoidance¶

Schedule 30 contains provision to counter avoidance involving financial arrangements.

^F12562 Transfers of trade to obtain terminal loss relief¶

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F20463 Sale of lessor companies etc: anti-avoidance¶

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

64 Leases of plant or machinery¶

Schedule 32 contains provision about leases of plant or machinery.

65 Long funding leases of films¶

Schedule 33 contains provision about long funding leases of films.

^F21466 Real Estate Investment Trusts¶

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

67 Deductions for employee liabilities¶

1 ITEPA 2003 is amended as follows.

2 In section 346 (deduction for employee liabilities), after subsection (2) insert—

3 After section 556 insert—

4 The amendments made by this section have effect in relation to payments made on or after 12 January 2009 (irrespective of when the arrangements are made).

68 Employment loss relief¶

1 In section 128 of ITA 2007 (employment loss relief against general income), after subsection (5) insert—

2 The amendment made by subsection (1)—

a has effect in relation to a loss made in the tax year 2009-10 or a subsequent tax year, and

b has effect in relation to a loss made in the tax year 2008-09 if or to the extent that it is occasioned by an act or omission occurring on or after 12 January 2009.

3 Where a person has made a claim under section 128 of ITA 2007 during the relevant period, no penalty is payable by the person on the ground that any return, statement or declaration made in connection with the claim contained an inaccuracy if it would not have done so but for the amendment made by subsection (1).For this purpose “the relevant period” is the period—

a beginning with 12 January 2009, and

b ending with 1 April 2009.

^F1074 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F27669 No loss relief for losses from contracts for life insurance etc¶

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

70 Intangible fixed assets and goodwill¶

1 Part 8 of CTA 2009 (intangible fixed assets) is amended as follows.

2 In section 712(1) (meaning of “intangible asset”), insert at the end “ (and includes an internally-generated intangible asset) ”.

3 In section 715 (application of Part 8 to goodwill)—

a in subsection (3), insert at the end “(and includes internally-generated goodwill)”, and

b insert at the end—

4 In section 883 (assets treated as created or acquired when expenditure incurred)—

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

b in subsection (2)(a), omit “internally-generated”,

c in subsection (2)(b), for “certain other internally-generated assets” substitute “ assets representing non-qualifying expenditure ”, and

d in subsection (3), omit “to which this section applies”.

5 In section 884 (internally-generated goodwill: time of creation)—

a omit “internally-generated”,

b for the words from “before” to the end substitute

, and

c in the heading, omit “Internally-generated”.

6 In section 885 (certain other internally-generated assets: time of creation)—

a in subsection (1)(b), omit “internally-generated”,

b in subsection (7), for the words from “before” to the end substitute

, and

c in the heading, for “Certain other internally-generated assets” substitute “ Assets representing non-qualifying expenditure ”.

7 The amendments made by this section have effect in relation to accounting periods beginning on or after 22 April 2009 (and, in relation to those accounting periods, are to be treated as always having had effect).

8 For the purposes of subsection (7) an accounting period beginning before, and ending on or after, 22 April 2009 is to be treated as if so much of the period as falls before that date, and so much of the period as falls on or after that date, were separate accounting periods.

71 Taxable benefit of living accommodation: lease premiums¶

1 Chapter 5 of Part 3 of ITEPA 2003 (taxable benefits: living accommodation) is amended as follows.

2 In section 105 (cash equivalent: cost of accommodation not over £75,000)—

a in subsection (3), after “is” insert “ (subject to subsections (4) and (4A)) ”, and

b for subsection (4) substitute—

4 Subsection (4A) applies where—

a a rental amount is payable by the person (“P”) at whose cost the accommodation is provided in respect of the whole or part of the taxable period (“the relevant period”), and

b the amount so payable is payable at an annual rate greater than the annual value.

4A Where this subsection applies—

a subsection (3) does not apply to the relevant period, and

b instead the “rental value of the accommodation” for the relevant period is the rental amount payable by P in respect of the relevant period.

4B A reference in subsection (4) or (4A) to a rental amount payable by P in respect of the relevant period is to the sum of—

a any rent for the period payable by P, and

b any amount attributed to the period in respect of a lease premium (see sections 105A and 105B).

3 After that section insert—

105A Lease premiums

1 For the purposes of section 105(4B)(b) an amount is attributed to the relevant period “in respect of a lease premium” if—

a the property consists of premises, or a part of premises, that are subject to a lease,

b the premises are not mainly used by P for a purpose other than the provision of living accommodation to which this Chapter applies,

c the lease is for a term of 10 years or less, and

d the net amount payable by P in relation to the lease by way of lease premium is greater than zero.

2 The amount so attributed is—

\frac{A}{C} \times C

where—

A is the relevant period (in days),

B is the term of the lease (in days), and

C is the net amount payable by P in relation to the lease by way of lease premium.

3 For provision about the application of this section in relation to certain leases with break clauses, see section 105B.

4 For the purposes of this section the net amount payable by P in relation to a lease by way of lease premium is—

a the total amount (if any) that has been paid, or is or will become payable, by P in relation to the lease by way of lease premium, less

b any amount within paragraph (a) that has been repaid or is or will become repayable.

5 In this section and section 105B “lease premium” means any premium payable—

a under a lease, or

b otherwise under the terms on which a lease is granted.

6 In the application of this section to Scotland “premium” includes a grassum.

105B Lease premiums in the case of leases with break clauses

1 This section applies to a lease (“the original lease”) that contains one or more relevant break clauses.

2 For the purposes of this section—

a “break clause” means a provision of a lease that gives a person a right to terminate it so that its term is shorter than it otherwise would be, and

b a break clause contained in the original lease is “relevant” if the right to terminate the lease that it confers is capable of being exercised in such a way that the term of the original lease is 10 years or less.

3 For the purposes of section 105A—

a the term of the original lease, and

b the net amount payable by P in relation to the lease by way of lease premium,

are to be determined on the assumption that any relevant break clause is exercised in such a way that the term of the lease is as short as possible.

4 If a relevant break clause is not in fact exercised in such a way that the term of the original lease is as short as possible, the parties to the lease are treated for the purposes of section 105A as if they were parties to another lease (a “notional lease”) the term of which—

a begins immediately after the time at which the term of the original lease would have ended, if that break clause had been so exercised, and

b ends at the time mentioned in subsection (5).

5 The term of a notional lease ends—

a at the time the term of the original lease would end, on the assumption that any relevant break clause that is exercisable only after the beginning of the term of the notional lease is exercised in such a way that the term of the original lease is as short as possible, or

b if earlier, the tenth anniversary of the beginning of the term of the original lease.

6 For the purposes of section 105A the net amount payable by P in relation to a notional lease by way of lease premium is, in the case of a notional lease the term of which ends under paragraph (a) of subsection (5)—

a the net amount that would be payable by P in relation to the original lease by way of lease premium on the assumption mentioned in that paragraph, less

b any part of that amount that has already been attributed to a period in respect of a lease premium under section 105(4B)(b).

7 For the purposes of section 105A the net amount payable by P in relation to a notional lease by way of lease premium is, in the case of a notional lease the term of which ends under paragraph (b) of subsection (5), the relevant proportion of—

a the net amount that would be payable by P in relation to the original lease by way of lease premium, on the assumption that no break clause is exercised, less

b any part of that amount that has already been attributed to a period in respect of a lease premium under section 105(4B)(b).

8 In subsection (7) “the relevant proportion” means—

\frac{D}{E}

where—

D is the term of the notional lease (in days), and

E is the sum of—

(a) the term of the notional lease (in days), and
(b) the number of days by which the term of the original lease would exceed 10 years, on the assumption that no break clause is exercised.

4 The amendments made by this section have effect in relation to—

a any lease entered into on or after 22 April 2009, and

b subject to subsection (5), any lease entered into before that date the term of which is extended on or after that date.

5 In relation to a lease of the kind mentioned in subsection (4)(b) the amendments made by this section have effect—

a as if the additional term of the lease created by the extension were the whole of the term of the lease, and

b ignoring any lease premium payable in respect of the unextended term of the lease.

6 In this section “lease premium” has the same meaning as in sections 105A and 105B of ITEPA 2003.

Part 3 Pensions¶

72 Special annual allowance charge etc¶

Schedule 35 contains provision for and in connection with a special annual allowance charge in respect of pension schemes.

73 Financial assistance scheme¶

1 The Treasury may by regulations make provision for and in connection with—

a the application of the relevant taxes in relation to the financial assistance scheme, and

b the application of the relevant taxes in relation to any person in connection with the financial assistance scheme.

2 “The financial assistance scheme” means the scheme provided for by regulations under section 286 of the Pensions Act 2004.

3 The provision that may be made by regulations under this section includes provision imposing any of the relevant taxes (as well as provisions for exemptions or reliefs).

4 The relevant taxes are—

a income tax,

b capital gains tax,

c corporation tax,

d inheritance tax,

e value added tax,

f stamp duty land tax,

g stamp duty, and

h stamp duty reserve tax.

5 Regulations under this section may, in particular, include provision for and in connection with the taxation of payments made by virtue of regulations under section 286 of the Pensions Act 2004.

6 The exemptions and reliefs that may be given by regulations under this section include, in particular, exemption from charges to income tax, corporation tax or capital gains tax in respect of—

a income arising from any assets held or managed by, or receipts of, the person who manages the financial assistance scheme (“the scheme manager”) and any chargeable gains arising from the disposal of any such assets, and

b the receipt of fraud compensation payments (within the meaning of Part 2 of the Pensions Act 2004: see section 182(1) of that Act).

7 Regulations under this section may include provision having effect in relation to any time before they are made if the provision does not increase any person's liability to tax.

8 The provision made by regulations under this section may be framed as provision applying with appropriate modifications provisions having effect in relation to registered pension schemes; and for this purpose “registered pension scheme” means a pension scheme within the meaning of Part 4 of FA 2004 which is registered under Chapter 2 of that Part of that Act.

9 Regulations under this section may include—

a provision amending any enactment or instrument, and

b consequential, supplementary and transitional provision.

10 Regulations under this section are to be made by statutory instrument.

11 A statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of the House of Commons.

74 FSCS intervention in relation to insurance in connection with pensions¶

1 The Treasury may by regulations make provision for and in connection with the application of the relevant taxes in relation to circumstances in which there is relevant intervention under the FSCS.

2 “Relevant intervention” means—

a anything done under, or while seeking to make, arrangements for securing continuity of insurance in connection with registered pension schemes,

b anything done as part of measures for safeguarding policyholders in connection with registered pension schemes, or

c the payment of compensation in connection with registered pension schemes.

3 “The FSCS” means the Financial Services Compensation Scheme (established under Part 15 of FISMA 2000).

4 The provision that may be made by regulations under this section includes provision imposing any of the relevant taxes (as well as provisions for exemptions or reliefs).

5 The relevant taxes are—

a income tax,

b capital gains tax,

c corporation tax,

d inheritance tax,

e stamp duty land tax,

f stamp duty, and

g stamp duty reserve tax.

6 Regulations under this section may include provision having effect in relation to any time before they are made if the provision does not increase any person's liability to tax.

7 The provision made by regulations under this section may be framed as provision modifying, or applying with appropriate modifications, provisions having effect in relation to registered pension schemes.

8 Regulations under this section may include—

a provision amending any enactment or instrument, and

b consequential, supplementary and transitional provision.

9 Regulations under this section are to be made by statutory instrument.

10 A statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of the House of Commons.

11 In this section “registered pension scheme” means a pension scheme within the meaning of Part 4 of FA 2004 which is registered under Chapter 2 of that Part of that Act.

75 Power to make retrospective non-charging provision¶

1 In section 282 of FA 2004 (orders and regulations under Part 4), insert at the beginning—

2 In consequence of the amendment made by subsection (1), omit the following provisions of Part 4 of FA 2004—

a section 164(2)(d),

b section 281(4),

c section 283(3C),

d in Schedule 28, paragraphs 3(2CA) and 17(4A), and

e in Schedule 29A, paragraph 9(2).

3 In consequence of subsection (2), omit—

a in FA 2006, in Schedule 23, paragraph 34(4), and

b in FA 2008, in Schedule 29, paragraph 2.

Part 4 Value added tax¶

76 Place of supply of services etc¶

Schedule 36 contains provisions about the place of supply of services for the purposes of value added tax and related matters.

77 Repayment to those in business in other States¶

1 VATA 1994 is amended as follows.

2 In subsection (3) of section 39 (repayment of VAT to those in business overseas)—

a in the words before paragraph (a), after “such cases” insert “ and to such extent ”,

b in sub-paragraph (ii) of paragraph (b), after “Act” insert “ in respect of such period as may be prescribed ” and omit the “and” at the end,

c after that paragraph insert—

, and

d in paragraph (c), for “methods by which” substitute “ time by which and manner in which claims must be made, ”.

3 After that section insert—

4 In section 83(1) (appeals), after paragraph (h) insert—

^F878 Information relating to cross-border supplies of services to taxable recipients¶

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

79 Effect of VAT changes on arbitration of rent for agricultural holdings¶

1 In paragraph 4(2) of Schedule 2 to the Agricultural Holdings Act 1986 (frequency of arbitrations of rent: changes in rent to be disregarded), insert at the end—

2 Paragraph 4(2)(d) of Schedule 2 to that Act (as inserted by subsection (1)) includes an increase or reduction of rent arising from an option, revocation or change in rate that takes effect before the day on which this Act is passed.

3 The references in that provision and in subsection (2) to an option to tax, or to the exercise or revocation of such an option, under Schedule 10 to VATA 1994 include a reference to an election to waive exemption, or to the making or revocation of such an election, under that Schedule (as it had effect before 1 June 2008).

Part 5 Stamp taxes¶

Stamp duty land tax¶

80 Exercise of collective rights by tenants of flats¶

1 Section 74 of FA 2003 (collective enfranchisement by leaseholders) is amended as follows.

2 For subsection (1) substitute—

3 In subsection (2)—

a omit “In that case,”, and

b for “flats in respect of which the right of collective enfranchisement is being exercised” substitute “ qualifying flats contained in the premises ”.

4 For subsection (4) substitute—

5 For the heading substitute “Exercise of collective rights by tenants of flats”.

6 Accordingly, in section 55(5) of that Act (amount of tax chargeable), for “collective enfranchisement by leaseholders” substitute “ exercise of collective rights by tenants of flats ”.

7 The amendments made by this section have effect in relation to transactions with an effective date on or after 22 April 2009.

81 Registered providers of social housing¶

1 Part 4 of FA 2003 (stamp duty land tax) is amended as follows.

2 Section 71 (certain acquisitions by registered social landlord) is amended as follows.

3 Insert at the beginning—

4 In subsection (4), for “subsection (1)(c)” substitute “ this section ”.

5 Schedule 9 (right to buy etc) is amended as follows.

6 In paragraph 5 (shared ownership leases: “qualifying body” etc)—

a in sub-paragraph (2), insert at the end—

, and

b after that sub-paragraph insert—

7 In paragraph 7 (shared ownership trusts: introduction)—

a in sub-paragraph (3), omit “(within the meaning of paragraph 5(2))”, and

b insert at the end—

7 In Condition 2 “qualifying body” means—

a a qualifying body within the meaning of paragraph 5(2)(a) to (f), or

b a registered provider of social housing within paragraph 5(2)(g) (subject to sub-paragraph (8)).

8 A registered provider of social housing within paragraph 5(2)(g) (“R”) is only a qualifying body in relation to a shared ownership trust if the following has been or is being funded with the assistance of a grant or other financial assistance under section 19 of the Housing and Regeneration Act 2008—

a the purchase or construction of the trust property by R (or a person connected with R), or

b the adaptation of the trust property by R (or a person connected with R) for use as a dwelling.

9 Section 839 of the Taxes Act 1988 (connected persons) has effect for the purposes of sub-paragraph (8).

8 The amendments made by this section have effect in relation to transactions with an effective date on or after the day on which this Act is passed.

82 Rent to shared ownership¶

1 In Schedule 9 to FA 2003 (stamp duty land tax: right to buy etc), insert at the end—

13 Rent to shared ownership lease: charge to tax

1 The chargeable consideration for transactions forming part of a rent to shared ownership lease scheme is determined in accordance with this paragraph.

2 A “rent to shared ownership lease scheme” means a scheme or arrangement under which a qualifying body—

a grants an assured shorthold tenancy of a dwelling to a person (“the tenant”) or persons (“the tenants”), and

b subsequently grants a shared ownership lease of the dwelling or another dwelling to the tenant or one or more of the tenants.

3 The following transactions are to be treated as if they were not linked to each other—

a the grant of the assured shorthold tenancy,

b the grant of the shared ownership lease, and

c any other land transaction between the qualifying body and the tenant, or any of the tenants, entered into as part of the scheme.

4 For the purpose of determining the effective date of the grant of the shared ownership lease, the possession of the dwelling by the tenant or tenants pursuant to the assured shorthold tenancy is to be disregarded.

5 In this paragraph—

“assured shorthold tenancy” has the same meaning as in Part 1 of the Housing Act 1988;
“qualifying body” has the same meaning as in paragraph 5;
“shared ownership lease” has the same meaning as in paragraph 4A.

14 Rent to shared ownership trust: charge to tax

1 The chargeable consideration for transactions forming part of a rent to shared ownership trust scheme is determined in accordance with this paragraph.

2 A “rent to shared ownership trust scheme” means a scheme or arrangement under which—

a a qualifying body grants an assured shorthold tenancy of a dwelling to a person (“the tenant”) or persons (“the tenants”), and

b the tenant, or one or more of tenants, subsequently becomes the purchaser under a shared ownership trust of the dwelling, or another dwelling, under which the qualifying body is the social landlord.

3 The following transactions are to be treated as if they were not linked to each other—

a the grant of the assured shorthold tenancy,

b the declaration of the shared ownership trust, and

c any other land transaction between the qualifying body and the tenant, or any of the tenants, entered into as part of the scheme.

4 For the purpose of determining the effective date of the declaration of the shared ownership trust, the possession of the dwelling by the tenant or tenants pursuant to the assured shorthold tenancy is to be disregarded.

5 In this paragraph—

“assured shorthold tenancy” has the same meaning as in Part 1 of the Housing Act 1988;
“qualifying body” has the same meaning as in paragraph 5;
“social landlord” and “purchaser”, in relation to a shared ownership trust, have the same meaning as in paragraph 7.

2 The amendment made by subsection (1) has effect in relation to cases in which the effective date of the grant of the shared ownership lease or the declaration of the shared ownership trust is on or after 22 April 2009.

3 Paragraphs 13(4) and 14(4) of Schedule 9 to FA 2003 (inserted by this section) have effect for the purposes of subsection (2).

Stock lending arrangements¶

^C183 Stamp taxes in event of insolvency¶

1 Schedule 37 contains provision amending Part 3 (stamp duty) and Part 4 (stamp duty reserve tax) of FA 1986 in respect of repurchase and stock lending arrangements in the event of the insolvency of one of the parties.

2 The amendments made by that Schedule have effect where the insolvency in question occurs on or after 1 September 2008.

3 This section and that Schedule cease to have effect—

a in relation to the amendments made to Part 3 of FA 1986, when the repeal of sections 80 to 85 of that Act (by Part 6 of Schedule 19 to, and in accordance with sections 107 to 109 of, FA 1990) comes into force, and

b in relation to the amendment made to Part 4 of FA 1986, when the repeal of that Part (by Part 7 of Schedule 19 to, and in accordance with section 110 of, FA 1990) comes into force.

Part 6 Oil¶

84 Capital allowances for oil decommissioning expenditure¶

Schedule 38 contains provision about capital allowances for oil decommissioning expenditure.

85 Blended oil¶

Schedule 39 contains provision about the treatment of blended oil for the purposes of petroleum revenue tax.

86 Chargeable gains¶

Schedule 40 contains provision about chargeable gains in oil trades.

87 Oil assets put to other uses¶

Schedule 41 contains provision about oil production assets put to certain other uses.

88 Former licensees and former oil fields¶

Schedule 42 contains provision about the treatment of certain former licensees and former oil fields for the purposes of petroleum revenue tax.

89 Abolition of provisional expenditure allowance¶

Schedule 43 contains provision abolishing provisional expenditure allowance.

^F23290 Supplementary charge: reduction for certain new oil fields¶

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

91 Miscellaneous amendments¶

Schedule 45 contains miscellaneous amendments relating to oil taxation.

Part 7 Administration¶

Standards and values¶

92 HMRC Charter¶

1 In CRCA 2005, after section 16 insert—

2 The duty imposed by section 16A(1) of CRCA 2005 must be complied with before the end of 2009.

93 Duties of senior accounting officers of qualifying companies¶

1 Schedule 46 contains provision about the duties of senior accounting officers of qualifying companies.

2 That Schedule has effect in relation to financial years (within the meaning of the Companies Act 2006) beginning on or after the day on which this Act is passed.

^I350^C4594 Publishing details of deliberate tax defaulters¶

1 The Commissioners may publish information about any person if—

a in consequence of an investigation conducted by the Commissioners, one or more relevant tax penalties is found to have been incurred by the person, and

b the potential lost revenue in relation to the penalty (or the aggregate of the potential lost revenue in relation to each of the penalties) exceeds £25,000.

2 A “relevant tax penalty” is—

a a penalty under paragraph 1 of Schedule 24 to FA 2007 (inaccuracy in taxpayer's document) in respect of a deliberate inaccuracy on the part of the person,

b a penalty under paragraph 1A of that Schedule (inaccuracy in taxpayer's document attributable to deliberate supply of false information or deliberate withholding of information by person),

c a penalty under paragraph 1 of Schedule 41 to FA 2008 (failure to notify) in respect of a deliberate failure on the part of the person, or

d a penalty under paragraph 2 (unauthorised VAT invoice), 3 (putting product to use attracting higher duty etc) or 4 (handling goods subject to unpaid excise duty) of that Schedule in respect of deliberate action by the person.

3 “Potential lost revenue”, in relation to a penalty, has the meaning given by—

a paragraphs 5 to 8 of Schedule 24 to FA 2007, or

b paragraphs 7 to 11 of Schedule 41 to FA 2008,

in relation to the inaccuracy, failure or action to which the penalty relates.

4 The information that may be published is—

a the person's name (including any trading name, previous name or pseudonym),

b the person's address (or registered office),

c the nature of any business carried on by the person,

d the amount of the penalty or penalties and the potential lost revenue in relation to the penalty (or the aggregate of the potential lost revenue in relation to each of the penalties),

e the periods or times to which the inaccuracy, failure or action giving rise to the penalty (or any of the penalties) relates, and

f any such other information as the Commissioners consider it appropriate to publish in order to make clear the person's identity.

4A Subsection (4B) applies where a person who is a body corporate or a partnership has incurred—

a a penalty under paragraph 1 of Schedule 24 to FA 2007 in respect of a deliberate inaccuracy which involves an offshore matter or an offshore transfer (within the meaning of paragraph 4A of that Schedule), or

b a penalty under paragraph 1 of Schedule 41 to FA 2008 in respect of a deliberate failure which involves an offshore matter or an offshore transfer (within the meaning of paragraph 6A of that Schedule).

4B The Commissioners may publish the information mentioned in subsection (4) in respect of any individual who—

a controls the body corporate or the partnership (within the meaning of section 1124 of CTA 2010), and

b has obtained a tax advantage as a result of the inaccuracy or failure.

4C Subsection (4D) applies where one or more trustees of a settlement have incurred—

4D The Commissioners may publish the information mentioned in subsection (4) in respect of any trustee who is an individual and who has obtained a tax advantage as a result of the inaccuracy or failure.

^C185 The information may be published in any manner that the Commissioners consider appropriate.

^C186 Before publishing any information about a person under subsection (1), the Commissioners must—

a inform the person that they are considering doing so, and

b afford the person reasonable opportunity to make representations about whether it should be published.

6A Before publishing any information about an individual under subsection (4B) or (4D), the Commissioners—

a must inform the individual that they are considering doing so, and

b afford the individual reasonable opportunity to make representations about whether it should be published.

^C187 No information may be published before the day when the penalty becomes final (or the latest day when any of the penalties becomes final).

^C188 No information may be published for the first time after the end of the period of one year beginning with that day (or that latest day).

^C189 No information may be published (or continue to be published) after the end of the period of one year beginning with the day on which it is first published.

10 No information may be published if the amount of the penalty is reduced under—

a paragraph 10 of Schedule 24 to FA 2007, ^F4...

aa paragraph 10A of that Schedule to the full extent permitted following an unprompted disclosure,

b paragraph 13 of Schedule 41 to FA 2008, or

c paragraph 13A of that Schedule to the full extent permitted following an unprompted disclosure.

(reductions for disclosure) to the full extent permitted.

11 For the purposes of this section a penalty becomes final—

a if it has been assessed, when the time for any appeal or further appeal relating to it expires or, if later, any appeal or final appeal relating to it is finally determined, or

b if a contract is made between the Commissioners and the person under which the Commissioners undertake not to assess the penalty or (if it has been assessed) not to take proceedings to recover it, at the time when the contract is made.

12 The Treasury may by order vary the amount for the time being specified in subsection (1).

13 This section comes into force on a day appointed by order made by the Treasury.

14 Orders under this section are to be made by statutory instrument.

15 A statutory instrument containing an order under subsection (12) is subject to annulment in pursuance of a resolution of the House of Commons.

16 In this section—

“the Commissioners” means the Commissioners for Her Majesty's Revenue and Customs;
“tax advantage” has the meaning given by section 208 of FA 2013.

Information etc¶

95 Amendment of information and inspection powers¶

1 Schedule 47 contains amendments of Schedule 36 to FA 2008 (information and inspection powers).

2 The Treasury may by order make any incidental, supplemental, consequential, transitional or transitory provision or saving which appears appropriate in consequence of, or otherwise in connection with, Schedule 36 to FA 2008 or Schedule 47.

3 An order under this section may—

a make different provision for different purposes, and

b make provision amending, repealing or revoking an enactment or instrument (whenever passed or made).

4 An order under this section is to be made by statutory instrument.

5 A statutory instrument containing an order under this section is subject to annulment in pursuance of a resolution of the House of Commons.

96 Extension of information and inspection powers to further taxes¶

^I1781 In paragraph 63(1) of Schedule 36 to FA 2008 (information and inspection powers: meaning of “tax”), for paragraph (e) (and the “and” before it) substitute—

2 Schedule 48 contains further amendments of that Schedule.

3 The amendments made by this section and Schedule 48 come into force on such day as the Treasury may by order appoint.

4 An order under subsection (3) may—

a appoint different days for different purposes, and

b contain transitional provision and savings.

5 The Treasury may by order make any incidental, supplemental, consequential, transitional or transitory provision or saving which appears appropriate in consequence of, or otherwise in connection with, this section and Schedule 48.

6 An order under subsection (5) may—

a make different provision for different purposes, and

b make provision amending, repealing or revoking an enactment or instrument (whenever passed or made).

7 An order under this section is to be made by statutory instrument.

8 A statutory instrument containing an order under subsection (5) is subject to annulment in pursuance of a resolution of the House of Commons.

97 Powers to obtain contact details for debtors¶

Schedule 49 contains provision about the powers of officers of Revenue and Customs to obtain contact details of debtors.

98 Record-keeping¶

1 Schedule 50 contains provision about obligations to keep records.

2 The amendments made by that Schedule come into force on such day as the Treasury may by order made by statutory instrument appoint.

Assessments, claims etc¶

99 Time limits for assessments, claims etc¶

1 Schedule 51 contains provision about time limits for assessments, claims etc.

2 The amendments made by that Schedule come into force on such day as the Treasury may by order made by statutory instrument appoint.

3 An order under subsection (2)—

a may make different provision for different purposes, and

b may include transitional provision and savings.

100 Recovery of overpaid tax etc¶

1 Schedule 52 contains provision for and in connection with the recovery of overpaid income tax, capital gains tax and corporation tax.

2 The amendments made by that Schedule have effect in relation to claims made on or after 1 April 2010.

3 The Treasury may by order make any incidental, supplemental, consequential, transitional or transitory provision or saving which appears appropriate in consequence of, or otherwise in connection with, that Schedule.

4 An order under this section may—

a make different provision for different purposes, and

b make provision modifying an enactment or instrument (whenever passed or made).

5 “Modifying” includes amending, repealing or revoking.

6 An order under this section is to be made by statutory instrument.

7 A statutory instrument containing an order under this section is subject to annulment in pursuance of a resolution of the House of Commons.

Interest¶

^I66^I295^I257^C40^C21^I196^I43^C82^I206^I163^I170^I400^C30^C85^I463^C74^C44^I256^C56^I164^I62^I382^I291^I121^I232^I254^I48^I106^C95^C7^I113^I353^C93^C104^I476^C108^C107^C106101 Late payment interest on sums due to HMRC¶

1 This section applies to any amount that is payable by a person to HMRC under or by virtue of an enactment.

2 But this section does not apply to—

a an amount of corporation tax,

b an amount of petroleum revenue tax, or

c an amount of any description specified in an order made by the Treasury.

3 An amount to which this section applies carries interest at the late payment interest rate from the late payment interest start date until the date of payment.

^C55^C76^C15^C504 The late payment interest start date in respect of any amount is the date on which that amount becomes due and payable.

5 In Schedule 53—

a Part 1 makes special provision as to the amount on which late payment interest is calculated,

b Part 2 makes special provision as to the late payment interest start date,

c Part 3 makes special provision as to the date to which late payment interest runs, and

d Part 4 makes provision about the effect that the giving of a relief has on late payment interest.

6 Subsection (3) applies even if the late payment interest start date is a non-business day within the meaning of section 92 of the Bills of Exchange Act 1882.

7 Late payment interest is to be paid without any deduction of income tax.

8 Late payment interest is not payable on late payment interest.

9 For the purposes of this section any reference to the payment of an amount to HMRC includes a reference to its being set off against an amount payable by HMRC (and, accordingly, the reference to the date on which an amount is paid includes a reference to the date from which the set-off takes effect).

^F5710 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F15211 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^I33^I176^I351^C32^I148^I332^C89^I9^I23^I275^C79^C36^I455^C78^C17^I13^I56^I329^I282^I294^I287^I255^I41^I47^C81^I268^C43^I250^C61^I410102 Repayment interest on sums to be paid by HMRC¶

1 This section applies to—

a any amount that is payable by HMRC to any person under or by virtue of an enactment, and

b a relevant amount paid by a person to HMRC that is repaid by HMRC to that person or to another person.

2 But this section does not apply to—

a an amount constituting a repayment of corporation tax,

b an amount constituting a repayment of petroleum revenue tax, or

^I228c an amount of any description specified in an order made by the Treasury.

3 An amount to which this section applies carries interest at the repayment interest rate from the repayment interest start date until the date on which the payment or repayment is made.

4 In Schedule 54—

a Parts 1 and 2 define the repayment interest start date, ^F17...

aa Part 2A makes special provision as to the period for which an amount of VAT credit carries interest, and

b Part 3 makes supplementary provision.

5 Subsection (3) applies even if the repayment interest start date is a non-business day within the meaning of section 92 of the Bills of Exchange Act 1882.

6 Repayment interest is not payable on an amount payable in consequence of an order or judgment of a court having power to allow interest on the amount.

7 Repayment interest is not payable on repayment interest.

8 For the purposes of this section—

a “relevant amount” means any sum that was paid in connection with any liability (including any purported or anticipated liability) to make a payment to HMRC under or by virtue of an enactment, and

b any reference to the payment or repayment of an amount by HMRC includes a reference to its being set off against an amount owed to HMRC (and, accordingly, the reference to the date on which an amount is paid or repaid by HMRC includes a reference to the date from which the set-off takes effect).

^I314^I152^I199^I352^I181^C47^C23^C64^C48^C91^C60^C39^C66^C72^C16^C52^I156^I42^C28^C103103 Rates of interest¶

1 The late payment interest rate is the rate provided for in regulations made by the Treasury under this subsection.

2 The repayment interest rate is the rate provided for in regulations made by the Treasury under this subsection.

3 Regulations under subsection (1) or (2)—

a may make different provision for different purposes,

b may either themselves specify a rate of interest or make provision for such a rate to be determined (and to change from time to time) by reference to such rate, or the average of such rates, as may be referred to in the regulations,

c may provide for rates to be reduced below, or increased above, what they otherwise would be by specified amounts or by reference to specified formulae,

d may provide for rates arrived at by reference to averages to be rounded up or down,

e may provide for circumstances in which alteration of a rate of interest is or is not to be take place, and

f may provide that alterations of rates are to have effect for periods beginning on or after a day determined in accordance with the regulations in relation to interest running from before that day as well as from or from after that day.

103A Further provision as to late payment interest and repayment interest¶

Schedule 54A makes special provision as to certain amounts of late payment interest and repayment interest.

104 Supplementary¶

1 In sections 101 to 103A (and Schedules 53 to 54A) —

“HMRC” means Her Majesty's Revenue and Customs;
“late payment interest” means interest payable under section 101;
“repayment interest” means interest payable under section 102;
“revenue” has the meaning given in section 5(4) of CRCA 2005.

2 A reference to the date on which an amount becomes due and payable is a reference to the date (however described) on or before which the amount must be paid.

3 Sections 101 to 103 come into force on such day as the Treasury may by order appoint.

4 An order under subsection (3)—

a may commence a provision generally or only for specified purposes, and

b may appoint different days for different provisions or for different purposes.

5 The Treasury may by order make any incidental, supplemental, consequential, transitional, transitory or saving provision which may appear appropriate in consequence of, or otherwise in connection with, those sections.

6 An order under subsection (5) may include provision amending, repealing or revoking any provision of any Act or subordinate legislation whenever passed or made (including this Act and any Act amended by it).

7 An order under subsection (5) may make different provision for different purposes.

8 The following are to be made by statutory instrument—

a orders under section 101(2) or 102(2),

b regulations under section 103(1) or (2), and

c orders under subsection (3) or (5).

9 A statutory instrument containing—

a an order under section 101(2) or 102(2),

b regulations under section 103(1) or (2),

c an order under subsection (5) which includes provision amending or repealing any provision of an Act,

is subject to annulment in pursuance of a resolution of the House of Commons.

105 Miscellaneous amendments¶

1 Section 239 of ITA 2007 (date from which interest is chargeable when EIS relief is withdrawn or reduced) is amended as follows.

2 In subsection (1)—

a for “in column 1 of the following table” substitute “ in subsection (2) ”,

b for “given by the corresponding entry in column 2 of the table” substitute “ 31 January next following the tax year for which the assessment is made ”, and

c omit the table.

3 For subsection (2) substitute—

4 In the following provisions, for the words from “the same rate” to the end substitute “ the rate applicable under section 178 of the Finance Act 1989 ”

a section 48(1) of FA 1975 (interest on repayment of estate duty), and

b section 235(1) of IHTA 1984 (interest on overpaid inheritance tax).

5 In section 178(2) of FA 1989 (setting of rates of interest)—

a after paragraph (g) insert—

, and

b in paragraph (k), after “sections 233” insert “ , 235(1) ”.

6 The following provisions (which require HMRC to make an order specifying the new rate of interest when that rate is changed by operation of regulations) are omitted—

a section 178(5) of FA 1989, and

b section 197(5) of FA 1996.

Penalties¶

106 Penalties for failure to make returns etc¶

1 Schedule 55 contains provision for imposing penalties on persons in respect of failures to make returns and other documents relating to liabilities for tax.

^C31^C92^C992 That Schedule comes into force on such day as the Treasury may by order appoint.

3 An order under subsection (2)—

a may commence a provision generally or only for specified purposes, and

b may appoint different days for different provisions or for different purposes.

^C10^C19^C1004 The Treasury may by order make any incidental, supplemental, consequential, transitional, transitory or saving provision which may appear appropriate in consequence of, or otherwise in connection with, Schedule 55.

5 An order under subsection (4) may include provision amending, repealing or revoking any provision of any Act or subordinate legislation whenever passed or made (including this Act and any Act amended by it).

6 An order under subsection (4) may make different provision for different purposes.

7 An order under this section is to be made by statutory instrument.

8 A statutory instrument containing an order under subsection (4) which includes provision amending or repealing any provision of an Act is subject to annulment in pursuance of a resolution of the House of Commons.

107 Penalties for failure to pay tax¶

1 Schedule 56 contains provision for imposing penalties on persons in respect of failures to comply with obligations to pay tax.

^C75^C1012 That Schedule comes into force on such day as the Treasury may by order appoint.

3 An order under subsection (2)—

a may commence a provision generally or only for specified purposes, and

b may appoint different days for different provisions or for different purposes.

^C8^C1024 The Treasury may by order make any incidental, supplemental, consequential, transitional, transitory or saving provision which may appear appropriate in consequence of, or otherwise in connection with, Schedule 56.

6 An order under subsection (4) may make different provision for different purposes.

7 An order under this section is to be made by statutory instrument.

^C84^C83^C42108 Suspension of penalties during currency of agreement for deferred payment¶

1 This section applies if—

a a person (“P”) fails to pay an amount of tax falling within the Table in subsection (5) when it becomes due and payable,

b P makes a request to an officer of Revenue and Customs that payment of the amount of tax be deferred, and

c an officer of Revenue and Customs agrees that payment of that amount may be deferred for a period (“the deferral period”).

2 P is not liable to a penalty for failing to pay the amount mentioned in subsection (1) if—

a the penalty falls within the Table, and

b P would (apart from this subsection) become liable to it between the date on which P makes the request and the end of the deferral period.

3 But if—

a P breaks the agreement (see subsection (4)), and

b an officer of Revenue and Customs serves on P a notice specifying any penalty to which P would become liable apart from subsection (2),

P becomes liable, at the date of the notice, to that penalty.

4 P breaks an agreement if—

a P fails to pay the amount of tax in question when the deferral period ends, or

b the deferral is subject to P complying with a condition (including a condition that part of the amount be paid during the deferral period) and P fails to comply with it.

5 The taxes and penalties referred to in subsections (1) and (2) are—

Tax	Penalty
^F244. . .	^F244. . .
Value added tax	Surcharge under section 59(4) or 59A(4) of VATA 1994 ^F142...
Aggregates levy	Penalty interest under paragraph 5 of Schedule 5 to FA 2001
Climate change levy	Penalty interest under paragraph 82 of Schedule 6 to FA 2000
Landfill tax	Penalty interest under paragraph 27(2) of Schedule 5 to FA 1996
Insurance premium tax	Penalty under paragraph 15(2) or (3) of Schedule 7 to FA 1994 which is payable by virtue of paragraph 15(1)(a) of that Schedule.
Any duty of excise	Penalty under section 9(2) or (3) of FA 1994 which is imposed for a failure to pay an amount of any duty of excise or an amount payable on account of any such duty.

6 If the agreement mentioned in subsection (1)(c) is varied at any time by a further agreement between P and an officer of Revenue and Customs, this section applies from that time to the agreement as varied.

7 The Treasury may by order amend the Table by adding or removing a tax or a penalty.

8 An order under subsection (7) is to be made by statutory instrument.

9 A statutory instrument containing an order under subsection (7) is subject to annulment in pursuance of a resolution of the House of Commons.

10 In this section, except in the entries in the Table, “penalty” includes surcharge and penalty interest.

11 This section has effect where the agreement mentioned in subsection (1)(c) is made on or after 24 November 2008.

109 Miscellaneous amendments¶

Schedule 57 contains amendments of Schedule 24 to FA 2007 (penalties for errors), Schedule 41 to FA 2008 (penalties for failure to notify and certain other wrongdoing) and certain other enactments relating to penalties.

Miscellaneous¶

110 Recovery of debts using PAYE regulations¶

Schedule 58 contains provision about the recovery of debts by means of deductions from PAYE income in accordance with PAYE regulations.

^F11111 Managed payment plans¶

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

112 Customs and excise enforcement: movements between member States¶

1 Section 4 of F(No.2)A 1992 (cases in which customs and excise enforcement powers can be used in relation to movement of persons or things between member States) is amended as follows.

2 In subsection (1), after “subsection” insert “ (1A) or ”.

3 After that subsection insert—

4 In subsection (2), for the words from the beginning to “or that” substitute “ The second case in which a power to which this section applies may be exercised as mentioned in subsection (1) above is where ”.

Part 8 Miscellaneous¶

Gambling¶

113 VAT exemption for gaming participation fees¶

1 Group 4 of Schedule 9 to VATA 1994 (exemptions: betting, gaming and lotteries) is amended as follows.

2 In Note (1), omit paragraph (b) (granting of right to play game of chance not exempted unless within Note (5)).

3 Omit Notes (5) to (11).

4 The Value Added Tax (Betting, Gaming and Lotteries) Order 2007 (S.I. 2007/2163) is revoked.

5 Omit—

a in BGDA 1981, sections 19(3)(b) and 26E(2), and

b in FA 1997, section 11(9)(a).

6 The amendments made by this section are treated as having come into force on 27 April 2009.

114 Gaming duty¶

1 FA 1997 is amended as follows.

2 Section 10 (gaming duty) is amended as follows.

3 For subsection (2) substitute—

4 In subsection (3)(e), after “Article” insert “ 77, ”.

5 After subsection (3A) insert—

6 In subsection (3C)(a), after “in” insert “ organising or ”.

7 For subsection (4) substitute—

8 In subsection (5), for “add to the games mentioned in subsection (2) above” substitute “ provide that any specified game is or is not to be a casino game or equal chance gaming for the purposes of this section ”.

9 In subsection (6), for “this section, or in an order under subsection (5) above,” substitute “ an order under subsection (5) above ”.

10 Section 14 (subordinate legislation) is amended as follows.

11 In subsection (2), for “or 11(11) above” substitute “ providing that any game is to be a casino game or equal chance gaming or any order under section 11(11) ”.

12 Insert at the end—

13 Section 15(3) (interpretation) is amended as follows.

14 After the definition of “accounting period” insert—

15 After the definition of “dutiable gaming” insert—

16 In consequence of the preceding provisions, omit—

a in FA 2002, section 11, and

b in FA 2007, in Schedule 25, paragraph 17(4).

17 The amendments made by this section are to be treated as having come into force on 27 April 2009.

18 But those amendments do not give rise to a duty under paragraph 6(3)(a) of Schedule 1 to FA 1997 (requirement to notify premises) before 25 May 2009.

115 Remote bingo etc¶

1 BGDA 1981 is amended as follows.

^F4152 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3 In section 26H (remote gaming duty: exemptions), after subsection (2) insert—

4 The amendments made by this section have effect in relation to games of bingo that begin to be played on or after 1 July 2009.

116 Meaning of “gaming machine” and “gaming”¶

1 BGDA 1981 is amended as follows.

2 Section 25 (meaning of “amusement machine”) is amended as follows.

3 For subsection (1A) substitute—

4 In subsection (1C), for “constructed” substitute “ designed ”.

5 Insert at the end—

6 In section 33 (interpretation)—

a in subsection (1), in the definition of “gaming”, omit “within the meaning of Group 4 of Schedule 9 to the Value Added Tax Act 1994”, and

b after that subsection insert—

Climate change levy¶

117 Taxable commodities ineligible for reduced-rate supply¶

1 Schedule 6 to FA 2000 (climate change levy) is amended as follows.

2 In paragraph 44 (reduced rate for supplies covered by climate change agreement), after sub-paragraph (2) insert—

2A The Secretary of State may—

a give a certificate that includes provision specifying one or more descriptions of taxable commodity as being ineligible for reduced-rate supply,

b vary a certificate so that it includes provision (or further provision) specifying one or more descriptions of taxable commodity as being ineligible for reduced-rate supply, or

c vary a certificate so that it ceases to include the provision (or some of the provision) specifying one or more descriptions of taxable commodity as being ineligible for reduced-rate supply.

2B A taxable supply of a taxable commodity to a facility is not a reduced-rate supply if, at the time of the supply, the commodity falls within a description that is specified (by virtue of sub-paragraph (2A)(a) or (b)) in the certificate relating to the facility.

2C The Secretary of State may only include provision in a certificate by virtue of sub-paragraph (2A)(a) or (b)—

a if the Treasury consents in writing to the specification before the specification is made, and

b if, and for as long as, the result is compatible with the common market by virtue of Commission Regulation (EC) No. 800/2008 of 6 August 2008 declaring certain categories of aid compatible with the common market in application of Articles 87 and 88 of the Treaty establishing the European Community (General block exemption Regulation) (O.J. 2008 No. L214/3).

2D In sub-paragraphs (2A) to (2C) “certificate” means such a certificate as is mentioned in sub-paragraph (1)(a).

3 In consequence of subsection (2)—

a in paragraph 44(2), after “subject to” insert “ sub-paragraphs (2A) to (2D) and ”, and

b in paragraph 147 (general interpretation), in the definition of “reduced-rate supply”, after “subject to” insert “ paragraph 44(2A) to (2D) and ”.

118 Removal of reduced rate where targets not met¶

1 Schedule 59 contains provision for removing the reduced rate of climate change levy where the targets set by a climate change agreement have not been met.

2 The amendments made by that Schedule have effect where the certification period begins on or after 1 April 2009.

Other environmental taxes and duties¶

119 Landfill tax: prescribed landfill site activities¶

Schedule 60 contains provision about charging landfill tax on prescribed activities at landfill sites.

120 Requirement to destroy replaced vehicle registration documents¶

In section 22(1) of VERA 1994 (registration regulations), after paragraph (h) insert—

121 Hydrocarbon oil duties: minor amendments¶

1 HODA 1979 is amended as follows.

2 In section 11(1) (rebate on heavy oil), omit “12”.

3 In section 14D(2) (civil penalty for supplying biodiesel or bioblend intending that it will be put to prohibited use), for “intending” substitute “ having reason to believe ”.

4 The amendment made by subsection (3) has effect in relation to supplies on or after the day on which this Act is passed.

Other matters¶

122 Inheritance tax: agricultural property and woodlands relief for EEA land¶

1 Part 5 of IHTA 1984 (miscellaneous reliefs) is amended as follows.

2 In section 115 (agricultural property relief: preliminary), in subsection (3), insert at the end “(or, in the case of property outside the United Kingdom, the Channel Islands and the Isle of Man, if it were subject to provisions equivalent in effect to such a covenant).”

3 For subsection (5) of that section substitute—

4 In section 116 (agricultural property relief: the relief), insert at the end—

5 In section 125 (woodlands relief), in paragraph (a) of subsection (1), omit “in the United Kingdom”.

6 After that subsection insert—

7 The amendments made by this section have effect in relation to transfers of value where the tax payable but for this section (or, in the case of tax payable by instalments, the last instalment of that tax)—

a would have been due on or after 22 April 2009, or

b was paid or due on or after 23 April 2003.

8 Where tax falling within subsection (7) has been paid, Her Majesty's Revenue and Customs must repay the tax (together with interest under section 235(1) of IHTA 1984) if, but only if, a claim for repayment is made on or before—

a the date determined under section 241(1) of that Act as the last date on which the claim may be made, or

b 21 April 2010,

whichever is later.

9 Where, by virtue of the amendments made by subsections (5) and (6), an election is made under section 125 of IHTA 1984, that election must be made on or before—

a the date determined under section 125(3) as the last date on which the election may be made, or

b 21 April 2010,

whichever is later.

123 Alternative finance investment bonds¶

Schedule 61 contains provision about the taxation of chargeable gains, stamp duty land tax and capital allowances for and in connection with arrangements to which section 564G of ITA 2007 or section 151N of TCGA 1992 (investment bond arrangements) applies.

124 Mutual societies: tax consequences of transfers of business etc¶

1 The Treasury may by regulations make provision for and in connection with—

a the tax consequences of a transfer of all or part of the business or engagements of a mutual society,

b the tax consequences of an amalgamation of mutual societies, and

c the tax consequences of the conversion of a mutual society into a company.

2 “Mutual society” means—

a a building society incorporated (or deemed to be incorporated) under the Building Societies Act 1986,

b a friendly society within the meaning of the Friendly Societies Act 1992, or

c a registered society within the meaning of the Co-operative and Community Benefit Societies Act 2014.

3 Regulations under this section may, in particular, make provision about—

a relief from tax in respect of losses,

b capital allowances,

c the taxation of chargeable gains (including provision conferring relief for specified transfers and amalgamations),

d the treatment of intangible fixed assets and goodwill,

e the treatment of loan relationships (and matters treated as loan relationships),

f the treatment of derivative contracts (and contracts treated as derivative contracts),

g exemption or other relief from stamp duty, stamp duty reserve tax or stamp duty land tax, and

h the treatment of arrangements the purpose, or one of the main purposes, of which is to secure a tax advantage.

4 Regulations under this section may, in particular—

a modify enactments and instruments relating to tax (whenever passed or made),

b make different provision for different cases or different purposes, and

c make incidental, consequential or transitional provision (including provision modifying enactments and instruments, whenever passed or made).

5 Regulations under this section may include provision having effect in relation to any time before they are made if the provision does not increase any person's liability to tax.

6 Regulations under this section are to be made by statutory instrument.

7 A statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of the House of Commons.

8 In this section—

“arrangements” includes any arrangements, scheme or understanding of any kind, whether or not legally enforceable and whether involving a single transaction or two or more transactions;
“company” means a company formed and registered under the Companies Act 2006 (or treated as formed and registered under that Act);
“derivative contract” has the same meaning as in Part 7 of CTA 2009 (see section 576 of that Act);
“goodwill” and “intangible fixed asset” have the same meaning as in Part 8 of CTA 2009 (see sections 713 and 715 of that Act);
“loan relationship” has the same meaning as in the Corporation Tax Acts (see section 302(1) and (2) of CTA 2009);
“modify” includes amend, repeal or revoke;
“tax” includes stamp duty;
“tax advantage” means—
1. a relief from tax (including a tax credit) or increased relief from tax,
2. a repayment of tax or increased repayment of tax,
3. the avoidance, reduction or delay of a charge to tax or an assessment to tax, or
4. the avoidance of a possible assessment to tax.

125 National Savings ordinary accounts: surplus funds¶

1 As soon as practicable after the passing of this Act—

a the Director of Savings and the Commissioners must prepare a statement showing the relevant surplus, and

b the Commissioners must pay the relevant surplus into the Consolidated Fund.

2 The relevant surplus is the amount held by the Commissioners by virtue of section 17 of the 1971 Act (including any such amount held in investments), less the aggregate of—

a such sums as the Treasury may determine to be equal to those expended by the Director of Savings in connection with ordinary accounts,

b such sums as are necessary to defray the expenses incurred by the Commissioners in connection with ordinary accounts, and

c such sums as are required to be paid into the Consolidated Fund by virtue of section 20 of the 1971 Act.

3 The Commissioners—

a must pay into the Consolidated Fund the sums determined in accordance with subsection (2)(a), and

b may retain the sums determined in accordance with subsection (2)(b).

4 As soon as practicable after preparing a statement under subsection (1), the Director of Savings and the Commissioners must transmit the statement to the Comptroller and Auditor General who must—

a examine, certify and make a report on it, and

b lay copies of the statement, together with copies of that report, before Parliament.

5 The Treasury may by order repeal or otherwise amend any enactment if the repeal or amendment appears to the Treasury to be necessary or expedient in consequence of—

a the closure of ordinary accounts and the transfer of their balances to other accounts (see, in particular, regulations 2B to 2BB of the National Savings Bank Regulations 1972 (S.I. 1972/764)), or

b this section.

6 An order under subsection (5) is to be made by statutory instrument.

7 No order may be made under subsection (5) unless a draft of the statutory instrument containing it has been laid before, and approved by a resolution of, the House of Commons.

8 In this section—

a a reference to sums expended or expenses incurred in connection with ordinary accounts includes a reference to sums expended or expenses incurred in connection with the holding of amounts by virtue of section 17 of the 1971 Act (including their holding in investments), and

b expressions used in this section and in the 1971 Act have the same meaning in this section as in that Act.

9 In this section—

“the 1971 Act” means the National Savings Bank Act 1971;
“enactment” includes—
1. an enactment contained in the 1971 Act, and
2. subordinate legislation (which has the same meaning as in the Interpretation Act 1978).

Part 9 Final provisions¶

126 Interpretation¶

1 In this Act—

“ALDA 1979” means the Alcoholic Liquor Duties Act 1979,
“BGDA 1981” means the Betting and Gaming Duties Act 1981,
“CAA 2001” means the Capital Allowances Act 2001,
“CRCA 2005” means the Commissioners for Revenue and Customs Act 2005,
“CTA 2009” means the Corporation Tax Act 2009,
“CTA 2010” means the Corporation Tax Act 2010,
“FISMA 2000” means the Financial Services and Markets Act 2000,
“HODA 1979” means the Hydrocarbon Oil Duties Act 1979,
“ICTA” means the Income and Corporation Taxes Act 1988,
“IHTA 1984” means the Inheritance Tax Act 1984,
“ITA 2007” means the Income Tax Act 2007,
“ITEPA 2003” means the Income Tax (Earnings and Pensions) Act 2003,
“ITTOIA 2005” means the Income Tax (Trading and Other Income) Act 2005,
“OTA 1975” means the Oil Taxation Act 1975,
“OTA 1983” means the Oil Taxation Act 1983,
“PRTA 1980” means the Petroleum Revenue Tax Act 1980,
“TCGA 1992” means the Taxation of Chargeable Gains Act 1992,
“TIOPA 2010” means the Taxation (International and Other Provisions) Act 2010,
“TMA 1970” means the Taxes Management Act 1970,
“TPDA 1979” means the Tobacco Products Duty Act 1979,
“VATA 1994” means the Value Added Tax Act 1994, and
“VERA 1994” means the Vehicle Excise and Registration Act 1994.

2 In this Act—

“FA”, followed by a year, means the Finance Act of that year, and
“F(No.2)A”, followed by a year, means the Finance (No.2) Act of that year.

3 In the tables in Part 1 of Schedule 1 to CAA 2001, Part 1 of Schedule 1 to ITEPA 2003 and Part 1 of Schedule 4 to ITTOIA 2005, at the beginning insert—

4 Omit all of the entries in those tables relating to a Finance Act or a Finance (No.2) Act.

5 In the following provisions, for “the Finance Act” substitute “ FA ”

a in CAA 2001, sections 70G(5), 70H(3) (in both places), 70O(4)(b), 105(2A), 186(3) and (5) (as amended by paragraph 5 of Schedule 27 to FA 2008), 257(2)(a), 360B(2)(a) and 360C(2)(b) and paragraph 105(2) of Schedule 3, and

b in ITEPA 2003, sections 420(1)(h) and 702(5B), paragraph 78(2)(b) of Schedule 2 and paragraph 54 of Schedule 7.

6 Accordingly, omit—

a in FA 2004, in Schedule 35, paragraphs 49 and 65(2),

b in F(No.2)A 2005, section 10(7),

c in FA 2006, section 84(4), and

d in FA 2008, in Schedule 25, paragraph 6.

127 Short title¶

This Act may be cited as the Finance Act 2009.

SCHEDULES

SCHEDULE 1 ¶

Income tax: abolition of non-residents' personal reliefs

Section 5

Introduction¶

1Chapter 1 of Part 7 of ICTA (income tax: personal reliefs) is amended as follows.

Abolition of reliefs¶

2Omit—

a section 256 (general),

b section 256A (“adjusted net income”),

c section 256B (“the minimum amount”),

d section 257 (personal allowance),

e sections 257A to 257BB (married couple's allowance etc),

f section 257C (indexation),

g section 265 (blind person's allowance),

h section 273 (payments securing annuities), and

i section 278 (non-residents).

Consequential amendments¶

1 Section 266 (life assurance premiums) is amended as follows.

2 In subsection (1)—

a for “individual” substitute “ eligible individual ”, and

b omit “or makes a payment falling within subsection (7) below”.

3 After that subsection insert—

4 In subsection (3), omit “(7),”.

5 In subsection (4), for “subsections (7) and” substitute “ subsection ”.

6 Omit subsection (7).

7 In subsection (8), for “and is entitled to relief by virtue of section 278(2) or (2ZA)” substitute “ (but is entitled to relief by virtue of subsection (1A)(b)) ”.

1 Section 274 (limits on relief under sections 266 and 273) is amended as follows.

2 In subsection (1), omit “or other sums”.

3 In subsection (2)—

a for “sections 266 and 273” substitute “ section 266 ”, and

b omit “or sums”, and

c for “the appropriate rate” substitute “ 12.5% ”.

4 Omit subsection (3).

5 In subsection (4), omit “or other sum” (in both places).

6 In the heading, for “sections 266 and 273” substitute “ section 266 ”.

5In paragraph 6(1) of Schedule 14 (provisions ancillary to section 266), omit “, otherwise than in accordance with subsection (7) of that section,”.

Repeals¶

6Omit—

a in TMA 1970—

i in section 36(3A), “section 257BA of the principal Act or”,

ii in section 37A, “section 257BB or 265 of the principal Act or”, and

iii in section 43A(2A)(a), “section 257BA of the principal Act or”,

b in FA 1988, section 33 and, in Schedule 3, paragraphs 8 and 10,

c in FA 1989, section 33(4)(a), (5)(b), (8)(a) and (9)(b),

d in F(No.2)A 1992, in Schedule 5, paragraphs 2, 8(4) and 9(3),

e in FA 1993, section 107(3)(a),

f in FA 1994, section 77(1) and (2),

g in FA 1996, in Schedule 20, paragraph 14(3) and, in Schedule 21, paragraphs 4 to 6,

h in FA 1997, section 56(2),

i in FA 1998, section 27(1)(a) and, in Schedule 3, paragraph 10,

j in FA 1999, sections 25(3), 31 and 32,

k in FA 2000, section 39(8) and (9),

l in ITEPA 2003, in Schedule 6, paragraph 35,

m in FA 2004, in Schedule 35, paragraph 12,

n in ITTOIA 2005, in Schedule 1, paragraph 124,

o in ITA 2007—

i in section 23, in Step 3, “or section 257 or 265 of ICTA”,

ii in sections 26(1)(a) and 27(5), “or section 257A, 257AB, 257BA or 257BB of ICTA”,

iii in section 423(5), “or section 257 or 265 of ICTA”, “or section 257A, 257AB, 257BA or 257BB of ICTA”, “or section 266(7) of ICTA” and “or section 273 of ICTA”,

iv in section 811, in subsection (5), “or section 278(2) of ICTA” and, in subsection (6), “or section 257 or 265 of ICTA”, “or section 257A, 257AB, 257BA or 257BB of ICTA” and “or section 273 of ICTA”,

v in section 833(5), “or section 278 of ICTA”,

vi in Schedule 1, paragraphs 27 to 35, 36(5) and (6), 37 and 232(2), and

vii in Schedule 2, Part 4,

p in FA 2008—

i in section 2(1) and (2), paragraph (b) and the “and” before it,

ii in section 3, in subsection (1), “and section 257(2) of ICTA” and “and section 257(3) of ICTA” and, in subsection (2), paragraph (b) and the “and” before it, and

iii in Schedule 39, paragraphs 18 to 20, and

q in this Act, in section 3(1) and (2), paragraph (b) and the “and” before it.

Commencement¶

7The amendments made by this Schedule have effect for the tax year 2010-11 and subsequent tax years.

SCHEDULE 2 ¶

Income tax rates

Section 6

Part 1 Amendments of ITA 2007¶

1ITA 2007 is amended as follows.

1 Section 6 (rates of income tax) is amended as follows.

2 In subsection (2), for “and higher rate” substitute “ , higher rate and additional rate ”.

3 In the heading, for “and higher rate” substitute “ , higher rate and additional rate ”.

1 Section 8 (dividend ordinary rate and dividend upper rate) is amended as follows.

2 Insert at the end—

3 In the heading, for “and dividend upper rate” substitute “ , dividend upper rate and dividend additional rate ”.

1 Section 10 (income charged at basic and higher rates: individuals) is amended as follows.

2 In subsection (3), insert at the end “and up to the higher rate limit.”

3 After that subsection insert—

4 After subsection (5) insert—

5 In subsection (6), for “is” substitute “ and higher rate limit are ”.

6 In the heading, for “and higher” substitute “ , higher and additional ”.

1 Section 13 (income charged at dividend ordinary and dividend upper rates: individuals) is amended as follows.

2 After subsection (2) insert—

3 In subsection (3), for “and (2)” substitute “ to (2A) ”.

4 In subsection (4), for “or higher” substitute “ , higher or additional ”.

5 In the heading, for “and dividend upper” substitute “ , dividend upper and dividend additional ”.

6In section 414(2)(b) (relief for gifts to charity), after “limit” insert “ and the higher rate limit ”.

7In section 515(a) (rate of tax in respect of heritage maintenance settlements), for “higher rate” substitute “ additional rate ”.

1 Section 989 (definitions) is amended as follows.

2 After the definition of “Act” insert—

3 After the definition of “distribution” insert—

4 After the definition of “higher rate” insert—

1 Schedule 4 (index of defined expressions) is amended as follows.

2 After the entry relating to “Act” insert—

3 In the entry relating to “basic rate limit”, for “20(2)” substitute “ 10 ”.

4 After the entry relating to “dividends (in Chapter 1 of Part 13)” insert—

5 After the entry relating to “higher rate” insert—

Part 2 Amendments of other Acts¶

FA 2004¶

10Part 4 of FA 2004 (pension schemes etc) is amended as follows.

11In section 192 (relief for pension contributions at source), for subsection (4) substitute—

12In section 208 (unauthorised payments charge), for subsection (6) substitute—

13In section 209 (unauthorised payments surcharge), for subsection (7) substitute—

14In section 215 (amount of lifetime allowance charge), after subsection (2) insert—

^F27515. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16In section 240 (amount of scheme sanction charge), after subsection (3) insert—

17In section 242 (de-registration charge), insert at the end—

1 Section 282 (orders and regulations) is amended as follows.

2 After subsection (1) insert—

3 In subsection (2), after “Part” insert “ , if made without a draft having been approved by a resolution of the House of Commons, ”.

ITTOIA 2005¶

19ITTOIA 2005 is amended as follows.

20In section 640(6)(b) (grossing-up of deemed income)—

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

b insert at the end

^F18521. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

22In section 685A(3) (settlor-interested settlements), for “higher rate” substitute “ additional rate ”.

1 Part 2 of Schedule 4 (index of defined expressions) is amended as follows.

2 After the entry relating to “acquisition expenditure (in Chapter 9 of Part 2)” insert—

3 After the entry relating to “distribution” insert—

F(No.2)A 2005¶

24In section 7(5) of F(No.2)A 2005 (charge to income tax on social security pension lump sum)—

a in paragraph (d), after “basic rate limit for that year” insert “ but does not exceed the higher rate limit for that year ”, and

b after that paragraph insert—

Part 3 Commencement¶

1 The powers conferred by the amendments made by this Schedule may be exercised at any time on or after the day on which this Act is passed but not so as to make provision having effect before the tax year 2010-11.

2 Subject to that, the amendments made by this Schedule have effect for the tax year 2010-11 and subsequent tax years.

SCHEDULE 3 ¶

VAT: supplementary charge and orders changing rate

Section 9

Part 1 Supplementary charge to VAT¶

The charge¶

1 There is a supplementary charge on a supply of goods or services that is treated as taking place on or after 25 November 2008 if—

a the supply spans the date of the VAT change,

b it is subject to VAT at the rate in force under section 2 of VATA 1994,

c the person to whom the supply is made is not entitled under VATA 1994 to credit for, or the repayment or refund of, all of the VAT on the supply, and

d a relevant condition is met.

2 In this Schedule “the date of the VAT change” means 1 January 2010.

3 For the cases in which a supply, other than the grant of a right to goods or services, spans the date of the VAT change and the relevant conditions in relation to such a supply, see paragraph 2.

4 For the cases in which a supply consisting of the grant of a right to goods or services spans the date of the VAT change and the relevant conditions in relation to such a supply, see paragraph 3.

5 Sub-paragraph (1) has effect subject to the exceptions made by or under Part 2 of this Schedule.

6 In this Schedule—

Part 3 contains provision about liability for, and the amount of, a supplementary charge under this Schedule,
Part 4 contains special provision about listed supplies, and
Part 5 contains provision about administration and interpretation.

7 A supplementary charge under this Schedule is to be treated for all purposes as if it were value added tax charged in accordance with VATA 1994.

Supply spanning the date of the VAT change¶

1 For the purposes of this Schedule a supply of goods or services spans the date of the VAT change where—

a by virtue of the issue of a VAT invoice or the receipt of a payment by the person making the supply (“the supplier”), the supply is treated as taking place before the date of the VAT change, but

b the basic time of supply (see paragraph 4) is on or after the date of the VAT change.

2 The relevant conditions are—

a in relation to a supply that is within sub-paragraph (1)(a) by virtue of the issue of a VAT invoice, conditions A to D, and

b in relation to a supply that is within sub-paragraph (1)(a) by virtue of the receipt of a payment, conditions A to C.

3 Condition A is that the supplier and the person to whom the supply is made are connected with each other at any time in the period—

a beginning with the day on which the supply is treated as taking place, and

b ending on the date of the VAT change.

4 Paragraph 5 modifies condition A in cases involving a series of supplies.

5 Condition B is that the aggregate of the following is more than £100,000—

a the relevant consideration for the supply, and

b the relevant consideration for every related supply of goods or services (including every related grant of a right to goods or services) that spans the date of the VAT change (see paragraph 6).

6 Condition C is that a prepayment in respect of the supply is financed by the supplier or a person connected with the supplier (see paragraph 7).

7 In sub-paragraph (6) “prepayment”, in respect of a supply, means a payment that is received by the supplier before the basic time of supply.

8 Condition D is that full payment of the amount shown on the VAT invoice referred to in sub-paragraph (1)(a) is not due before the end of the period of 6 months beginning with the date on which the invoice is issued.

9 This paragraph does not apply in relation to a supply consisting of the grant of a right to goods or services (see paragraph 3).

Grant of right spanning the date of the VAT change¶

1 For the purposes of this Schedule a supply consisting of the grant by a person (“the grantor”) of a right to goods or services spans the date of the VAT change where—

a that supply is treated as taking place before the date of the VAT change,

b the goods or services are to be supplied at a discount or free of charge, and

c the basic time of supply for the supply of some or all of the goods or services (see paragraph 4) is on or after the date of the VAT change.

2 In relation to the grant of the right, the relevant conditions are conditions A to C.

3 Condition A is that the grantor and the person to whom the right is granted are connected with each other at any time in the period—

a beginning with the day on which the supply consisting of the grant of the right is treated as taking place, and

b ending on the date of the VAT change or, if the right is exercised (entirely or partly) on a later date, that date (or, if more than one, the first of those dates).

4 Paragraph 5 modifies condition A in cases involving a series of supplies.

5 Condition B is that the aggregate of the following is more than £100,000—

a the relevant consideration for the grant of the right, and

b the relevant consideration for every related supply of goods or services (including every related grant of a right to goods or services) that spans the date of the VAT change (see paragraph 6).

6 Condition C is that the payment made in respect of the grant of the right is financed by the grantor or a person connected with the grantor (see paragraph 7).

7 In this Schedule references to a right to goods or services include—

a any right or option with respect to such goods or services, and

b any interest deriving from such a right or option.

“Basic time of supply” ¶

1 In this Schedule the “basic time of supply” is the time given by subsection (2) or (3) of section 6 of VATA 1994 (disregarding subsections (4) to (14) of that section).

2 Sub-paragraph (1) does not apply in relation to listed supplies (see Part 4 of this Schedule).

Series of supplies¶

1 This paragraph applies where—

a the supply or grant of a right referred to in paragraph 2 or 3 (“the affected supply or grant”) is one of a series of supplies of, or grants of a right to, the same or substantially the same goods or services, and

b each of the supplies, and the grants of a right, in the series was or will be made in the expectation that the affected supply or grant would or will take place.

2 In condition A in paragraphs 2 and 3 the references to the supplier and the grantor include any person who makes one of the supplies or grants one of the rights in the series.

Financing¶

1 This paragraph applies for the purposes of condition C in paragraphs 2 and 3.

2 A payment is financed by a person if, directly or indirectly, the person—

a provides funds to enable the person to whom the supply is made to make the whole or part of the payment (whether the funds are provided before or after the payment is made),

b procures the provision of such funds by another person,

c provides funds for discharging (in whole or in part) any liability that has been or may be incurred by any person for or in connection with raising funds to enable the person to whom the supply is made to make the payment, or

d procures that any such liability is or will be discharged (in whole or in part) by another person.

3 In sub-paragraph (2) the references to providing funds for a purpose are to—

a making a loan of funds that are or are to be used for that purpose,

b providing a guarantee or other security in relation to such a loan,

c providing consideration for the issue of shares or other securities issued wholly or partly for raising those funds,

d providing consideration for the acquisition by any person of any such shares or securities, or

e any other transfer of assets or value as a consequence of which any of those funds are made available for that purpose.

Connected persons¶

8Section 1122 of CTA 2010 (connected persons) applies for the purposes of this Schedule.

Receipt of payments¶

9In this Schedule a reference to receipt of a payment by the person making a supply or granting a right (however expressed) includes a reference to receipt by a person to whom a right to receive it has been assigned.

Power to change relevant conditions¶

1 The Treasury may by order amend this Part of this Schedule by adding, modifying or omitting relevant conditions.

2 An order under this paragraph—

a may make different provision for different cases, and

b may make incidental or consequential amendments of this Schedule.

Supplies treated as taking place before 31 March 2009¶

11In relation to supplies treated as taking place before 31 March 2009, this Schedule has effect as if—

a paragraphs 2(5), 3(5) and 6 (condition B) and all references to condition B were omitted,

b in paragraph 2(6) (condition C), the words “or a person connected with the supplier” were omitted, and

c in paragraph 3(6) (condition C), the words “or a person connected with the grantor” were omitted.

Part 2 Exceptions¶

Letting etc of assets¶

1 This paragraph applies in relation to a supply within paragraph 2 which arises from the letting, hiring or rental of assets.

2 There is no supplementary charge under this Schedule if—

a the period to which the VAT invoice or payment referred to in paragraph 2(1) relates does not exceed 12 months, and

b the VAT invoice is issued, or the payment is received, in accordance with normal commercial practice in relation to the letting, hiring or rental of such assets.

Condition B cases involving normal commercial practice¶

13There is no supplementary charge under this Schedule on a supply of goods or services within paragraph 2 or a grant of a right to goods or services within paragraph 3 if—

a the only relevant condition met is condition B, and

b the supply is made, or the right is granted, in accordance with normal commercial practice in relation to the supply of, or the grant of a right to, such goods or services.

Normal commercial practice¶

14In this Part of this Schedule “normal commercial practice” means normal commercial practice at a time when an increase in the rate of VAT in force under section 2 of VATA 1994 is not expected.

Further exceptions¶

1 The Treasury may by order provide that there is no supplementary charge under this Schedule on supplies (including grants of rights to goods or services) of a description specified in the order.

2 An order under this paragraph may make provision having effect in relation to supplies of goods or services that are treated as taking place on or after 25 November 2008 or a later date.

Part 3 Liability and amount¶

Liability¶

1 A supplementary charge under this Schedule on a supply within paragraph 2—

a is a liability of the supplier (subject to sub-paragraph (3)), and

b becomes due on the date of the VAT change (rather than at the time of supply).

2 A supplementary charge under this Schedule on a supply consisting of the grant of a right to goods or services within paragraph 3—

a is a liability of the grantor (subject to sub-paragraph (3)), and

b becomes due on the first occasion on or after the date of the VAT change on which the right is exercised (rather than at the time the right is granted).

3 If, on the date on which the supplementary charge becomes due, the person who would be liable to pay the charge under sub-paragraph (1) or (2)—

a is not a taxable person, but

b is treated as a member of a group under sections 43A to 43D of VATA 1994,

the supplementary charge is a liability of the representative member of the group.

Amount¶

1 The amount of the supplementary charge on a supply within paragraph 2 is equal to the difference between—

a the amount of VAT chargeable on the supply apart from this Schedule, and

b the amount of VAT that would be chargeable on the supply if it were subject to VAT at the rate of 17.5%.

2 The amount of the supplementary charge on a grant of a right to goods or services within paragraph 3 is equal to the difference between—

a the amount of VAT chargeable on the grant of the right apart from this Schedule, and

b the amount of VAT that would be chargeable on the grant of the right if it were subject to VAT at the rate of 17.5%,

(but see sub-paragraph (3)).

3 If the basic time of supply for some of those goods and services is before the date of the VAT change, sub-paragraph (2) has effect as if the references to the amount of VAT chargeable and to the amount of VAT that would be chargeable were references to the relevant proportion of each of those amounts.

4 “The relevant proportion” is—

\frac{P}{W}

where—

P is so much of the consideration for the grant of the right as is attributable on a just and reasonable basis to a right to the goods and services for which the basic time of supply is on or after the date of the VAT change, and

W is the whole of the consideration for the grant of the right.

Part 4 Listed supplies¶

“Listed supply” ¶

1 In this Schedule “listed supply” means a supply falling within sub-paragraph (2)—

a which is made for a consideration the whole or part of which is determined or payable periodically or from time to time, and

b which is treated as taking place by virtue of the issue of a VAT invoice or the receipt of a payment by the person making the supply.

2 The following supplies fall within this sub-paragraph—

a a supply of services,

b a supply arising from the grant of a major interest in land,

c a supply of water other than—

i distilled water, deionised water or water of similar purity, or

ii bottled water,

d a supply of—

i coal gas, water gas, producer gases or similar gases, or

ii petroleum gases, or other gaseous hydrocarbons, in a gaseous state,

e a supply of power, heat, refrigeration or ventilation, and

f a supply of goods together with services in the course of the construction, alteration, demolition, repair or maintenance of a building or civil engineering work.

3 The Treasury may by order amend sub-paragraph (2) by—

a adding or omitting any description of supply, or

b varying any description of supply for the time being listed in that sub-paragraph.

“Basic time of supply”: listed supplies¶

1 For the purposes of this Schedule, in relation to a listed supply, “the basic time of supply” is the end of the period to which the VAT invoice or payment mentioned in paragraph 18(1) relates, except as provided in sub-paragraphs (2) and (4).

2 Where the person making the supply issues an invoice—

a in respect of part of the listed supply to which the VAT invoice or payment mentioned in paragraph 18(1) relates, and

b for a period (a “billing period”) ending before the end of the period to which that VAT invoice or payment relates,“the basic time of supply”, in relation to that part of the supply, is the end of the billing period.

3 For the purposes of sub-paragraph (2) the listed supply (and the consideration for the supply) must be apportioned between periods on a just and reasonable basis.

4 Where a listed supply is treated as taking place by virtue of—

a the issue by the person making the supply of a VAT invoice relating to a premium for the grant of a tenancy or lease, or

b the receipt by the person making the supply of such a premium,“the basic time of supply” is the date of the grant of the tenancy or lease.

Part 5 Administration and interpretation¶

Person ceasing to be taxable person before supplementary charge due¶

1 This paragraph applies if, on the date on which a supplementary charge under this Schedule becomes due (“the due date”), the person who is liable to pay the charge under paragraph 16 is not a taxable person.

2 The supplementary charge must be accounted for by that person in accordance with VATA 1994 (and regulations made under that Act) as if it were VAT due in the last period for which the person was required to make a return by or under VATA 1994.

3 If an amount assessed as due by way of supplementary charge under this Schedule would (in the absence of this sub-paragraph) carry interest from a date earlier than the due date, it is to be treated as only carrying interest from the due date.

Adjustment of contracts following the VAT change¶

1 This paragraph applies where—

a a contract for the supply of goods or services is made before the date of the VAT change, and

b there is a supplementary charge under this Schedule on the supply.

2 The consideration for the supply is to be increased by an amount equal to the supplementary charge, unless the contract provides otherwise.

Invoices¶

22Regulations under paragraph 2A of Schedule 11 to VATA 1994 (VAT invoices) may make provision about the provision, replacement or correction of invoices in connection with a supplementary charge under this Schedule.

Orders under this Schedule¶

1 An order under this Schedule is to be made by statutory instrument.

2 A statutory instrument containing an order under this Schedule is subject to annulment in pursuance of a resolution of the House of Commons, unless it is an instrument to which sub-paragraph (4) applies.

3 Sub-paragraph (4) applies to a statutory instrument containing an order made under paragraph 10 (or under that paragraph and under other provisions) which extends the supplies that are subject to a supplementary charge under this Schedule.

4 An instrument to which this sub-paragraph applies—

a must be laid before the House of Commons, and

b ceases to have effect at the end of the period of 28 days beginning with the day on which it was made unless it is approved during that period by a resolution of the House of Commons.

5 In reckoning the period of 28 days no account is to be taken of any time during which Parliament is dissolved or prorogued or during which the House of Commons is adjourned for more than 4 days.

6 The order ceasing to have effect does not affect—

a anything previously done under it, or

b the making of a new order.

Interpretation: general¶

1 Expressions used in this Schedule and in VATA 1994 have the same meaning in this Schedule as in that Act.

2 In this Schedule—

a “treated as taking place” means treated as taking place for the purposes of the charge to VAT, and

b references to the person by or to whom a supply is made (however expressed) are to the person by or to whom the supply is treated as being made for the purposes of VATA 1994.

Part 6 Amendments of VATA 1994¶

1 VATA 1994 is amended as follows.

2 In section 2(2) (orders increasing or decreasing rate of VAT), after “such order” insert “ that has not previously expired or been revoked ”.

3 In section 97 (orders, rules and regulations), after subsection (4) insert—

SCHEDULE 4 ¶

Vehicle excise duty: further provision about rates of duty etc

Section 14

1VERA 1994 is amended as follows.

1 Section 3 (duration of licences) is amended as follows.

2 In subsection (4)(b), for “a licence taken out on the first registration under this Act of” substitute “ the first vehicle licence for ”.

3 Insert at the end—

1 Section 19 (rebates) is amended as follows.

2 In subsection (1), for “from the Secretary of State the amount specified in subsection (2)” substitute “ the relevant amount from the Secretary of State ”.

3 Omit subsection (2).

4 After subsection (3) insert—

1 Section 62 (definitions) is amended as follows.

2 In subsection (1), after the definition of “exempt vehicle” insert—

3 After subsection (1A) insert—

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

2 In paragraph 1A (vehicles to which Part 1A applies)—

a in sub-paragraph (1)(a), after “registered”, and

b in sub-paragraph (5), after “registration”,

insert “, under this Act or under the law of a country or territory outside the United Kingdom,”.

3 In paragraph 1C (the reduced rate)—

a in sub-paragraph (3)(a), after “registration” insert “ , under this Act or under the law of a country or territory outside the United Kingdom, ”,

b in sub-paragraph (3)(b), for “its” substitute “ that ”, and

c in sub-paragraph (4), after “registration” insert “ under this Act ”.

4 In paragraph 1H (vehicles to which Part 1B applies)—

a in sub-paragraph (1)(a), after “registered”, and

b in sub-paragraph (3), after “registration”,

insert “, under this Act or under the law of a country or territory outside the United Kingdom,”.

5 In paragraph 1K(a) (pre-2007 lower-emission vans), after “registered” insert “ , under this Act or under the law of a country or territory outside the United Kingdom, ”.

6 In paragraph 1M(a) (post-2008 lower-emission vans), after “registered” insert “ , under this Act or under the law of a country or territory outside the United Kingdom, ”.

1 Paragraph 25 of Schedule 2 (exempt vehicles: light passenger vehicles with low CO₂ emissions) is re-numbered as sub-paragraph (1) of that paragraph.

2 After that sub-paragraph insert—

1 The amendments made by this Schedule have effect in relation to licences taken out on or after 1 April 2010.

2 But the amendments made by paragraph 5 do not have effect in relation to vehicles first registered under this Act before that date.

SCHEDULE 5 ¶

Air passenger duty

Section 17

Amendments¶

1Chapter 4 of Part 1 of FA 1994 (air passenger duty) is amended as follows.

1 Section 30 (rates of duty) is amended as follows.

2 After subsection (8) insert—

3 Omit subsections (9) to (9B).

3For section 39 substitute—

39 Schemes for simplified operation of Chapter

1 This section applies if the Commissioners consider that, having regard to difficulties encountered or expected to be encountered by any registered operator in obtaining and recording information about passengers and their journeys, it is appropriate for this Chapter to have effect in relation to the registered operator in accordance with a special accounting scheme.

2 The Commissioners may agree with the registered operator that this Chapter is to have effect in relation to the registered operator in accordance with a special accounting scheme agreed between the Commissioners and the registered operator (but subject to subsection (4)).

3 A special accounting scheme is a scheme which makes provision for methods of calculating—

a how many persons are to be regarded for the purposes of this Chapter as chargeable passengers carried by chargeable aircraft operated by a registered operator, and

b how many of those are to be so regarded as having been so carried on journeys in respect of which duty is chargeable at any particular rate.

4 The Commissioners may publish a notice specifying terms and conditions subject to which special accounting schemes are to have effect.

5 Where the Commissioners and a registered operator have agreed that this Chapter is to have effect in relation to the registered operator in accordance with a special accounting scheme, this Chapter has effect in relation to the registered operator in accordance with the scheme (and with any notice under subsection (4) which has been published by the Commissioners and not withdrawn) for the period agreed by the Commissioners and the registered operator.

6 The Commissioners and the registered operator may at any time agree to vary the special accounting scheme for the future.

7 The Commissioners may at any time terminate the operation of the special accounting scheme—

a on the application of the registered operator, or

b where they have reasonable grounds for doing so,

by giving notice to the registered operator.

4In section 42(4) (orders), after “chargeable passengers” insert “ , or to increase the rate of air passenger duty to be charged on the carriage of any chargeable passengers whose journeys end in any place, ”.

5After Schedule 5 insert—

SCHEDULE 5A

Air passenger duty: territories etc

Part 1 Part 1 territories

Albania	Finland	Latvia	Portugal (including Madeira)
Algeria	France (including Corsica)	Libya	Romania
Andorra	Germany	Liechtenstein	Russian Federation, west of the Urals
Austria	Gibraltar	Lithuania	San Marino
Azores	Greece	Luxembourg	Serbia
Belarus	Greenland	Former Yugoslav Republic of Macedonia	Slovak Republic
Belgium	Guernsey	Malta	Slovenia
Bosnia and Herzegovina	Hungary	Moldova	Spain (including the Balearic Islands and the Canary Islands)
Bulgaria	Iceland	Monaco	Sweden
Croatia	Republic of Ireland	Montenegro	Switzerland
Cyprus	Isle of Man	Morocco	Tunisia
Czech Republic	Italy (including Sicily and Sardinia)	Netherlands	Turkey
Denmark (including the Faroe Islands)	Jersey	Norway (including Svalbard)	Ukraine
Estonia	Republic of Kosovo	Poland	Western Sahara

Part 2 Part 2 territories

Afghanistan	Egypt	Kazakhstan	Saudi Arabia
Armenia	Equatorial Guinea	Kuwait	Senegal
Azerbaijan	Eritrea	Kyrgyzstan	Sierra Leone
Bahrain	Ethiopia	Lebanon	Sudan
Benin	Gabon	Liberia	Syria
Bermuda	Gambia	Mali	Tajikistan
Burkina Faso	Georgia	Mauritania	Togo
Cameroon	Ghana	Niger	Turkmenistan
Canada	Guinea	Nigeria	Uganda
Cape Verde	Guinea-Bissau	Oman	United Arab Emirates
Central African Republic	Iran	Pakistan	United States of America
Chad	Iraq	Qatar	Uzbekistan
Democratic Republic of Congo	Israel and the Occupied Palestinian Territories	Russian Federation, east of the Urals	Yemen
Republic of Congo	Ivory Coast	Saint Pierre and Miquelon
Djibouti	Jordan	Sao Tome and Principe

Part 3 Part 3 territories

Angola	Cuba	Macao SAR	Saint Helena
Anguilla	Dominica	Madagascar	Saint Lucia
Antigua and Barbuda	Dominican Republic	Malawi	Saint Martin
Aruba	Ecuador	Maldives	Saint Vincent and the Grenadines
Ascension Island	El Salvador	Martinique	Seychelles
Bahamas	French Guiana	Mauritius	Somalia
Bangladesh	Grenada	Mayotte	South Africa
Barbados	Guadeloupe	Mexico	Sri Lanka
Belize	Guatemala	Mongolia	Suriname
Bhutan	Guyana	Montserrat	Swaziland
Botswana	Haiti	Mozambique	Tanzania
Brazil	Honduras	Namibia	Thailand
British Indian Ocean Territory	Hong Kong SAR	Nepal	Trinidad and Tobago
British Virgin Islands	India	Netherlands Antilles	Turks and Caicos Islands
Burma	Jamaica	Nicaragua	Venezuela
Burundi	Japan	Panama	Vietnam
Cayman Islands	Kenya	Puerto Rico	Virgin Islands
China	North Korea	Reunion	Zambia
Colombia	South Korea	Rwanda	Zimbabwe.
Comoros	Laos	Saint Barthelemy
Costa Rica	Lesotho	Saint Christopher and Nevis (St Kitts and Nevis)

Consequential repeals¶

6In consequence of the amendments made by section 17 and this Schedule, omit—

a in FA 1995, section 15,

b in FA 2000, in section 18—

i subsections (1) to (5), and

ii subsection (7),

c in FA 2002, section 121, and

d in FA 2007, section 12.

Commencement etc¶

7The amendments made by paragraphs 2(3) and 6(a), (b)(i), (c) and (d) have effect in relation to the carriage of passengers beginning on or after 1 November 2009.

1 No agreement for Chapter 4 of Part 1 of FA 1994 to have effect in relation to a registered operator in accordance with a special accounting scheme pursuant to section 39 of FA 1994 as substituted by paragraph 3 may be made so as to have effect as respects the carriage of passengers beginning before 1 November 2009.

2 Nothing in this Schedule affects the continuing operation of, or of schemes prepared under, that section as it has effect immediately before this Act is passed as respects the carriage of passengers beginning before 1 November 2009.

SCHEDULE 6 ¶

Temporary extension of carry back of losses

Section 23

Income tax¶

1 A person who has made a loss in a trade in the tax year 2008-09 or 2009-10 may make a claim for relief under this paragraph if—

a relief is available to the person under section 64 of ITA 2007 (trade loss relief against general income) in relation to an amount of the loss (“the section 64 amount”), and

b condition A or B is met.

2 Condition A is that the person makes a claim under that section for relief in respect of the section 64 amount—

a where it is a loss made in the tax year 2008-09, for either or both of the tax years 2007-08 and 2008-09, or

b where it is a loss made in the tax year 2009-10, for either or both of the tax years 2008-09 and 2009-10.

3 Condition B is that—

a where it is a loss made in the tax year 2008-09, for the tax years 2007-08 and 2008-09, or

b where it is a loss made in the tax year 2009-10, for the tax years 2008-09 and 2009-10,

the person's total income is nil or does not include any income from which a deduction could be made in pursuance of a claim under that section for relief in respect of the section 64 amount.

4 The amount of the loss that may be relieved under this paragraph (“the deductible amount”) is—

a in a case where condition A is met, so much of the section 64 amount as cannot be relieved pursuant to the claim under section 64 of ITA 2007, and

b in a case where condition B is met, the whole of the section 64 amount,

(but see sub-paragraph (12)).

5 A claim for relief under this paragraph is for the deductible amount to be deducted (in accordance with sub-paragraph (6) and with whichever is applicable of sub-paragraphs (7), (8), (9) and (10))—

a where it is a loss made in the tax year 2008-09, in either or both of the following ways—

i in computing the person's total income for either or both of the tax years 2005-06 and 2006-07 in accordance with section 835 of ICTA, and

ii in calculating the person's net income for the tax year 2007-08 in accordance with Step 2 of the calculation in section 23 of ITA 2007 (which applies as if this paragraph were a provision listed in section 24 of that Act), or

b where it is a loss made in the tax year 2009-10, in either or both of the following ways—

i in computing the person's total income for the tax year 2006-07 in accordance with section 835 of ICTA, and

ii in calculating the person's net income for either or both of the tax years 2007-08 and 2008-09 in accordance with Step 2 of the calculation in section 23 of ITA 2007 (which applies as if this paragraph were a provision listed in section 24 of that Act).

6 A deduction is to be made only from profits of the trade (and accordingly, in relation to the tax years 2007-08 and 2008-09, subsection (2) of section 25 of ITA 2007 has effect as if this sub-paragraph were included in subsection (3) of that section).

7 This sub-paragraph explains how the deductions are to be made in a case where the loss is made in the tax year 2008-09 and the person makes a claim under section 64 of ITA 2007 for relief in respect of the section 64 amount for the tax year 2007-08.Step 1Deduct the deductible amount from the profits of the trade for the tax year 2006-07.Step 2Deduct from the profits of the trade for the tax year 2005-06 so much of the deductible amount as has not been deducted under Step 1.

8 This sub-paragraph explains how the deductions are to be made in any other case where the loss is made in the tax year 2008-09.Step 1Deduct the deductible amount from the profits of the trade for the tax year 2007-08.Step 2Deduct from the profits of the trade for the tax year 2006-07 so much of the deductible amount as has not been deducted under Step 1.Step 3Deduct from the profits of the trade for the tax year 2005-06 so much of the deductible amount as has not been deducted under Step 1 or 2.

9 This sub-paragraph explains how the deductions are to be made in a case where the loss is made in the tax year 2009-10 and the person makes a claim under section 64 of ITA 2007 for relief in respect of the section 64 amount for the tax year 2008-09.Step 1Deduct the deductible amount from the profits of the trade for the tax year 2007-08.Step 2Deduct from the profits of the trade for the tax year 2006-07 so much of the deductible amount as has not been deducted under Step 1.

10 This sub-paragraph explains how the deductions are to be made in any other case where the loss is made in the tax year 2009-10.Step 1Deduct the deductible amount from the profits of the trade for the tax year 2008-09.Step 2Deduct from the profits of the trade for the tax year 2007-08 so much of the deductible amount as has not been deducted under Step 1.Step 3Deduct from the profits of the trade for the tax year 2006-07 so much of the deductible amount as has not been deducted under Step 1 or 2.

11 The provision made by the preceding provisions means that the following sections of ITA 2007 apply in relation to relief under this paragraph as in relation to relief under section 64 of that Act—

a section 66 to 70 (restrictions on relief under section 64),

b sections 74ZA to 74D (general restrictions on relief),

c sections 75 to 79 (restrictions on relief under section 64 and early trade losses relief in relation to capital allowances),and

d section 80 (restrictions on those reliefs in relation to ring fence income), ^F55...

^F55e . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12 The total amount that may be deducted in accordance with sub-paragraph (7), or in accordance with Steps 2 and 3 in sub-paragraph (8), is limited to £50,000; and the total amount that may be deducted in accordance with sub-paragraph (9), or in accordance with Steps 2 and 3 in sub-paragraph (10), is also limited to £50,000.

1 A claim for relief under paragraph 1 must be made—

a where the relief is in respect of a loss made in the tax year 2008-09, on or before the first anniversary of the normal self-assessment filing date for that tax year, and

b where the relief is in respect of a loss made in the tax year 2009-10, on or before the first anniversary of the normal self-assessment filing date for that tax year.

2 Paragraph 1 applies to professions and vocations as it applies to trades.

3 Paragraph 1 is subject to paragraph 2 of Schedule 1B to TMA 1970 (claims for loss relief involving 2 or more years).

4 Sections 61 to 63 of ITA 2007 (meaning of “making a loss in a tax year” etc and prohibition against double counting) have effect as if paragraph 1 were included in Chapter 2 of Part 4 of that Act.

5 Subsections (1) to (3) of section 127 of that Act (UK furnished holiday lettings business treated as trade) have effect as if paragraph 1 were included in Part 4 of that Act.

6 The reference in paragraph 3(1) of Schedule 2 to the Social Security Contributions and Benefits Act 1992 and the Social Security Contributions and Benefits (Northern Ireland) Act 1992 (levy of Class 4 contributions with income tax) to section 64 of ITA 2007 includes paragraph 1.

Corporation tax¶

1 Sections 37(3)(b) and 38(1) and (3) of CTA 2010 (trade loss relief against profits of same or earlier accounting period) have effect in relation to any loss to which this paragraph applies as if the references to 12 months were references to 3 years (but subject as follows).

2 This paragraph applies to any loss incurred by a company in a trade in a relevant accounting period (but subject to sub-paragraph (3)); and a relevant accounting period is one ending after 23 November 2008 and before 24 November 2010.

3 The maximum amount of loss to which this paragraph applies in the case of any company is—

a £50,000 in relation to losses incurred in relevant accounting periods ending after 23 November 2008 and before 24 November 2009, and

b £50,000 in relation to losses incurred in relevant accounting periods ending after 23 November 2009 and before 24 November 2010;

and the overall limit or limits apply whether a loss is incurred by the company in only one relevant accounting period or losses are so incurred in more than one such period.

4 Subject to that, if in the case of the company the length of a relevant accounting period is less than one year, the maximum amount of the loss incurred in that period that may be relieved under section 37 of CTA 2010 by virtue of this paragraph is the relevant proportion of £50,000.

5 “The relevant proportion” is—

\frac{RAP}{Y}

where—

RAP is the number of days in the relevant accounting period, and

Y is 365.

6 The reference in subsection (2) of section 40 of CTA 2010 to the loss mentioned in subsection (1)(a) of that section (so far as not a terminal loss and so far as not exceeding the allowance mentioned in subsection (1)(b) of that section) (“the section 40 loss”) has effect in relation to a relevant accounting period as a reference to so much of the section 40 loss as exceeds that which can be set off under section 37 by virtue of this paragraph.

SCHEDULE 7 ¶

Contaminated and derelict land

Section 26

Part 1 Amendments of Part 14 of CTA 2009¶

1Part 14 of CTA 2009 (remediation of contaminated land) is amended as follows.

2In the heading of the Part, after “contaminated” insert “ or derelict ”.

1 Section 1143 (overview of Part) is amended as follows.

2 In subsection (1), after “contamination” insert “ or dereliction ”.

3 In subsection (7), after “contaminated” insert “ or derelict ”.

1 Section 1144 (“qualifying land remediation expenditure”) is amended as follows.

2 In subsection (1), for “E” substitute “ F ”.

3 In subsection (2), insert at the end “or a derelict state (see section 1145A)”.

4 In subsection (3), after “contaminated” insert “ or derelict ”.

5 For subsection (4) substitute—

6 In subsection (5), for paragraph (c) (and the “or” before it) substitute—

7 After subsection (6) insert—

5For section 1145 substitute—

1145 Land “in a contaminated state”

1 For the purposes of this Part land is in a contaminated state if (and only if), because of something in, on or under the land, the land is in a condition such that—

a relevant harm is being caused, or

b there is a serious possibility that relevant harm will be caused.

2 But land is not in a contaminated state by reason of the presence in, on or under it of—

a living organisms or decaying matter deriving from living organisms, air or water, or

b anything present otherwise than as a result of industrial activity.

3 The Treasury may by order specify circumstances in which subsection (2) is not to apply to the extent specified in the order; and an order under this subsection may contain incidental, supplemental, consequential and transitional provision and savings.

4 In this section “relevant harm” means—

a death of living organisms or significant injury or damage to living organisms,

b significant pollution of controlled waters,

c a significant adverse impact on the ecosystem, or

d structural or other significant damage to buildings or other structures or interference with buildings or other structures that significantly compromises their use.

1145A Land “in a derelict state”

For the purposes of this Part land is in a derelict state if (and only if) the land—

a is not in productive use, and

b cannot be put into productive use without the removal of buildings or other structures.

1145B Exclusion of nuclear sites

1 A nuclear site is not land in a contaminated state or land in a derelict state for the purposes of this Part.

2 “Nuclear site” means—

a any site in respect of which a nuclear site licence is for the time being in force, or

b any site in respect of which, after the revocation or surrender of a nuclear site licence, the period of responsibility of the licensee has not yet come to an end.

3 In subsection (2) “nuclear site licence”, “licensee” and “period of responsibility” have the same meaning as in the Nuclear Installations Act 1965.

1 Section 1146 (“relevant land remediation”) is amended as follows.

2 In subsection (1)—

a for “land remediation”, in relation to land” substitute “contaminated land remediation”, in relation to land which is in a contaminated state and in which a major interest has been”, and

b for “and B” substitute “ to C ”.

3 In subsection (3)—

a in paragraph (a), for “harm, or any pollution of controlled waters,” substitute “ relevant harm ”, and

b omit paragraph (b) (and the “or” before it).

4 After that subsection insert—

5 In subsection (5), for the words after “(and only if)” substitute

6 In the heading, after “relevant” insert “ contaminated ”.

7After that section insert—

1146A “Relevant derelict land remediation”

1 For the purposes of this Part “relevant derelict land remediation”, in relation to land which is in a derelict state and in which a major interest has been acquired by a company, means—

a activities in relation to which conditions A and B are met, and

b if there are such activities, relevant preparatory activity.

2 Condition A is that the activities comprise the doing of any works, the carrying out of any operations or the taking of any steps in relation to the land in question.

3 Condition B is that the purpose of the activities is a purpose specified by order made by the Treasury.

4 An order under subsection (3) may contain incidental, supplemental, consequential and transitional provision and savings.

5 For the purposes of subsection (1)(b) “relevant preparatory activity” has the same meaning as for the purposes of subsection (1)(b) of section 1146 (see subsection (4) of that section, but reading the reference to subsection (1)(a) of that section as a reference to subsection (1)(a) of this section).

8In the heading of Chapter 2, after “contaminated” insert “ or derelict ”.

1 Section 1147 (deduction for capital expenditure) is amended as follows.

2 In subsection (2), after “that” insert “ a major interest in ”.

3 For subsection (3) substitute—

1 Section 1149 (additional deduction for qualifying land remediation expenditure) is amended as follows.

2 In subsection (2), after “that” insert “ a major interest in ”.

3 For subsection (3) substitute—

1 Section 1150 (no relief if company responsible for contamination) is amended as follows.

2 The existing provision becomes subsection (1) of that section.

3 In that subsection, for “state if the land is in that” substitute “ or derelict state if the land is in a contaminated or derelict ”.

4 After that subsection insert—

2 A company is not entitled to relief under this Chapter in respect of expenditure on land all or part of which is in a contaminated or derelict state if—

a the land is in that state wholly or partly as a result of any thing done, or omitted to be done, by a person not within subsection (1), and

b that person, or a person connected with that person, has a relevant interest in the land.

3 For the purposes of subsection (2) a person has a relevant interest in land if the person—

a holds any interest in, right over or licence to occupy the land (including an option to acquire any such interest, right or licence in any circumstances), or

b has disposed of any estate or interest in the land for a consideration that to any extent reflects the impact, or likely impact, on the value of the land of the remediation of its contamination or dereliction.

5 In the heading, insert at the end “or dereliction or polluter has interest”.

1 Section 1161 (relief in respect of I minus E basis: enhanced expenses payable) is amended as follows.

2 In subsection (2), after “that” insert “ a major interest in ”.

3 For subsection (3) substitute—

3 Condition B is that—

a in the case of land in a contaminated state, the land was in a contaminated state at the time of the acquisition by the company of a major interest in the land, and

b in the case of land in a derelict state, the land was in a derelict state throughout the period beginning with the earlier of—

i 1 April 1998, and

ii the date on which a major interest in the land was first acquired by the company or a person who was connected with the company.

3A The Treasury may by order—

a specify circumstances in which the condition in paragraph (a) of subsection (3) need not be met, or

b replace the date for the time being specified in paragraph (b)(i) of that subsection with a later date.

3B An order under subsection (3A) may contain incidental, supplemental, consequential and transitional provision and savings.

4 In subsection (4)—

a for “Chapter 4” substitute “ land remediation ”, and

b omit “(see section 1162)”.

5 Omit subsection (5).

6 In subsection (6), omit “150% of”.

7 In the heading, omit “enhanced”.

8 In the heading before the section omit “for qualifying Chapter 4 expenditure”.

13For section 1162 substitute—

1 Section 1163 (no relief if company responsible for contamination) is amended as follows.

2 The existing provision becomes subsection (1) of that section.

3 In that subsection—

a after “1161” insert “ or 1162 ”, and

b for “state if the land is in that” substitute “ or derelict state if the land is in a contaminated or derelict ”.

4 After that subsection insert—

2 A company is not entitled to relief under this Chapter in respect of expenditure on land all or part of which is in a contaminated or derelict state if—

a the land is in that state wholly or partly as a result of any thing done, or omitted to be done, by a person not within subsection (1), and

b that person, or a person connected with that person, has a relevant interest in the land.

3 For the purposes of subsection (2) a person has a relevant interest in land if—

a the person holds any interest in, right over or licence to occupy the land (including an option to acquire any such interest, right or licence in any circumstances), or

5 In the heading, insert at the end “or dereliction or polluter has interest”.

15In section 1165(1)(a) (meaning of “qualifying life assurance business loss”), after “1161” insert “ or 1162 ”.

16In section 1169(2)(c) and (3)(c) (artificially inflated claims for relief), after “1161” insert “ or 1162 ”.

1 Section 1173 (expenditure incurred because of contamination) is amended as follows.

2 In subsections (1) and (2), after “contaminated” insert “ or derelict ”.

3 For subsection (3) substitute—

4 In the heading, insert at the end “or dereliction”.

18Omit section 1174 (sub-contractor payments: introductory).

1 Section 1175 (“qualifying expenditure on sub-contracted land remediation”: connected persons) is amended as follows.

2 After subsection (1) insert—

3 In subsection (2), for “sub-contracted land remediation” substitute “connected sub-contracted land remediation” for the purposes of section 1144(5)”.

4 In subsection (3)—

a in paragraph (a), after “carrying on” insert “ or arranging for carrying on ”, and

b in paragraph (c) for “incurred on” substitute “ in respect of ”.

5 For the heading substitute “Connected sub-contractors”.

20Omit section 1176 (“qualifying expenditure on sub-contracted land remediation”: other cases).

21In section 1178 (persons having a “relevant connection” to a company)—

a after “contaminated” insert “ or derelict ”, and

b in paragraph (b), after “when” insert “ a major interest in ”.

22After section 1178 insert—

1178A “Major interest in land”

1 References in this Part to the acquisition of a major interest in land are to the acquisition of a freehold interest in the land or of a relevant leasehold interest in the land.

2 The reference in subsection (1) to the acquisition of a freehold interest in land is—

a in relation to land in England and Wales, to the acquisition of an estate in fee simple absolute (whether subsisting at law or in equity),

b in relation to land in Scotland, to the acquisition of the interest of an owner of land, and

c in relation to land in Northern Ireland, to the acquisition of any freehold estate (whether subsisting at law or in equity).

3 The reference in subsection (1) to the acquisition of a relevant leasehold interest in land is to the acquisition by grant or assignment (or assignation) of—

a in relation to land in England and Wales, a term of years absolute (whether subsisting at law or in equity),

b in relation to land in Scotland, the tenant's right over or interest in a property subject to a lease, or

c in relation to land in Northern Ireland, any leasehold estate (whether subsisting at law or in equity),

in relation to which the condition in subsection (4) is met.

4 That condition is that—

a in the case of a grant, the term of years or period of the lease is at least 7 years, and

b in the case of an assignment (or assignation) the unexpired portion of the term or period is at least 7 years.

23In section 1179 (definitions), omit the definitions of “harm” and “land” and the definition of “substance” (apart from the “and” at the end).

Part 2 Amendments of other enactments¶

ICTA¶

24In section 76(7) of ICTA (expenses of insurance companies), in step 3—

a for “1161” substitute “ 1162 ”,

b for “150%” substitute “ 50% additional ”, and

c after “contaminated” insert “ or derelict ”.

FA 1998¶

25In Schedule 18 to FA 1998 (company tax returns etc), in the heading of Part 9B, after “contaminated” insert “ or derelict ”.

CTA 2009¶

1 Schedule 4 to CTA 2009 (index of expressions) is amended as follows.

2 After the entry relating to “deposit back arrangements” insert—

3 Omit the entries relating to “harm (in Part 14)” and “land (in Part 14)”.

4 After the entry relating to “major interest (in Chapter 12 of Part 8)” insert—

5 After the entry relating to “relevant consortium creditor relationship (in Chapter 7 of Part 5)” insert—

6 After the entry relating to “relevant debits (in Part 8)” insert—

7 Omit the references relating to “relevant land remediation (in Part 14)”, “sub-contractor payment (and sub-contractor) (in Chapter 6 of Part 14)” and “substance (in Part 14)”.

Part 3 Commencement¶

27Any power to make orders which is conferred on the Treasury by virtue of an amendment of CTA 2009 made by this Schedule may be exercised at any time after this Act is passed; and any order made by virtue of any such amendment before 6 April 2010 may make provision having effect in relation to expenditure incurred on or after 1 April 2009.

28Subject to that, the amendments made by this Schedule have effect in relation to expenditure incurred on or after 1 April 2009; and for this purpose no account is to be taken of section 61 of CTA 2009 (earlier expenditure treated as incurred when trade started).

SCHEDULE 8 ¶

Venture capital schemes

Section 27

Enterprise investment scheme¶

1Schedule 5B to TCGA 1992 (enterprise investment scheme: re-investment) is amended as follows.

1 Paragraph 1(2) (application of Schedule) is amended as follows.

2 For paragraphs (g) and (h) substitute

3 In the words following the paragraphs, for “conditions in paragraphs (g) and (h) above do” substitute “ condition in paragraph (g) above does ”.

1 Paragraph 1A (failure of conditions of application) is amended as follows.

2 In sub-paragraph (4)—

a omit “or (h)”, and

b for “sub-paragraph (4A) below” substitute “ section 175(3) of ITA 2007 ”.

3 Omit sub-paragraph (4A).

1 Paragraph 9 (other reconstructions and amalgamations) is amended as follows.

2 For sub-paragraph (1) substitute—

3 In sub-paragraph (2), for “Sub-paragraph (1) above shall not have effect to disapply section 135 or 136 where” substitute “ Sub-paragraph (1A) does not apply if ”.

4 For sub-paragraph (3) substitute—

5In paragraph 16 (information), omit sub-paragraph (4A).

1 Section 158 of ITA 2007 (form and amount of EIS relief) is amended as follows.

2 In subsection (4), omit—

a “Subject to subsection (5),”, and

b “before 6 October”.

3 Omit subsection (5).

1 Section 175 of that Act (use of money raised requirement) is amended as follows.

2 For subsection (1) substitute—

3 In subsection (2), for “requirements in subsection (1)(a) and (b) do” substitute “ requirement in subsection (1) does ”.

4 In subsection (3)—

a for “subsection (1)(a)” substitute “ subsection (1) ”, and

b for “12 months” (in both places) substitute “ two years ”.

Corporate venturing scheme¶

1 Paragraph 36 of Schedule 15 to FA 2000 (corporate venturing scheme: requirement as to money raised) is amended as follows.

2 In sub-paragraph (1), for “At least 80%” substitute “ All ”.

3 Omit sub-paragraph (1A).

4 In sub-paragraph (1B), for “12 months” (in both places) substitute “ two years ”.

5 In sub-paragraph (1C), for “Sub-paragraphs (1) and (1A) are” substitute “ Sub-paragraph (1) is ”.

6 In sub-paragraph (5) omit “does not apply and the requirement of sub-paragraph (1A)”.

Venture Capital Trusts¶

1 Section 293 of ITA 2007 (use of money raised requirement) is amended as follows.

2 For subsection (1) substitute—

3 Omit subsections (2) to (4).

Consequential repeals¶

10In consequence of the amendments made by paragraphs 2, 3 and 5, omit—

a in FA 2001, in Schedule 15, paragraphs 26 to 28,

b in FA 2004, in Schedule 18, paragraph 13(1)(f), and

c in ITA 2007, in Schedule 1, paragraph 345(2)(b), (3)(a) and (13)(b).

Commencement¶

11The amendments made by paragraphs 2, 3, 5, 7, 8 and 10 have effect in relation to shares issued on or after 22 April 2009.

12The amendments made by paragraph 4 have effect in relation to—

a any exchange of shares to which section 135 of TCGA 1992 applies, where the new holding is issued on or after 22 April 2009, and

b any arrangement within section 136(1) of that Act entered into on or after that date.

1 The amendments made by paragraph 6 have effect as follows.

2 The amendments made by sub-paragraph (2) have effect in relation to shares issued in the tax year 2009-10 or a subsequent tax year.

3 The amendment made by sub-paragraph (3) has effect in relation to claims made under section 158(4) of ITA 2007 in respect of shares issued in the tax year 2009-10 or a subsequent tax year.

14The amendments made by paragraph 9 have effect in relation to shares or securities issued on or after 22 April 2009.

^F190SCHEDULE 9 ¶

Group relief: preference shares

Section 28

Amendments of Schedule 18 to ICTA¶

1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commencement¶

5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Election to opt out of changes in relation to pre-existing etc shares¶

6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Paragraph 2(7) of Schedule 25 to ICTA¶

8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F45SCHEDULE 10 ¶

Sale of lessor companies etc: reforms

Section 29

^F45Introduction¶

^F451. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F45Paragraph 7¶

^F452. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F45Paragraph 13A¶

^F453. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F45Paragraph 17¶

^F454. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F45Paragraph 23¶

^F455. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F45Paragraph 23A¶

^F456. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F45Paragraph 32¶

^F457. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F45Paragraph 39¶

^F458. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F45Commencement¶

^F459. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SCHEDULE 11 ¶

Tax relief for business expenditure on cars and motor cycles

Section 30

Part 1 Capital allowances¶

Plant and machinery allowances for cars and motor cycles¶

1Part 2 of CAA 2001 (plant and machinery allowances) is amended as follows.

2In section 38B (general exclusions from AIA qualifying expenditure), in general exclusion 2, for “81” substitute “ 268A ”.

3In section 46(2) (general exclusions from first year allowances), in general exclusion 2, for “81” substitute “ 268A ”.

4Omit sections 74 to 79 (cars above the cost threshold).

5Omit section 81 (extended meaning of “car”) and section 82 (qualifying hire cars).

6In section 84 (cases in which short-life asset treatment is ruled out), in the Table, in item 3, in the first column, for “81” substitute “ 268A ”.

1 Section 104A (special rate expenditure) is amended as follows.

2 In subsection (1)—

a in paragraph (a), after “the” insert “ first ”,

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

c insert at the end

3 In subsection (2), after “The” insert “ first ”.

4 After that subsection insert—

8After that section insert—

104AA Meaning of “main rate car”

1 “Main rate car” means—

a a car that is first registered before 1 March 2001,

b a car that has low CO₂ emissions, or

c a car that is electrically-propelled.

2 For the purposes of this section a car has low CO₂ emissions if it meets conditions A and B.

3 Condition A is that, when the car is first registered, it is so registered on the basis of a qualifying emissions certificate.

4 Condition B is that the applicable CO₂ emissions figure in relation to the car does not exceed 160 grams per kilometre driven.

5 The Treasury may by order amend the amount from time to time specified in subsection (4).

6 An order under subsection (5) may contain transitional provision and savings.

7 In this section—

“applicable CO₂ emissions figure” and “qualifying emissions certificate” have the meanings given in section 268C;
“car” has the meaning given in section 268A;
“electrically-propelled” has the meaning given in section 268B.

9After section 104E insert—

104F Special rate cars: discontinued activity continued by relevant company

1 This section applies if—

a a company (“the taxpayer”) has incurred special rate expenditure within section 104A(1)(e) (expenditure on a car other than a main rate car) to which section 104C applies (allocation to special rate pool),

b the qualifying activity carried on by the taxpayer is permanently discontinued, and

c conditions A, B and C are met.

2 Condition A is that the qualifying activity carried on by the taxpayer consisted of or included (other than incidentally) making cars available to other persons.

3 Condition B is that, at any time in the 6 months after the taxpayer's qualifying activity is permanently discontinued, the qualifying activity of a group relief company consists of or includes (other than incidentally) making cars available to other persons.

4 Condition C is that the balancing allowance (“SBA”) to which the taxpayer would be entitled (but for this section) in respect of the special rate pool is greater than—

BC - OBA

where—

BC is the total of the balancing charges (if any) to which the taxpayer is liable for the final chargeable period in respect of any pool, and

OBA is the total of the balancing allowances to which the taxpayer is entitled for that period in respect of any pool other than the special rate pool.

For the purposes of this section if BC – OBA is a negative amount it is to be treated as if it were nil.

5 The balancing allowance to which the taxpayer is entitled in respect of the special rate pool is reduced to an amount equal to BC — OBA.

6 The relevant company is to be treated as having incurred qualifying expenditure within section 104A(1)(e) (“notional expenditure”), whether or not the relevant company owns cars previously owned by the taxpayer.

7 The amount of the notional expenditure is an amount equal to the amount by which SBA exceeds BC — OBA.

8 The relevant company is to be treated as having incurred the notional expenditure on the day after the end of the taxpayer's final chargeable period.

9 If part of the chargeable period in which the relevant company is treated as incurring expenditure under this section (“the acquisition period”) overlaps with the taxpayer's penultimate chargeable period—

a the part of the expenditure which is proportional to that part of the acquisition period is not to be taken into account in determining the relevant company's available qualifying expenditure for the acquisition period, but

b this does not prevent that part of the expenditure being taken into account in determining the relevant company's available qualifying expenditure for any subsequent chargeable period.

10 In this section—

“car” has the meaning given in section 268A;
“company” means any body corporate;
“group relief company” means—
1. a company to which group relief under Chapter 4 of Part 10 of ICTA would be available (on the making of a claim) in respect of balancing allowances surrendered by the taxpayer in the taxpayer's final chargeable period, and
2. a company to which such relief would be available (on the making of a claim) in respect of balancing allowances surrendered by a company within paragraph (a);
“main rate car” has the meaning given in section 104AA;
“penultimate chargeable period” means the chargeable period preceding the final chargeable period;
“the relevant company” means the group relief company mentioned in subsection (3) or, if there is more than one, the one—
1. nominated by the taxpayer not more than 6 months after the end of the taxpayer's final chargeable period, or
2. in the absence of such a nomination, nominated by Her Majesty's Revenue and Customs.

10After section 208 insert—

208A Cars: disposal value in avoidance cases

1 This section applies if—

a a disposal value is required to be brought into account under section 61,

b the disposal event is that the person ceases to own a section 206 car because of a sale or the performance of a contract, and

c allowances under this Part in respect of the person's expenditure under that transaction are restricted under section 217 or 218 (anti-avoidance).

2 A car is a section 206 car if expenditure on the provision of the car is required to be allocated to a single asset pool under that section.

3 The disposal value to be brought into account is—

a the market value of the car at the time of the disposal event, or

b if less, the capital expenditure incurred, or treated as incurred, on the provision of the car by the person disposing of it.

4 The person acquiring the car is to be treated as having incurred capital expenditure on its provision of an amount equal to the disposal value required to be brought into account under subsection (3).

5 In this section “car” has the meaning given in section 268A.

11After section 268 insert—

Cars etc

268A Meaning of “car” and “motor cycle”

1 In this Part “car” means a mechanically propelled road vehicle other than—

a a motor cycle,

b a vehicle of a construction primarily suited for the conveyance of goods or burden of any description, or

c a vehicle of a type not commonly used as a private vehicle and unsuitable for such use.

2 In this Part “motor cycle” has the meaning given by section 185(1) of the Road Traffic Act 1988.

268B Electrically-propelled vehicles

For the purposes of this Part a vehicle is electrically-propelled only if—

a it is propelled solely by electrical power, and

b that power is derived from—

i a source external to the vehicle, or

ii an electrical storage battery which is not connected to any source of power when the vehicle is in motion.

268C Terms relating to emissions

1 In this Part “qualifying emissions certificate”, in relation to a vehicle, means an EC certificate of conformity, or a UK approval certificate, that specifies—

a in the case of a vehicle other than a bi-fuel vehicle, a CO₂ emissions figure in terms of grams per kilometre driven, or

b in the case of a bi-fuel vehicle, separate CO₂ emissions figures in terms of grams per kilometre driven for different fuels.

2 For the purposes of this Part, in relation to a vehicle other than a bi-fuel vehicle, the applicable CO₂ emissions figure is—

a where the qualifying emissions certificate specifies only one CO₂ emissions figure, that figure, and

b where the certificate specifies more than one CO₂ emissions figure, the figure specified as the CO₂ emissions (combined) figure.

3 For the purposes of this Part, in relation to a bi-fuel vehicle, the applicable CO₂ emissions figure is—

a where the qualifying emissions certificate specifies more than one CO₂ emissions figure in relation to each fuel, the lowest CO₂ emissions (combined) figure specified, and

b in any other case, the lowest CO₂ figure specified by the certificate.

4 In this section—

“bi-fuel”, in relation to a vehicle, means capable of being propelled by—
1. petrol and road fuel gas, or
2. diesel and road fuel gas;
“diesel” means any diesel fuel within the definition in Article 2 of Directive 98/70/EC of the European Parliament and of the Council;
“EC certificate of conformity” means a certificate of conformity issued by a manufacturer under any provision of the law of a member State implementing Article 6 of Council Directive 70/156/EEC, as amended;
“petrol” has the meaning given by Article 2 of Directive 98/70/EC of the European Parliament and of the Council;
“road fuel gas” has the same meaning as in section 171(1) of ITEPA 2003;
“UK approval certificate” means a certificate issued under—
1. section 58(1) or (4) of the Road Traffic Act 1988, or
2. Article 31A(4) or (5) of the Road Traffic (Northern Ireland) Order 1981 (S.I. 1981/154 (N.I. 1)).

Consequential amendments of CAA 2001¶

12CAA 2001 is amended as follows.

13In section 33 (personal security), omit subsection (7).

1 Section 45D (expenditure on cars with low carbon dioxide emissions) is amended as follows.

2 In subsection (1), for paragraph (c) substitute—

3 In subsection (2), for “a car with low CO₂ emissions is a car which” substitute “ a car has low CO₂ emissions if it ”.

4 In subsection (3), for the words from “an EC certificate” to the end substitute “ a qualifying emissions certificate. ”

5 In subsection (4), for “in the case of” substitute “ in relation to ”.

6 Omit subsections (5) and (6).

7 In subsection (8)—

a after “car” insert “ is to a car within the meaning of section 268A, except that it ”, and

b omit paragraph (b) (and the “but” before it).

8 Omit subsections (9) and (10).

9 After subsection (10) insert—

15In section 54(3) (single asset pools), omit “section 74 (car above the cost threshold)”.

16In section 55(6) (determination of entitlement or liability), after “subject to” insert “ section 104F (special rate cars: discontinued activity continued by relevant company) and ”.

17In section 65(3) (the final chargeable period), for “sections 77(1) and” substitute “ section ”.

18In section 66 (list of provisions about disposal values)—

a omit the entry in the list relating to section 79, and

b insert at the appropriate place—

1 In section 84 (cases in which short-life asset treatment is ruled out), the Table is amended as follows.

2 In item 3, for the words in the second column substitute “The car is a hire car for a disabled person (as defined by section 268D).”

3 In item 4, in the second column, insert “The expenditure is incurred on the provision of a car which is a hire car for a disabled person (as defined by section 268D)”.

4 In item 5, in the second column, for “within section 82(4) (cars hired out to persons receiving disability allowances etc)” substitute “ a hire car for a disabled person (as defined by section 268D) ”.

1 Section 86 (short-life assets) is amended as follows.

2 In subsection (2)(b), for “main pool” substitute “ appropriate pool ”.

3 After subsection (4) insert—

21In section 96 (expenditure on cars excluded from being long-life asset expenditure), for “car (as defined by section 81)” substitute “ car or motor cycle (as defined by section 268A) ”.

22After section 268C (inserted by this Part of this Schedule) insert—

268D Hire cars for disabled persons

1 For the purposes of this Part a car is a hire car for a disabled person if it is provided wholly or mainly for hire to, or the carriage of, disabled persons in the ordinary course of a trade.

2 “Disabled person” means a person in receipt of—

a a disability living allowance under—

i the Social Security Contributions and Benefits Act 1992, or

ii the Social Security Contributions and Benefits (Northern Ireland) Act 1992,

because of entitlement to the mobility component,

b a mobility supplement under a scheme made under the Personal Injuries (Emergency Provisions) Act 1939,

c a mobility supplement under an Order in Council made under section 12 of the Social Security (Miscellaneous Provisions) Act 1977, or

d a payment that appears to the Treasury to be similar to those mentioned in paragraphs (a) to (c) and that is specified by order made by the Treasury.

1 Part 2 of Schedule 1 (defined expressions) is amended as follows.

2 In the entry relating to “car (in Part 2)”, for “section 81” substitute “ section 268A ”.

3 Insert at the appropriate places—

24In Schedule 3 (transitionals and savings), omit paragraph 19 (cars above the cost threshold) and the headings immediately before it.

Consequential repeal¶

25In consequence of the amendments made by this Part of this Schedule, in FA 2002, in Schedule 19, omit paragraph 6.

Commencement and transitionals: introduction¶

26For the purposes of this Part of this Schedule—

a the first relevant date is—

i for corporation tax purposes, 1 April 2009, and

ii for income tax purposes, 6 April 2009,

b the second relevant date is—

i for corporation tax purposes, 1 August 2009, and

ii for income tax purposes, 6 August 2009, and

c the third relevant date is—

i for corporation tax purposes, 1 April 2014, and

ii for income tax purposes, 6 April 2014.

1 For the purposes of this Part of this Schedule “new expenditure” means—

a expenditure incurred on or after the first relevant date, and

b expenditure incurred before that date to which sub-paragraph (2) applies,

and expenditure that is not new expenditure is “old expenditure”.

2 This sub-paragraph applies to expenditure if—

a it is incurred under an agreement for the provision of a car entered into after 8 December 2008, and

b under that agreement the car is not required to be made available before the second relevant date.

3 For the purposes of sub-paragraph (2) an agreement is entered into on the date on which the following conditions are met—

a there is a contract in writing for the provision of the car,

b the contract is unconditional or, if it is conditional, the conditions have been met, and

c no terms remain to be agreed.

Commencement¶

1 The amendments made by this Part of this Schedule have effect in relation to new expenditure (subject to sub-paragraph (2)).

2 The repeal of section 79 of CAA 2001 and the amendments made by paragraphs 10 and 18 have effect in cases in which a person ceases to own a car or motor cycle if the expenditure incurred on the provision of the car or motor cycle is new expenditure.

1 The repeal of sections 74 to 78 of CAA 2001 and the amendments made by paragraphs 15 and 17 have effect in relation to old expenditure, but only for chargeable periods beginning on or after the third relevant date.

2 The repeal of section 79 of CAA 2001 and the amendment made by paragraph 18(a) have effect in cases in which a person ceases to own a car or motor cycle if the expenditure incurred on the provision of the car or motor cycle is old expenditure, but only for chargeable periods beginning on or after the third relevant date.

Transitionals¶

1 This paragraph applies where expenditure incurred by a person on the provision of a car or motor cycle includes both new expenditure and old expenditure.

2 The new expenditure and the old expenditure are to be treated as if they were incurred on the provision of separate (but identical) cars or motor cycles.

3 Any amount required to be brought into account in connection with a disposal event in respect of the car or motor cycle mentioned in sub-paragraph (1) is to be apportioned on a just and reasonable basis.

1 This paragraph applies where—

a old expenditure is required to be allocated to a single asset pool by section 74 of CAA 2001,

b there is unrelieved expenditure in that pool at the end of a transitional chargeable period, and

c the unrelieved expenditure is not required to be allocated to a single asset pool by any other provision of Part 2 of that Act.

2 The unrelieved expenditure must be carried forward to the main pool.

3 A “transitional chargeable period” is one that begins before the third relevant date and ends on or after the day before the third relevant date.

32An order made under section 82(4)(d) of CAA 2001 (qualifying hire cars for disabled persons) before the day on which this Act is passed (and not revoked before that day) has effect as if it had also been made under section 268D(2)(d) of that Act (hire cars for disabled persons) (inserted by this Part of this Schedule).

Interpretation¶

33In this Part of this Schedule—

a “car” and “motor cycle” have the meaning given in section 268A of CAA 2001 (inserted by paragraph 11), and

b other expressions used in this Part of this Schedule and in Part 2 of CAA 2001 have the same meaning here as in that Part of that Act.

Part 2 Restrictions on deductions for hire expenses¶

Income tax¶

34ITTOIA 2005 is amended as follows.

35In section 31(1)(b) (relationship between rules prohibiting and allowing deductions), omit “or motor cycle”.

1 Section 48 (rules restricting deductions from profits: car or motor cycle hire) is amended as follows.

2 In subsection (1), for the words from “or motor cycle”, in the first place, to the end substitute

3 In subsection (2), for the words from “multiplying” to the end substitute “ 15% ”.

4 In subsection (4), for “multiplying it by the fraction in subsection (2)” substitute “ 15% ”.

5 In subsection (4A)(a), (b) and (c), omit “or motor cycle”.

6 Omit subsection (5).

7 In the heading, omit “or motor cycle”.

1 Section 49 (car or motor cycle hire: supplementary) is amended as follows.

2 In subsection (1)—

a omit “or motor cycle”,

b omit “one”,

c before paragraph (a) insert—

, and

d in paragraphs (a) and (b), insert at the beginning “a vehicle”.

3 After that subsection insert—

4 In subsection (2)—

a omit “or motor cycle” (in each place),

b omit paragraph (c), and

c insert at the end—

5 In subsection (6), omit “and section 48”.

6 In the heading, omit “or motor cycle”.

38Omit section 50 (hiring cars with low carbon dioxide emissions).

39After that section insert—

50A Short-term hiring in and long-term hiring out

1 Section 48 does not apply to expenses incurred by a person (“the taxpayer”) on the hiring of a car if condition A or B is met.

2 Condition A is that—

a the expenses are incurred in respect of the making available of the car to the taxpayer for a period (“the hire period”) of not more than 45 consecutive days, and

b if the car is made available to the taxpayer (whether by the same person or different persons) for one or more periods linked to the hire period, the hire period and the linked period or periods, taken together, consist of not more than 45 days.

3 Condition B is that the expenses are incurred in respect of a period (“the sub-hire period”) throughout which the taxpayer makes the car available to another person (“the customer”) and—

a the sub-hire period consists of more than 45 consecutive days, or

b if the taxpayer makes the car available to the customer throughout one or more periods linked to the sub-hire period, the sub-hire period and the linked period or periods, taken together, consist of more than 45 days,

but see subsection (4).

4 Condition B is not met if—

a the customer is an employee of the taxpayer or of a person connected with the taxpayer, or

b during all or part of the sub-hire period (or any period linked to the sub-hire period), the customer makes any car available to an employee of the taxpayer under arrangements with the taxpayer or with a person connected with the taxpayer.

5 Neither condition A nor condition B is met if the car is hired under arrangements the purpose, or one of the main purposes, of which is—

a to disapply or reduce the effect of section 48, or

b other avoidance of tax.

6 For the purposes of condition B the expenses incurred by the taxpayer on the hiring of the car must be apportioned between—

a the sub-hire period, and

b the remainder of the period during which the car is made available to the taxpayer,

according to the respective lengths of those periods.

7 A period of consecutive days (“the main period”) is linked to—

a a period of consecutive days that ends not more than 14 days before the main period begins,

b a period of consecutive days that begins not more than 14 days after the main period ends, and

c a period of consecutive days linked to a period in paragraph (a) or (b).

8 For the purposes of this section, where arrangements for the hiring of a car include arrangements for the provision of a replacement car in the event that the first car is not available, the first car and any replacement car are to be treated as if they were the same car.

9 In this section (and section 50B) “arrangements” includes any arrangements, scheme or understanding of any kind, whether or not legally enforceable and whether involving a single transaction or two or more transactions.

50B Connected persons: application of section 48

1 This section applies where connected persons incur expenses on the hiring of the same car for the same period and—

a section 48 would (but for this section) apply to the expenses of two or more of those persons, or

b section 48 and section 56 of CTA 2009 would (but for this section and section 58B of that Act) each apply to the expenses of at least one of those persons.

2 This section only applies where one or more of the persons mentioned in subsection (1)(a) or (b) incurs the expenses under commercial arrangements (and such a person is referred to below as a “commercial lessee”).

3 In relation to the expenses mentioned in subsection (1) to which section 48 would (but for this section) apply, section 48 only applies to the following—

a where there is one commercial lessee, any such expenses incurred by that lessee, and

b where there is more than one, any such expenses incurred by the first commercial lessee in the chain of arrangements for the hiring of the car for the period.

4 In this section—

a references to expenses incurred by a commercial lessee include expenses incurred in that or any other capacity, and

b “commercial arrangements” means arrangements the terms of which are such as would reasonably have been expected if the parties to the arrangements had been dealing at arm's length.

40In section 247(1) (other rules about what counts as post-cessation receipts), omit “or motor cycle”.

41In section 272(2) (profits of a property business: application of trading income rules), in the entry in the Table relating to sections 48 to 50—

a for “50” substitute “ 50B ”, and

b omit “or motor cycle”.

42In section 274(1)(b) (relationship between rules prohibiting and allowing deductions), omit “or motor cycle”.

43In section 354(2) (other rules about what counts as post-cessation receipts), omit “or motor cycle”.

44In Schedule 2 (transitionals and savings), omit paragraphs 16 and 17 (and the heading before them).

Corporation tax¶

45CTA 2009 is amended as follows.

46In section 51(1)(b)(i) (relationship between rules prohibiting and allowing deductions), omit “or motor cycle”.

1 Section 56 (rules restricting deductions from profits: car or motor cycle hire) is amended as follows.

2 In subsection (1), for the words from “or motor cycle”, in the first place, to the end substitute

3 In subsection (2), for the words from “multiplying” to the end substitute “ 15% ”.

4 In subsection (4), for “multiplying it by the fraction in subsection (2)” substitute “ 15% ”.

5 In subsection (5)(a), (b) and (c), omit “or motor cycle”.

6 Omit subsection (6).

7 In the heading, omit “or motor cycle”.

1 Section 57 (car or motor cycle hire: supplementary) is amended as follows.

2 In subsection (1)—

a omit “or motor cycle”,

b omit “one”,

c before paragraph (a) insert—

, and

d in paragraphs (a) and (b), insert at the beginning “a vehicle”.

3 After that subsection insert—

4 In subsection (2)—

a omit “or motor cycle” (in each place),

b omit paragraph (c), and

c insert at the end—

5 In subsection (6), omit “and section 56”.

6 In the heading, omit “or motor cycle”.

49Omit section 58 (hiring cars with low CO₂ emissions before 1 April 2013).

50After section 58 insert—

58A Short-term hiring in and long-term hiring out

1 Section 56 does not apply to expenses incurred by a company (“the taxpayer”) on the hiring of a car if condition A or B is met.

2 Condition A is that—

a the expenses are incurred in respect of the making available of the car to the taxpayer for a period (“the hire period”) of not more than 45 consecutive days, and

3 Condition B is that the expenses are incurred in respect of a period (“the sub-hire period”) throughout which the taxpayer makes the car available to another person (“the customer”) and—

a the sub-hire period consists of more than 45 consecutive days, or

but see subsection (4).

4 Condition B is not met if—

a the customer is an employee or officer of the taxpayer or of a person connected with the taxpayer, or

b during all or part of the sub-hire period (or any period linked to the sub-hire period), the customer makes any car available to an employee or officer of the taxpayer under arrangements with the taxpayer or with a person connected with the taxpayer.

5 Neither condition A nor condition B is met if the car is hired under arrangements the purpose, or one of the main purposes, of which is—

a to disapply or reduce the effect of section 56, or

b other avoidance of tax.

6 For the purposes of condition B the expenses incurred by the taxpayer on the hiring of the car must be apportioned between—

a the sub-hire period, and

b the remainder of the period during which the car is made available to the taxpayer,

according to the respective lengths of those periods.

7 A period of consecutive days (“the main period”) is linked to—

a a period of consecutive days that ends not more than 14 days before the main period begins,

b a period of consecutive days that begins not more than 14 days after the main period ends, and

c a period of consecutive days linked to a period in paragraph (a) or (b).

9 In this section (and section 58B) “arrangements” includes any arrangements, scheme or understanding of any kind, whether or not legally enforceable and whether involving a single transaction or two or more transactions.

58B Connected persons: application of section 56

1 This section applies where connected persons incur expenses on the hiring of the same car for the same period and—

a section 56 would (but for this section) apply to the expenses of two or more of those persons, or

b section 56 and section 48 of ITTOIA 2005 would (but for this section and section 50B of that Act) each apply to the expenses of at least one of those persons.

3 In relation to the expenses mentioned in subsection (1) to which section 56 would (but for this section) apply, section 56 only applies to the following—

a where there is one commercial lessee, any such expenses incurred by that lessee, and

b where there is more than one, any such expenses incurred by the first commercial lessee in the chain of arrangements for the hiring of the car for the period.

4 In this section—

a references to expenses incurred by a commercial lessee include expenses incurred in that or any other capacity, and

b “commercial arrangements” means arrangements the terms of which are such as would reasonably have been expected if the parties to the arrangements had been dealing at arm's length.

51In section 191(1) (other rules about what counts as post-cessation receipts), omit “or motor cycle”.

52In section 210(2) (profits of a property business: application of trading income rules), in the entry in the Table relating to sections 56 to 58—

a for “58” substitute “ 58B ”, and

b omit “or motor cycle”.

53In section 214(1)(b)(i) (relationship between rules prohibiting and allowing deductions), omit “or motor cycle”.

54In section 283(2) (other rules about what counts as post-cessation receipts), omit “or motor cycle”.

55In section 865(3)(a) (debits for expenditure not generally deductible for tax purposes), omit “or motor cycle”.

56In section 1231(3) (absence of accounts), omit “or motor cycle”.

1 Section 1251 (car or motor cycle hire: companies with investment business) is amended as follows.

2 In subsection (1), for the words from “or motor cycle”, in the first place, to the end substitute

3 In subsection (2), for the words from “multiplying” to the end substitute “ 15% ”.

4 In subsection (4)(b), for “multiply that amount by the fraction set out in subsection (2) above” substitute “ reduce that amount by 15% ”.

5 In subsection (5)(a), (b) and (c), omit “or motor cycle”.

6 Omit subsection (6).

7 In subsection (7)—

a omit “or motor cycle”, and

b for “58 (hiring cars with low CO₂ emissions before 1 April 2013)” substitute “ 58A (short-term hiring in and long-term hiring out) ”.

8 After that subsection insert—

9 In the heading, omit “or motor cycle”.

58In Schedule 2 (transitionals and savings), omit paragraphs 16 and 17 (and the heading before them).

59ICTA is amended as follows.

1 Section 76ZN (car or motor cycle hire: expenses of insurance companies) is amended as follows.

2 In subsection (1)—

a in paragraph (a), omit “or motor cycle”, and

b for paragraphs (b) and (c) substitute—

3 After that subsection insert—

4 In subsection (2), for the words from “multiplying” to the end substitute “ 15% ”.

5 In subsection (5), for the words from “multiplying” to the end substitute “ 15% ”.

6 In subsection (6)(a), (b) and (c), omit “or motor cycle”.

7 Omit subsection (7).

8 In subsection (8), omit “or motor cycle” (in both places).

9 After that subsection insert—

61Omit section 76ZO (hiring cars (but not motor cycles) with low CO₂ emissions before 1 April 2013).

1 Section 578A (rules restricting deductions: car or motor cycle hire) is amended as follows.

2 In subsection (2), for paragraphs (a) and (b) substitute

3 Omit subsections (2A) and (2B).

4 After subsection (2B) insert—

5 In subsection (3), for the words from “multiplying” to the end substitute “ 15% ”.

6 In subsection (4), for “multiplying it by the fraction in subsection (3) above” substitute “ 15% ”.

7 After that subsection insert—

1 Section 578B (expenditure on car or motor cycle hire: supplementary) is amended as follows.

2 In subsection (1)—

a omit “one”,

b before paragraph (a) insert—

c in paragraphs (a) and (b), insert at the beginning “a vehicle”, and

d omit the words after paragraph (b).

3 In subsection (2)—

a omit paragraph (b), and

b insert at the end—

4 In subsection (3), omit “section 578A and”.

5 Omit subsection (4).

Consequential repeals¶

64In consequence of the amendments made by this Part of this Schedule, omit—

a in FA 2008, section 77(4)(b), and

b in CTA 2009, in Schedule 1, paragraph 45.

Commencement¶

65For the purposes of this Part of this Schedule—

a the first relevant date is—

i for corporation tax purposes, 1 April 2009, and

ii for income tax purposes, 6 April 2009, and

b the second relevant date is—

i for corporation tax purposes, 1 April 2010, and

ii for income tax purposes, 6 April 2010, and

1 The amendments made by this Part of this Schedule have effect in relation to deductions for expenses incurred on the hiring of a car or motor cycle under an agreement under which the hire period begins on or after the first relevant date (but see paragraph 67).

2 For the purposes of this paragraph and paragraph 67, the hire period, in relation to an agreement, begins on the first day on which the car or motor cycle is required to be made available for use under the agreement.

Election for new regime not to apply in certain cases¶

1 This paragraph applies where—

a a person incurs expenses on the hiring of a car or motor cycle under an agreement entered into on or before 8 December 2008, and

b the hire period begins before the second relevant date.

2 If the person makes an election under this paragraph, none of the amendments made by this Part of this Schedule has effect in relation to any deduction for expenses incurred by the person on the hiring of the car or motor cycle under the agreement.

3 The election must be made by notice given to an officer of Revenue and Customs—

a for income tax purposes, on or before the normal time limit for amending a tax return for the tax year in which the relevant chargeable period ends, and

b for corporation tax purposes, no later than 2 years after the end of the relevant chargeable period.

4 “The relevant chargeable period” means the first chargeable period (as defined in section 6 of CAA 2001) in which any expenditure by the person on the provision of the car or motor cycle under the agreement was incurred.

5 The election is irrevocable.

6 All such assessments and adjustments of assessments are to be made as are necessary to give effect to the election.

7 For the purpose of this paragraph, an agreement is entered into on the first date on which the following conditions are met—

a there is a contract in writing for the use of the car or motor cycle by the person,

b the contract is unconditional or, if it is conditional, the conditions have been met, and

c no terms remain to be agreed.

Saving¶

68The repeal of section 82 of CAA 2001 (meaning of “qualifying hire car”) by Part 1 of this Schedule does not affect the continued operation of the following provisions until they are repealed by this Part of this Schedule—

a section 578B(2)(b) of ICTA,

b section 49(2)(c) of ITTOIA 2005, and

c section 57(2)(c) of CTA 2009.

SCHEDULE 12 ¶

Reallocation of chargeable gain or loss within a group

Section 31

Main provisions¶

1In TCGA 1992, for section 171A substitute—

171A Election to reallocate gain or loss to another member of the group

1 This section applies where—

a a chargeable gain or an allowable loss accrues to a company (“company A”) in respect of an asset (or would so accrue but for an election under this section),

b at the time of accrual, company A and another company (“company B”) are members of the same group, and

c had company A disposed of the asset to company B immediately before the time of accrual, section 171(1) would have applied.

2 In determining for the purposes of subsection (1)(c) whether subsection (1) of section 171 would have applied, it is to be assumed that subsection (1A)(b) of that section read—

3 In this section “the time of accrual” means the time the chargeable gain or allowable loss accrues to company A (or would so accrue but for an election under this section).

4 Companies A and B may make a joint election to transfer the chargeable gain or allowable loss, or such part of it as is specified in the election, from company A to company B.

5 An election under this section must be made—

a by notice to an officer of Revenue and Customs, and

b no later than two years after the end of the accounting period of company A in which the time of accrual falls.

6 An election, or two or more elections made simultaneously, is or are of no effect if, taken together with each earlier election (if any) made in respect of the same gain or loss, it or they would (apart from this subsection) have effect in relation to an amount exceeding the gain or loss.

7 This section does not apply in relation to a chargeable gain or allowable loss that accrues by virtue of section 179.For provision as to the reallocation within a group of gains and losses arising on such a disposal, see section 179A.

8 For the effect of an election under this section, see section 171B.

171B Election under section 171A: effect

1 This section applies where an election is made under section 171A.

2 The effect of the election is that the chargeable gain or allowable loss, or such amount of it as is specified in the election, is treated as accruing not to company A but to company B.

3 The gain or loss treated as accruing to company B is to be taken to accrue at the time that, had the election not been made, it would have accrued to company A.

4 Where company B is not resident in the United Kingdom, the gain or loss treated as accruing to it is to be taken to accrue in respect of a chargeable asset held by it.

5 For this purpose an asset is a “chargeable asset” in relation to a company at any time if any gain accruing to the company on a disposal of the asset by the company at that time would be a chargeable gain and would by virtue of section 10B form part of its chargeable profits for corporation tax purposes.

6 Any payment made by company A to company B or by company B to company A, in pursuance of an agreement between them in connection with the election—

a is not to be taken into account in computing profits or losses of either company for corporation tax purposes, and

b is not for any purposes of the Corporation Tax Acts to be regarded as a distribution,

provided it does not exceed the amount of the chargeable gain or allowable loss that is treated, as a result of the election, as accruing to company B.

171C Elections under section 171A: insurance companies

1 This section applies where —

a an election is made under section 171A in relation to a gain or loss, and

b company B is an insurance company.

2 For the purposes of section 171A(1)(c), section 440(3) of the Taxes Act (disposals of certain assets by and to insurance companies to fall outside the rule in section 171) is to be disregarded.

3 Subsection (2) does not apply if—

a company A is an insurance company, and

b the gain or loss arose in respect of the disposal of an asset that, immediately before the disposal, was part of that company's long-term insurance fund.

4 The chargeable gain or allowable loss treated as accruing to company B as a result of the election is to be treated as arising in respect of an asset that is not part of company B's long-term insurance fund.

5 In this section “insurance company” and “long-term insurance fund” have the same meaning as in Chapter 1 of Part 12 of the Taxes Act (see section 431(2) of that Act).

Consequential amendments¶

^F1042. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F1703. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4In consequence of the amendment made by paragraph 1, omit—

a in FA 2000, section 101,

b in FA 2001, section 77,

c in FA 2003, in Schedule 33, paragraph 17, and

d in F(No.2)A 2005, section 36.

Commencement¶

5The amendments made by this Schedule have effect in relation to chargeable gains and allowable losses accruing on or after the day on which this Act is passed.

SCHEDULE 13 ¶

Chargeable gains in stock lending: insolvency etc of borrower

Section 32

1TCGA 1992 is amended as follows.

1 Section 263B (stock lending arrangements) is amended as follows.

2 In subsection (2), for “section 263C(2)” substitute “ sections 263C(2) and 263CA(3) and (5) ”.

3 In subsection (4)—

a in paragraph (a), insert at the end “for a consideration equal to their market value at that time”,

b in paragraph (b), after “at that time” insert “ for that consideration ”, and

c insert at the end (not as part of paragraph (c))— “ This subsection does not apply where section 263CA (insolvency of borrower) applies. ”

4 In subsection (7), omit the definition of “interest”.

3After section 263C (stock lending involving redemption) insert—

263CA Stock lending: insolvency etc of borrower

1 This section applies where, in the case of any stock lending arrangement—

a the borrower (B) becomes insolvent after the lender (L) has transferred the securities,

b as a result of the insolvency, the requirement for B to make a transfer back to L will not be complied with as regards some or all of the securities,

c collateral is used (whether directly or indirectly) to enable L to acquire securities (“replacement securities”) of the same description as the securities which will not be transferred back, and

d the replacement securities are acquired before the end of the period of 30 days beginning with the day on which B becomes insolvent (“the insolvency date”).

2 In accordance with section 263B(2), the transfer of the securities under the arrangement is not to be regarded as a disposal by L for the purposes of this Act (but this is subject to subsection (5)).

3 B is to be treated for the purposes of this Act as having acquired the securities which will not be transferred back to L; and that acquisition is to be treated—

a as being made on the insolvency date, and

b as being for a consideration equal to their market value on that date.

4 The acquisition of the replacement securities is to be treated, as regards L, as if it were a transfer back of securities in accordance with the arrangement (so that, in accordance with section 263B(2), that acquisition is not regarded as an acquisition by L for the purposes of this Act).

5 If the number of replacement securities is less than the number of securities which B is treated as having acquired, L is to be treated for the purposes of this Act as having made a disposal, at the insolvency date, of the difference (“the deemed disposal”).

6 The consideration for the deemed disposal is—

a where all the collateral is used to enable L to acquire replacement securities, nil, and

b where not all the collateral is so used, the difference between—

i the market value (at the insolvency date) of the number of securities which could have been acquired using the collateral, and

ii the market value (at that date) of the number of securities which were in fact so acquired.

7 But if L at any time receives any amount (whether arising out of B's insolvency or otherwise) in respect of B's liability to L in respect of the securities which are treated under subsection (5) as having been disposed of by L that amount is to be treated as a chargeable gain accruing at that time to L.

8 The liability mentioned in subsection (7) is not to be treated as giving rise to a relevant non-lending relationship for the purposes of Part 6 of CTA 2009 (relationships treated as loan relationships etc).

9 For the purposes of this section, B becomes insolvent—

a if a company voluntary arrangement takes effect under Part 1 of the Insolvency Act 1986,

b if an administration application (within the meaning of Schedule B1 to that Act) is made or a receiver or manager, or an administrative receiver, is appointed,

c on the commencement of a creditor's voluntary winding up (within the meaning of Part 4 of that Act) or a winding up by the court under Chapter 6 of that Part,

d if an individual voluntary arrangement takes effect under Part 8 of that Act,

e on the presentation of a bankruptcy petition (within the meaning of Part 9 of that Act),

f if a compromise or arrangement takes effect under Part 26 of the Companies Act 2006,

g if a bank insolvency order takes effect under Part 2 of the Banking Act 2009,

h if a bank administration order takes effect under Part 3 of that Act, or

i on the occurrence of any corresponding event which has effect under or as a result of the law of Scotland or Northern Ireland or a country or territory outside the United Kingdom.

10 In this section—

a “collateral” means an amount of money or other property which—

i is provided under the arrangement (or under arrangements of which the arrangement forms part), and

ii is payable to or made available for the benefit of L for the purpose of securing the discharge of the requirement to transfer any or all of the securities back to L, and

b any expression used in this section and in section 263B has the same meaning as in that section.

1 The amendments made by paragraphs 2(2) and (3)(c) and 3 apply—

a in any case where B becomes insolvent on or after 24 November 2008, and

b where L makes an election under this paragraph, in any case where B becomes insolvent in the period beginning on 1 September 2008 and ending on 23 November 2008.

2 An election under sub-paragraph (1)(b) must relate to all stock lending arrangements in which L is the lender and B is the borrower and must be made—

a where L is a company (within the meaning given by section 288(1) of TCGA 1992), no later than the second anniversary of the end of the accounting period of L in which 23 November 2008 falls, and

b otherwise, no later than 31 January 2011.

3 Where section 263CA (inserted by paragraph 3) applies to any case which occurs before a period for which CTA 2009 has effect, the reference in subsection (8) of that section to a relevant non-lending relationship for the purposes of Part 6 of that Act is to be read as a reference to a relationship to which section 100 of FA 1996 applies.

SCHEDULE 14 ¶

Corporation tax treatment of company distributions

Section 34

Part 1 Insertion of new Part 9A of CTA 2009¶

1In CTA 2009, after Part 9 insert—

Part 9A Company distributions

Chapter 1 The charge to tax

931A Charge to tax on distributions received

1 The charge to corporation tax on income applies to any dividend or other distribution of a company, but only if the distribution is not exempt.

2 Subsection (1) does not apply in the case of a distribution of a capital nature.

3 For provision as to whether a distribution is exempt, see—

Chapter 2 (distributions received by small companies), and
Chapter 3 (distributions received by companies that are not small).

Chapter 2 Exemption of distributions received by small companies

931B Exemption from charge to tax

A dividend or other distribution of a company that is received in an accounting period of the recipient in which the recipient is a small company is exempt if—

a the payer is a resident of (and only of) the United Kingdom or a qualifying territory at the time that the distribution is received,

b the distribution is not of a kind mentioned in paragraph (d) or (e) of section 209(2) of ICTA (certain non-dividend distributions),

c no deduction is allowed to a resident of any territory outside the United Kingdom under the law of that territory in respect of the distribution, and

d the distribution is not made as part of a tax advantage scheme.

931C Meaning of “qualifying territory”

1 For the purpose of section 931B a territory is a “qualifying territory” if—

a arrangements to which section 788 of ICTA applies (“double taxation relief arrangements”) have effect in relation to the territory, and

b the arrangements contain a non-discrimination provision.

2 The Treasury may by regulations—

a provide that a territory specified in or of a description specified in the regulations that does not satisfy subsection (1)(a) or (b) is a qualifying territory for the purpose of section 931B, and

b provide that a territory so specified or described that satisfies subsection (1)(a) and (b) is not a qualifying territory for that purpose.

3 For the purpose of section 931B a company is a resident of a territory if, under the laws of the territory, the company is liable to tax there—

a by reason of its domicile, residence or place of management, but

b not in respect only of income from sources in that territory or capital situated there.

4 In subsection (1) “non-discrimination provision”, in relation to double taxation relief arrangements, means a provision to the effect that nationals of a state which is a party to those arrangements (a “contracting state”) are not to be subject in any other contracting state to—

a any taxation, or

b any requirement connected with taxation,

which is other or more burdensome than the taxation and connected requirements to which nationals of that other state in the same circumstances (in particular with respect to residence) are or may be subjected.

5 In subsection (4) “national”, in relation to a contracting state, includes—

a an individual possessing the nationality or citizenship of the contracting state, and

b a legal person, partnership or association deriving its status as such from the laws in force in that contracting state.

6 Regulations under this section may—

a describe a territory by reference to the double taxation relief arrangements for the time being in force in relation to the territory,

b make different provision in relation to different descriptions of company, and

c make provision having effect in relation to accounting periods current on the day on which the regulations are made.

Chapter 3 Exemption of distributions received by companies that are not small

931D Exemption from charge to tax

A dividend or other distribution of a company that is received in an accounting period of the recipient in which the recipient is not a small company is exempt if—

a the distribution falls into an exempt class (see sections 931E to 931Q),

b the distribution is not of a kind mentioned in paragraph (d) or (e) of section 209(2) of ICTA (certain non-dividend distributions), and

c no deduction is allowed to a resident of any territory outside the United Kingdom under the law of that territory in respect of the distribution.

Exempt classes

931E Distributions from controlled companies

1 A dividend or other distribution falls into an exempt class if condition A or B is met.

2 Condition A is that the recipient controls the payer.

3 Condition B is that—

a the recipient is one of two persons who, taken together, control the payer,

b the recipient is a person in whose case the 40% test in section 755D(3) of ICTA is satisfied, and

c the other is a person in whose case the 40% test in section 755D(4) of ICTA is satisfied.

4 Section 755D of ICTA (meaning of “control” etc) applies for the purposes of this section.

5 As so applied, that section has effect with the omission of subsection (6)(c) and (d).

931F Distributions in respect of non-redeemable ordinary shares

A dividend or other distribution falls into an exempt class if it is made in respect of a share that—

a is an ordinary share, and

b is not redeemable.

931G Distributions in respect of portfolio holdings

1 A dividend or other distribution falls into an exempt class if the recipient—

a holds less than 10% of the issued share capital of the payer,

b is entitled to less than 10% of the profits available for distribution to holders of the issued share capital of the payer, and

c would be entitled on a winding up to less than 10% of the assets of the company available for distribution to holders of the issued share capital of the payer.

2 Where the payer has more than one class of share, references in subsection (1) to the issued share capital of the payer are to issued share capital of the same class as the share in respect of which the distribution is made.

3 For the purposes of this section shares are not of the same class if the amounts paid up on them (otherwise than by way of premium) are different.

931H Dividends derived from transactions not designed to reduce tax

1 A dividend falls into an exempt class if it is paid in respect of relevant profits.

2 In this section “relevant profits” means any profits available for distribution at the time that the dividend is paid, other than profits that reflect the results of a transaction, or of one or more of a series of transactions, where—

a the transaction or series of transactions achieve a reduction (other than a negligible reduction) in United Kingdom tax, and

b the purpose or one of the main purposes of that transaction or series of transactions is to achieve that reduction.

3 A dividend that falls into an exempt class otherwise than by virtue of this section is for the purposes of this section treated, so far as possible, as paid in respect of relevant profits.

4 Any other dividend is for the purposes of this section treated, so far as possible, as paid in respect of profits other than relevant profits.

5 Where by virtue of subsection (4) part of a dividend is treated as paid in respect of relevant profits and part is treated as paid in respect of profits other than relevant profits, the two parts are treated for the purposes of this Part and Part 18 of ICTA (double taxation relief) as separate dividends.

931I Dividends in respect of shares accounted for as liabilities

A dividend falls into an exempt class if the dividend is paid in respect of a share to which, at the time of the payment, section 521C (shares accounted for as liabilities treated as loan relationships) does not apply only because the condition in subsection (1)(f) of that section is not met.

Exempt classes: anti-avoidance

931J Schemes involving manipulation of controlled company rules

1 This section applies to a dividend that would, apart from this section, fall into an exempt class by virtue of section 931E.

2 The dividend does not fall into an exempt class by virtue of that section if—

a the dividend is paid as part of a scheme the main purpose, or one of the main purposes, of which is to secure that dividends of the payer received by the recipient fall into an exempt class by virtue of that section, and

b the following condition is met.

3 The condition is that the dividend is paid in respect of pre-control profits.

4 A dividend that falls into an exempt class otherwise than by virtue of section 931E is for the purposes of this section treated, so far as possible, as paid in respect of profits other than pre-control profits.

5 Any other dividend is for the purposes of this section treated, so far as possible, as paid in respect of pre-control profits.

6 In this section “pre-control profits” means any profits available for distribution at the time the dividend is paid that arose at a time when neither condition A nor condition B in section 931E was met.

7 Where—

a the condition in subsection (2)(a) is met, and

b by virtue of subsection (5) part of a dividend is treated as paid in respect of pre-control profits and part is treated as paid in respect of profits other than pre-control profits,

the two parts are treated for the purposes of this Part and Part 18 of ICTA (double taxation relief) as separate dividends.

931K Schemes involving quasi-preference or quasi-redeemable shares

1 This section applies to a dividend or other distribution that would, apart from this section, fall into an exempt class by virtue of section 931F.

2 The distribution does not fall into an exempt class by virtue of that section if—

a the distribution is made as part of a scheme the main purpose, or one of the main purposes, of which is to secure that distributions of the payer received by the recipient fall into an exempt class by virtue of that section, and

b the following condition is met.

3 The condition is that the distribution is made in respect of a share that—

a would not be an ordinary share, or

b would be redeemable,

were the rights under the scheme of each relevant person to be attached to the share.

931L Schemes involving manipulation of portfolio holdings rule

1 This section applies to a dividend or other distribution that would, apart from this section, fall into an exempt class by virtue of section 931G.

2 The distribution does not fall into an exempt class by virtue of that section if—

b the following condition is met.

3 The condition is that the distribution would not fall into an exempt class by virtue of section 931G if the reference in subsection (1) of that section to the recipient were to all relevant persons taken together.

931M Schemes in the nature of loan relationships

1 This section applies to a dividend or other distribution that does not fall into an exempt class by virtue of section 931E but would, apart from this section, fall into an exempt class otherwise than by virtue of that section.

2 The distribution does not fall into an exempt class if—

a the distribution is made as part of a tax advantage scheme, and

b conditions A to C are met.

3 Condition A is that the distribution constitutes part of a return in relation to an amount that is produced by the scheme for a relevant person, or two or more relevant persons taken together.

4 Condition B is that the return is economically equivalent to interest.

5 For this purpose a return produced for a person or persons by a scheme in relation to an amount is “economically equivalent to interest” if (and only if)—

a it is reasonable to assume that it is a return by reference to the time value of that amount of money,

b it is at a rate reasonably comparable to a commercial rate of interest, and

c at the time the scheme is entered into by the person or any of the persons, there is no practical likelihood that it will cease to be produced in accordance with the scheme.

6 Condition C is that there is a connection between the payer and the recipient for the accounting period of the payer in which the distribution is made.

7 Section 466 (companies connected for an accounting period) applies for the purposes of subsection (6) as if that subsection were a provision of Part 5 to which that section is applied (but this does not affect the application of section 1316(1) (meaning of connected persons) for the purposes of any other provision of this Part).

931N Schemes involving distributions for which deductions are given

1 This section applies to a dividend or other distribution that would, apart from this section, fall into an exempt class.

2 The distribution does not fall into an exempt class if—

a the distribution is made as part of a tax advantage scheme, and

b the following condition is met.

3 The condition is that a deduction is allowed to a resident of any territory outside the United Kingdom under the law of that territory in respect of an amount determined by reference to the distribution.

931O Schemes involving payments for distributions

1 This section applies to a dividend or other distribution that would, apart from this section, fall into an exempt class.

2 The distribution does not fall into an exempt class if—

a the distribution is made as part of a tax advantage scheme, and

b the following condition is met.

3 The condition is that the scheme includes a payment, or the giving up of a right to income, by a relevant person where—

a the payment is made, or the right to income is given up, under a liability incurred for consideration in money or money's worth all or any of which consists of, or of the right to receive, the distribution, and

b in the case of a payment, the conditions in subsections (2) and (4) to (7) of section 1301 (restriction of deductions for annual payments) apply to the payment.

931P Schemes involving payments not on arm's length terms

1 This section applies to a dividend or other distribution that would, apart from this section, fall into an exempt class.

2 The distribution does not fall into an exempt class if—

a the distribution is made as part of a tax advantage scheme, and

b the following condition is met.

3 The condition is that—

a the scheme includes a payment or receipt, or the giving up of a right to income, by a relevant person in respect of goods or services, and

b the amount of the payment or receipt, or the amount of income given up, differs from the amount the relevant person would have paid, received or given up in respect of those goods or services had the distribution not been made.

4 This section does not apply to a scheme that consists of a transaction or series of transactions in relation to which Schedule 28AA to ICTA (provision not at arms length between parties under common control) applies.

931Q Schemes involving diversion of trade income

1 This section applies to a dividend or other distribution that would, apart from this section, fall into an exempt class.

2 The distribution does not fall into an exempt class if—

a the distribution is made as part of a scheme entered into by the recipient and another relevant person (“C”),

b if C had received the distribution, it would be reasonable to assume that the distribution would be dealt with under Part 3 (trading income), and

c the main purpose, or one of the main purposes, of the scheme is to produce the result that the distribution is dealt with under this Part because it is received by the recipient.

3 For the purposes of subsection (2)(b) it is to be assumed that, in the case of any relevant transaction to which a relevant person other than C is a party, C were that party to that transaction.

4 In this section “relevant transaction” means any of the transactions giving rise to the distribution.

Chapter 4 Supplementary

Election that distribution should not be exempt

931R Election that distribution should not be exempt

1 This section applies where, apart from this section, a distribution (“the distribution”) would be exempt.

2 If the recipient so elects, the distribution is not exempt.

3 An election under this section must be made on or before the second anniversary of the end of the accounting period in which the distribution is received.

4 Subsection (5) applies where the distribution is a dividend that is treated for certain purposes of Part 18 of ICTA (double taxation relief) as two separate dividends by virtue of section 801C of that Act (separate streaming of dividend so far as representing an ADP dividend of a CFC).

5 If the recipient so elects—

a the distribution is to be treated for the purposes of this Part as if it were an ADP dividend and a separate residual dividend as provided for in that section of that Act, and

b the ADP dividend is not exempt.

6 The reference in subsection (4) to section 801C of ICTA is to that section as it continues to have effect in accordance with paragraph 8(1) of Schedule 16 to FA 2009 in relation to dividends paid on or after 1 July 2009 for accounting periods beginning before that day.

Interpretation

931S Meaning of “small company”

1 For the purposes of this Part a company is a “small company” in an accounting period if it is in that period a micro or small enterprise, as defined in the Annex to Commission Recommendation 2003/361/EC of 6 May 2003.

2 But a company is not a “small company” in an accounting period if it is at any time in that period—

a an open-ended investment company,

b an authorised unit trust scheme,

c an insurance company, or

d a friendly society.

3 In subsection (2)—

“open-ended investment company” has the meaning given by section 236 of FISMA 2000;
“authorised unit trust scheme” means a unit trust scheme (within the meaning given by section 237 of FISMA 2000) in relation to which a order under section 243 of that Act (authorisation orders) is in force;
“insurance company” has the meaning given by section 431 of ICTA;
“friendly society” has the meaning given by section 466(2) of ICTA.

931T Meaning of “payer”, “recipient” and “relevant person”

In this Part—

“the payer”, in relation to a distribution, means the company that makes the distribution;
“the recipient”, in relation to a distribution, means the company that receives the distribution;
“a relevant person”, in relation to a distribution, means—
1. the company that receives the distribution, or
2. any person connected with that company.

931U Meaning of “ordinary share” and “redeemable”

1 In this Part “ordinary share” means a share that does not carry any present or future preferential right to dividends or to a company's assets on its winding up.

2 A share is regarded as “redeemable” for the purposes of this Part only if it is redeemable as a result of its terms of issue (or any collateral arrangements)—

a requiring redemption,

b entitling the holder to require redemption, or

c entitling the issuing company to redeem.

931V Meaning of “scheme” and “tax advantage scheme”

“ For the purposes of this Part—

“scheme” includes any scheme, arrangements or understanding of any kind whatever, whether or not legally enforceable, involving a single transaction or two or more transactions;
“tax advantage scheme” means a scheme the main purpose, or one of the main purposes, of which is to obtain a tax advantage (other than a negligible tax advantage).

2 In this section “tax advantage” has the meaning given by section 840ZA of ICTA.

Boundary provisions

931W Provisions which must be given priority over this Part

1 Any income so far as it falls within—

a this Part, and

b Chapter 2 of Part 3 (income taxed as trade profits),

is dealt with under Part 3.

2 Any income so far as it falls within—

a this Part, and

b Chapter 3 of Part 4 (profits of property businesses) so far as the Chapter relates to a UK property business,

is dealt with under Part 4.

3 Any income so far as it falls within—

a this Part, and

b Chapter 1 of Part 12 of ICTA (insurance companies),

is dealt with under that Chapter.

Part 2 Other amendments¶

ICTA¶

2ICTA is amended as follows.

3In section 13(7) (small companies' relief), omit “resident in the United Kingdom”.

1 Section 505(1)(c) (charitable companies: general) is amended as follows.

2 After sub-paragraph (ii) insert—

3 Omit sub-paragraph (iib).

1 Section 95ZA (taxation of UK distributions received by insurance companies) is amended as follows.

2 In subsection (1), for “section 1285” substitute “ section 130(2) ”.

3 In subsection (2)(a), omit “resident in the United Kingdom”.

^F486. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7In section 795 (double taxation relief: computation of income subject to foreign tax), omit subsection (3A).

^F228. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9Omit sections 806A to 806K (double taxation relief in relation to foreign dividends: onshore pooling and utilisation of eligible unrelieved foreign tax).

10In section 826 (interest on tax overpaid), omit subsection (7BC).

^F21611. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F19612. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13In paragraph 5(3)(c) of Schedule 27 (distributing funds: United Kingdom equivalent profits)—

a for “section 1285” substitute “ Chapter 2 or 3 of Part 9A ”, and

b omit “in like manner as if they were dividends or distributions of a company resident outside the United Kingdom”.

^F16414. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

FA 1989¶

15FA 1989 is amended as follows.

1 Section 85A (life assurance: excess adjusted Case I profits) is amended as follows.

2 In paragraph (a) of subsection (6), for “distributions received by the company in the accounting period from companies resident in the United Kingdom” substitute “ non-taxable distributions received by the company in the accounting period ”.

3 After that subsection insert—

1 Section 89 (life assurance: policy holders' share of profits) is amended as follows.

2 In subsection (2)(b), for “distributions received from companies resident in the United Kingdom” substitute “ non-taxable distributions received ”.

3 In subsection (7), after the definition of “Case I profits” insert—

FA 1994¶

18In section 219 of FA 1994 (taxation of profits of Lloyd's underwriters etc)—

a in subsection (3), omit “Subject to subsection (4A) below,”, and

b omit subsections (4), (4A) and (4C).

FA 2006¶

^F21219. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CTA 2009¶

20CTA 2009 is amended as follows.

21In section 1(2) (overview of Act), before the “and” at the end of paragraph (f) insert—

22For section 130 (traders receiving distributions etc) substitute—

23In section 932(1) (overview of Part 10), omit paragraph (a).

24Omit Chapter 2 of Part 10 (taxation of dividends from non-UK resident companies).

1 Section 974 (charge to tax in relation to sale of foreign dividend coupons) is amended as follows.

2 In subsection (3)(a), after “realisation of” insert “ taxable ”.

3 In subsection (4), after “sale of” insert “ taxable ”.

4 After subsection (4) insert—

26In section 982(1)(a) and (2)(a) (boundary provisions for Part 10), omit “2,”.

27Omit section 1285 (exemption for distributions of UK resident companies).

28In section 1310(4) (orders and regulations subject to affirmative resolution procedure in House of Commons), before paragraph (a) insert—

29In Schedule 4 (index of defined expressions), insert at the appropriate places—

;

Consequential repeals¶

30In consequence of the amendments made by this Schedule, omit—

a in F(No.2)A 1997, section 22(2) and (3)(a),

b in FA 2000, in Schedule 30, paragraphs 8(4)(c), 21 and 22,

c in FA 2001, in Schedule 27, paragraphs 1(3), 4 and 5,

d in FA 2008, in Schedule 39, paragraph 25, and

e in CTA 2009, in Schedule 1, paragraphs 174(4)(c), 252 to 254 and 392(4) and (5).

Part 3 Commencement etc¶

Commencement¶

31The amendments made by this Schedule have effect in relation to distributions paid on or after 1 July 2009 (“the commencement date”).

Transitional provision¶

1 This paragraph contains transitional provision in relation to the commencement of Part 9A of CTA 2009 (as inserted by paragraph 1).

2 In section 931H—

a a reference to a transaction that is one of a series of transactions does not include a transaction where each transaction in the series was entered into more than 12 months before the commencement date,

b a reference to any other transaction does not include a transaction entered into more than 12 months before the commencement date, and

c a reference to a dividend that falls into (or does not fall into) an exempt class otherwise than by virtue of that section is, in relation to a dividend paid before the commencement date, to a dividend that would have so fallen (or not so fallen) had that section had effect in relation to the dividend.

3 In section 931J—

a a reference to profits available for distribution that arose at any time does not include such profits that arose in a period of account ending more than 12 months before the commencement date, and

b a reference to a dividend that falls into (or does not fall into) an exempt class otherwise than by virtue of section 931E is, in relation to a dividend paid before the commencement date, to a dividend that would have so fallen (or not so fallen) had that section had effect in relation to the dividend.

SCHEDULE 15 ¶

Tax treatment of financing costs and income

Section 35

Part 1 Introduction¶

Overview¶

^F1581. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part 2 Application of this Schedule¶

Application of Schedule¶

^F1582. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

UK net debt of the worldwide group for period of account of worldwide group¶

^F1583. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net debt of a company¶

^F1584. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Worldwide gross debt of worldwide group for period of account of worldwide group¶

^F1585. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

References to amounts disclosed in balance sheet of relevant group company¶

^F1586. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Qualifying financial services groups¶

^F1587. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Qualifying activities¶

^F1588. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Lending activities and activities ancillary to lending activities¶

^F1589. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Relevant dealing in financial instruments¶

^F15811. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

UK trading income of the worldwide group¶

^F15812. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Worldwide trading income of the worldwide group¶

^F15813. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Foreign currency accounting¶

^F15814. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part 3 Disallowance of deductions¶

Application of Part and meaning of “total disallowed amount”¶

^F15815. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of “company to which this Part applies”¶

^F15816. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Appointment of authorised company for relevant period of account¶

^F15817. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of “the reporting body”¶

^F15818. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Statement of allocated disallowances: submission¶

^F15819. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Statement of allocated disallowances: submission of revised statement¶

^F15820. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Statement of allocated disallowances: requirements¶

^F15821. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Statement of allocated disallowances: effect¶

^F15822. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Company tax returns¶

^F15823. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Power to make regulations about statement of allocated disallowances¶

^F15824. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Failure of reporting body to submit statement of allocated disallowances¶

^F15825. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Powers to make regulations in relation to reductions required under paragraph 25¶

^F15826. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part 4 Exemption of financing income¶

Application of Part and meaning of “total disallowed amount”¶

^F15827. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of “company to which this Part applies”¶

^F15828. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Appointment of authorised company for relevant period of account¶

^F15829. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of “the reporting body”¶

^F15830. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Statement of allocated exemptions: submission¶

^F15831. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Statement of allocated exemptions: submission of revised statement¶

^F15832. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Statement of allocated exemptions: requirements¶

^F15833. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Statement of allocated exemptions: effect¶

^F15834. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Company tax returns¶

^F15835. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Power to make regulations about statement of allocated exemptions¶

^F15836. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Failure of reporting body to submit statement of allocated exemptions¶

^F15837. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Power to make regulations in relation to reductions required under paragraph 37¶

^F15838. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balancing payments between group companies: no charge to, or relief from, tax¶

^F15839. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part 5 Intra-group financing income where payer denied deduction¶

Exemption from tax for certain financing income received from certain EEA companies¶

^F15840. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of “relevant associate”¶

^F15841. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of “tax-resident” and “EEA territory”¶

^F15842. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Qualifying EEA tax relief for payment in the current period or a previous period¶

^F15843. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Qualifying EEA tax relief for payment in future period¶

^F15844. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

References to tax of a territory¶

^F15845. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financing income amounts of a company¶

^F15846. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part 6 Anti-avoidance¶

Schemes involving manipulation of rules in Part 2¶

^F15847. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Schemes involving manipulation of rules in Parts 3 and 4¶

^F15848. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of “relevant net deduction”¶

^F15849. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Calculation of amounts¶

^F15850. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of “carried-back amount” and “carried-forward amount”¶

^F15851. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Schemes involving manipulation of rules in Part 5¶

^F15852. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of “scheme” and “excluded scheme”¶

^F15853. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part 7 “Financing expense amount” and “financing income amount”¶

The financing expense amounts of a company¶

^F15854. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The financing income amounts of a company¶

^F15855. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interpretation of paragraphs 54 and 55¶

^F15856. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Group treasury companies¶

^F15857. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Real estate investment trusts¶

^F15858. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Companies engaged in oil extraction activities¶

^F15859. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Intra-group short-term finance: financing expense¶

^F15860. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Intra-group short-term finance: financing income¶

^F15861. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Short-term loan relationships¶

^F15862. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Stranded deficits in non-trading loan relationships: financing expense¶

^F15863. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Stranded deficits in non-trading loan relationships: financing income¶

^F15864. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Stranded management expenses in non-trading loan relationships: financing expense¶

^F15865. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Stranded management expenses in non-trading loan relationships: financing income¶

^F15866. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Charities¶

^F15867. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Educational and public bodies¶

^F15868. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interpretation of paragraphs 57 to 68¶

^F15869. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part 8 The “tested expense amount” and “tested income amount”¶

The tested expense amount¶

^F15870. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The tested income amount¶

^F15871. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Companies with net financing deduction or net financing income that is small¶

^F15872. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part 9 The “available amount”¶

The available amount¶

^F15873. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Group members with income from oil extraction subject to particular tax treatment in UK¶

^F15874. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Group members with income from shipping subject to particular tax treatment in UK¶

^F15875. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Group members with income from property rental subject to particular tax treatment in UK¶

^F15876. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of accounting expressions used in this Part¶

^F15877. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part 10 Other interpretative provisions¶

The worldwide group¶

^F15878. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of “group”¶

^F15879. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of “ultimate parent”¶

^F15880. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of “corporate entity”¶

^F15881. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of “relevant non-corporate entity”¶

^F15882. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Treatment of entities stapled to corporate entities or relevant non-corporate entities¶

^F15883. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Treatment of business combinations¶

^F15884. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of “large” in relation to a group¶

^F15885. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of “UK group company” and “relevant group company”¶

^F15886. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financial statements of the worldwide group¶

^F15887. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-compliant financial statements of worldwide group¶

^F15888. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-existent financial statements of worldwide group¶

^F15889. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

References to amounts disclosed in financial statements¶

^F15890. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Translation of amounts disclosed in financial statements into sterling¶

^F15891. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Expressions taking their meaning from international accounting standards¶

^F15892. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of “relevant accounting period”¶

^F15893. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of “the Commissioners” and “HMRC”¶

^F15894. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part 11 Consequential amendments and commencement¶

Consequential amendments¶

^F15895. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F6296. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commencement¶

^F6097. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Anti-avoidance: change of period of account of worldwide group¶

^F6098. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transitional provision¶

^F6099. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SCHEDULE 16 ¶

Controlled foreign companies

Section 36

Part 1 Abolition of acceptable distribution policy exemption¶

Abolition of acceptable distribution policy exemption¶

1 ICTA is amended as follows.

2 In section 748(1) (cases where apportionment under section 747(3) does not apply), omit paragraph (a) (including the “or” at the end).

3 In Schedule 25 (supplementary provision in relation to cases where apportionment under section 747(3) does not apply), omit Part 1 (acceptable distribution policy).

Consequential amendments¶

1 ICTA is amended as follows.

2 Omit section 754A (returns where it is not established whether acceptable distribution policy applies).

3 In section 801 (dividends paid between related companies: relief for UK and third country taxes), omit subsections (2A)(aa), (2B), (6) and (7).

4 Omit section 801C (double taxation relief: separate streaming of dividend so far as representing an ADP dividend of a CFC).

5 In section 803A (foreign taxation of group as single entity), omit subsection (1A).

6 In Schedule 24 (assumptions for calculating chargeable profits, creditable tax and corresponding UK tax of foreign companies), omit—

a in paragraph 1(3A), paragraph (b)(ii) (and the “and” before it) and the words “or which is an ADP exempt period” (in both places),

b paragraph 1(6),

c paragraph (b) of paragraph 2(1) (and the “or” before it),

d paragraph (b) of paragraph 4(1A) (and the “or” before it),

e paragraph 4(3A),

f in paragraph 9(1)(c), “, and is not to be assumed by virtue of paragraph 2(1)(b) above to have been resident,”, and

g paragraph (b) of paragraph 10(1) (and the “or” before it).

3In paragraph 116 of Schedule 29 to FA 2002 (assumptions for calculating chargeable profits of CFCs in connection with intangible fixed assets), omit paragraph (b) of sub-paragraph (2) (and the “or” before it).

4In section 870 of CTA 2009 (assumptions for calculating chargeable profits of CFCs in connection with intangible fixed assets), omit—

a paragraph (b) of subsection (3) (and the “or” before it), and

b subsection (7).

5In consequence of the amendments made by paragraphs 1 to 4, omit—

a in FA 1990, section 67(3)(b) and (c),

b in FA 1994, section 134,

c in FA 1996, in Schedule 36, paragraphs 3(3), (8) and (9) and 4(2) and (3)(b),

d in FA 1998, in Schedule 17, paragraphs 10, 17(2) to (5) and 26 to 28,

e in FA 1999, section 88,

f in FA 2000, in Schedule 30, paragraph 13,

g in FA 2001, section 82,

h in FA 2005, sections 89 and 90,

i in FA 2007, in Schedule 7, paragraph 56,

j in FA 2008, section 64(4) and, in Schedule 17, paragraph 29, and

k in this Act, section 57(4).

Commencement¶

6The amendments made by this Part have effect in relation to accounting periods of controlled foreign companies beginning on or after 1 July 2009.

Periods straddling 1 July 2009¶

1 Where a controlled foreign company has an accounting period (“the straddling accounting period”) that—

a begins before 1 July 2009, and

b ends on or after that date,

the straddling accounting period is to be treated as split.

2 Where this paragraph provides that the straddling accounting period is to be treated as “split”—

a that part of the straddling accounting period that falls before 1 July 2009 and that part of the straddling accounting period that falls on or after that date are to be treated for the purposes of Chapter 4 of Part 17, and Part 18, of ICTAand Part 2 of TIOPA 2010 as separate accounting periods, and

b the company's chargeable profits for the straddling accounting period, and its creditable tax (if any) for that period, are to be apportioned to the two separate accounting periods on a just and reasonable basis.

Transitional provision¶

1 The amendments made by this Part do not affect the application of sections 801, 801C or 803A of, or Part 1 of Schedule 25 to, ICTA in relation to dividends paid on or after 1 July 2009 if they are paid for accounting periods beginning before that date.

2 Sub-paragraph (3) applies where a dividend of a controlled foreign company is paid during the second of the two accounting periods provided for by paragraph 7(2).

3 For the purposes of Part 1 of Schedule 25 to ICTA, section 799 of that Act has effect as if the reference in subsection (3)(c) to the last period for which accounts of the company were made up which ended before the dividend became payable were to the first of the two accounting periods provided for by paragraph 7(2).

Interpretation¶

9The following expressions have the same meaning for the purposes of this Part as they have for the purposes of Chapter 4 of Part 17 of ICTA—

“accounting period”;
“chargeable profits”;
“controlled foreign company”;
“creditable tax”.

Part 2 Amendment of exempt activities exemption¶

Abolition of special rules for holding companies other than local holding companies¶

1 Part 2 of Schedule 25 to ICTA (exempt activities) is amended as follows.

2 In paragraph 6 (definition of exempt activities)—

a in sub-paragraph (1)(c), for “(2), (3), (4) or (4A)” substitute “ (2) or (3) ”,

b in sub-paragraph (3)(b), omit “or superior holding companies”,

c omit sub-paragraphs (4) to (4BB),

d in sub-paragraph (5)—

i for “sub-paragraphs (3) to (4B)” substitute “ sub-paragraph (3) ”, and

ii omit “or superior holding company”,

e in sub-paragraph (5ZA), omit “or superior holding company”,

f in sub-paragraph (5ZB), omit “or superior holding company”,

g in sub-paragraph (5A), for “sub-paragraphs (3) to (4B)” substitute “ sub-paragraph (3) ”,

h omit sub-paragraph (5B),

i in sub-paragraph (5C), omit “or superior holding company”, and

j in sub-paragraph (6), for “sub-paragraphs (1) to (4BB) above” substitute “ this paragraph ”.

3 In paragraph 8(3) (paragraph 6(1)(b) condition), omit “or superior holding company”.

4 In paragraph 12 (definition of “holding company” etc)—

a in sub-paragraph (1), for “paragraph 12A below and in” substitute “ in ”,

b in sub-paragraph (4), omit “or (4), as the case may be,”, and

c in sub-paragraph (5)—

i in the words before paragraph (a), for “sub-paragraphs (3) and (4)” substitute “ sub-paragraph (3) ”, and

ii in paragraph (a), omit “or superior holding company”.

5 Omit paragraph 12A (definition of “superior holding company” etc).

11In consequence of the amendments made by paragraph 10, omit—

a in FA 1998, in Schedule 17, paragraphs 30(4)(a), (5), (6) and (8), 31, 32(2) and (3)(a) and 33,

b in FA 2000, in Schedule 31, paragraph 7(2) to (7), (10) and (11), and

c in FA 2003, in Schedule 42, paragraph 2(2).

Commencement¶

1 The amendments made by this Part have effect in relation to accounting periods of controlled foreign companies beginning on or after the commencement date.

2 For this purpose “the commencement date” means—

a in relation to a controlled foreign company other than a qualifying holding company, 1 July 2009, ^F176...

^F176b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3 The amendments made by this Part have no effect in relation to a qualifying holding company.

Meaning of “qualifying holding company” and “exempt holding company”¶

1 In this Part “qualifying holding company” means a controlled foreign company that was an exempt holding company in relation to the last accounting period to end before 1 July 2009.

2 For the purposes of sub-paragraph (1) paragraphs 14 and 15 are to be disregarded.

3 For the purposes of this Part a company is an “exempt holding company” in relation to an accounting period if—

a throughout the period the company is, within the meaning of Part 2 of Schedule 25 to ICTA, engaged in exempt activities, and

b paragraph 6(4) or (4A) of that Schedule applies to the company in relation to the period.

Periods straddling 1 July 2009¶

1 Where a controlled foreign company has an accounting period (“the straddling accounting period”) that—

a begins before 1 July 2009, and

b ends on or after that date,

the straddling accounting period is to be treated as split.

2 Where this paragraph provides that the straddling accounting period is to be treated as “split”—

b the company's gross income for the straddling accounting period, and its chargeable profits and creditable tax (if any) for that period, are to be apportioned to the two separate accounting periods on a time basis according to the respective lengths of the periods.

Qualifying holding companies: periods straddling 1 July 2012¶

^F7715. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Qualifying holding companies: definition of “relevant accounting period”¶

16For the purposes of paragraph 17 an accounting period of a qualifying holding company is a “relevant accounting period” if it—

a begins on or after 1 July 2009 but before 1 January 2013, ^F245...

^F245b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Qualifying holding companies: treatment during three years before 1 July 2012¶

1 In its application in relation to a relevant accounting period of a qualifying holding company, Part 2 of Schedule 25 to ICTA has effect subject to the modifications in this paragraph.

2 Sub-paragraph (4) or (4A) of paragraph 6 applies to a company only if—

a the condition specified in that sub-paragraph is met, and

b conditions A and B are met.

3 Condition A is that at all material times the company was a member of a group with the same ultimate corporate parent.

4 For this purpose the following times are “material”—

a the beginning of 9 December 2008, and

b all times during the accounting period in question.

5 Condition B is that amount X does not exceed amount Y.

6 Amount X is the amount of the company's gross income in the accounting period in question that is non-qualifying gross income.

7 Amount Y is (subject to sub-paragraph (8))—

a where there are three reference periods in relation to the company, the greatest of the amounts of the company's non-qualifying gross income in each of those periods,

b where there are two reference periods in relation to the company, the greater of the amounts of the company's non-qualifying gross income in each of those periods,

c where there is one reference period in relation to the company, the amount of the company's non-qualifying gross income in that period, or

d where there is no reference period in relation to the company, the amount of the company's non-qualifying gross income in the period of 12 months ending with 9 December 2008.

8 Where the number of days in the period by reference to which amount X is determined is not the same as the number of days in the period by reference to which amount Y is determined, amount Y is to be multiplied by—

\frac{DX}{DY}

where—

DX is the number of days in the period by reference to which amount X is determined, and

DY is the number of days in the period by reference to which amount Y is determined.

9 In this paragraph—

“non-qualifying gross income” means gross income that does not satisfy the test in paragraph 6(3), (4) or (4A) of Schedule 25 to ICTA;
“a reference period”, in relation to a company, means an accounting period of the company that—
1. is one of the last three accounting periods of the company to end before 9 December 2008, and
2. is an accounting period in relation to which the company is an exempt holding company.

Meaning of “ultimate corporate parent” and “group” for the purposes of paragraph 17(3)¶

1 In paragraph 17(3) the “ultimate corporate parent”, in relation to a group, means a member of the group that—

a is a body corporate, and

b is not a subsidiary (whether direct or indirect) of another body corporate.

2 A reference in this paragraph to a body corporate does not include—

a the Crown,

b a Minister of the Crown,

c a government department,

d a Northern Ireland department, or

e a foreign sovereign power.

3 In paragraph 17(3) and this paragraph “group” has the meaning for the time being given by international accounting standards.

4 In this paragraph “subsidiary” has the meaning for the time being given by international accounting standards.

Reference periods: anti-avoidance¶

1 This paragraph applies where, on or after 9 December 2008, a company alters its accounting date so that any period (“period A”) that would otherwise have fallen in an accounting period ending on or after 9 December 2008 falls instead in an accounting period ending before that date.

2 The reference in paragraph (a) of the definition of “a reference period” in paragraph 17(9) to 9 December 2008 is to be treated as a reference to the beginning of period A.

Interpretation¶

20The following expressions have the same meaning for the purposes of this Part as they have for the purposes of Chapter 4 of Part 17 of ICTA—

“accounting period”;
“chargeable profits”;
“control”;
“controlled foreign company”;
“creditable tax”;
“gross income”.

Part 3 Reduction in chargeable profits for certain financing income¶

Reduction in chargeable profits for certain financing income¶

21ICTA is amended as follows.

^F16522. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

23After section 751A insert—

751AA Reduction in chargeable profits for certain financing income

1 This section applies if—

a an apportionment under section 747(3) falls to be made as regards an accounting period (“the relevant accounting period”) of a controlled foreign company,

b the chargeable profits of the controlled foreign company for the relevant accounting period would, apart from this section, include an amount of income in respect of a payment made by another company (“the payer”),

c the amount that the payer brings into account for the purposes of corporation tax in respect of the payment is reduced (in part or in full) by virtue of Part 3 of Schedule 15 to FA 2009 (tax treatment of financing costs and income), and

d a company resident in the United Kingdom (“the UK resident company”) has a relevant interest in the controlled foreign company in the relevant accounting period.

2 The UK resident company may make an application to the Commissioners for Her Majesty's Revenue and Customs for the chargeable profits of the controlled foreign company for the relevant accounting period (“the chargeable profits”) to be reduced by an amount (“the specified amount”) specified in the application (including to nil).

3 If the Commissioners grant the application—

a the chargeable profits are treated as reduced by the specified amount, and

b the controlled foreign company's creditable tax (if any) for that period is treated as reduced by so much of that tax as, on a just and reasonable basis, relates to the reduction in the chargeable profits,

for the purpose of applying section 747(3) to (5) for determining the sum (if any) chargeable on the UK resident company under section 747(4)(a) (but for no other purpose).

4 The Commissioners may grant the application only if they are satisfied that the specified amount does not exceed the relevant amount.

5 In subsection (4) “the relevant amount” means the amount (if any) by which it is just and reasonable that the chargeable profits should be treated as reduced, having regard to the effect of Parts 3 and 4 of Schedule 15 to FA 2009 on amounts brought into account for the purposes of corporation tax by the payer, or any other company.

1 Section 751B (supplementary) is amended as follows.

2 In the heading, for “Section 751A” substitute “ Sections 751A and 751AA ”.

^F873 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4 In subsection (8)—

a after “ “the relevant amount”” insert

, and

b after “mentioned in that subsection” insert

^F895 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commencement¶

1 The amendments made by this Part have effect in relation to accounting periods of controlled foreign companies ending on or after 1 January 2010.

2 For this purpose “accounting period” and “controlled foreign company” have the same meaning as they have for the purposes of Chapter 4 of Part 17 of ICTA.

SCHEDULE 17 ¶

International movement of capital

Section 37

Part 1 Abolition of existing regime¶

1In ICTA, omit—

a section 765 (prior Treasury consent required for certain transactions involving movement of capital outside Europe),

b section 765A (HMRC to be given information about certain transactions involving movement of capital within Europe),

c section 766 (offence of failure to comply with section 765), and

d section 767 (interpretation).

2In section 98 of TMA 1970 (special returns etc)—

a omit subsection (5),

b in the first column of the Table, omit “section 765A(2)(b);”, and

c in the second column of the Table, omit “section 765A(2)(a);”.

3In consequence of the amendments made by paragraphs 1 and 2, omit—

a in FA 1988, section 105(6), and

b in FA 1990, section 68(1), (2) and (3)(b) to (d).

Part 2 Reporting requirement¶

Reporting requirement¶

1 If a UK corporate parent is a reporting body at the time a reportable event takes place or a reportable transaction is carried out, it must, within 6 months of that time, make a report to an officer of Revenue and Customs.

2 The report must contain such information relating to the event or transaction, or persons connected with the event or transaction, as is specified in regulations made by the Commissioners.

3 The purpose of the report is to enable the Commissioners to consider whether the event or transaction results, directly or indirectly, in an advantage for any person in respect of corporation tax or any other tax or duty.

4 In this Schedule “the Commissioners” means the Commissioners for Her Majesty's Revenue and Customs.

Meaning of “reporting body”¶

1 For the purposes of this Schedule a body corporate (“body A”) is a reporting body at any time if, at that time—

a it is a UK corporate parent, and

b condition A, B, C or D is met.

2 Condition A is that body A is not controlled by a body corporate resident outside the United Kingdom.

3 Condition B is that—

a body A is controlled by a body corporate resident outside the United Kingdom (“the foreign parent”), and

b no other relevant UK body corporate is controlled by the foreign parent.

4 Condition C is that —

a body A is controlled by a body corporate resident outside the United Kingdom (“the foreign parent”),

b one or more other UK corporate parents are controlled by the foreign parent, and

c body A is not a party to an arrangement under paragraph 6.

5 Condition D is that—

a body A is controlled by a body corporate resident outside the United Kingdom (“the foreign parent”),

b one or more other UK corporate parents are controlled by the foreign parent, and

c body A is a party to an arrangement under paragraph 6 and is the nominated reporting body under that arrangement.

Groups with more than one UK corporate parent: nomination of single reporting body¶

1 Sub-paragraph (2) applies where—

a a UK corporate parent is controlled by a body corporate resident outside the United Kingdom (“the foreign parent”), and

b one or more other UK corporate parents are controlled by the foreign parent.

2 Two or more of the UK corporate parents controlled by the foreign parent may enter into an arrangement under which one of their number (“the nominated reporting body”) is nominated to exercise, on behalf of all of them, the functions conferred under this Schedule on a reporting body.

3 A party to an arrangement under this paragraph may withdraw from the arrangement.

4 The Commissioners may by regulations make provision about entering into and withdrawing from an arrangement under this paragraph.

5 Regulations under sub-paragraph (4) may, in particular, include provision—

a as to the form and manner in which bodies may enter into, or a body may withdraw from, an arrangement,

b requiring a person to give information to HMRC in connection with entering into or withdrawing from an arrangement, and

c as to circumstances in which a body is to be treated as having withdrawn from an arrangement.

Meaning of “UK corporate parent”¶

7In this Schedule “UK corporate parent” means a body corporate that—

a is resident in the United Kingdom,

b controls one or more bodies corporate that are not resident in the United Kingdom, and

c is not controlled by—

i a body corporate that is resident in the United Kingdom, or

ii two or more bodies corporate taken together each of which is resident in the United Kingdom.

Reportable events and transactions¶

1 For the purposes of this Schedule an event or transaction is “reportable”, in relation to a reporting body, if—

a it is of a value exceeding £100 million,

b it is within sub-paragraph (2), and

c it is not an excluded transaction (see paragraph 9).

2 An event or transaction is within this sub-paragraph if—

a it is an issue of shares or debentures by a foreign subsidiary,

b it is a transfer by the reporting body, or a transfer caused or permitted by the reporting body, of shares or debentures of a foreign subsidiary in which the reporting body has an interest,

c where the reporting body is a party to an arrangement under paragraph 6, it is a transfer by another party to the arrangement, or a transfer caused or permitted by such a party, of shares or debentures of a foreign subsidiary in which that party has an interest,

d it results in a foreign subsidiary becoming, or ceasing to be, a controlling partner in a partnership, or

e it is of a description specified in regulations made by the Commissioners.

3 For the purposes of sub-paragraph (2)(d) a foreign subsidiary is a “controlling partner” in a partnership if, whether alone or taken together with one or more other partners that are subsidiaries, it controls the partnership.

4 The Commissioners may by regulations make provision about how the value of an event or transaction is to be determined for the purposes of this paragraph.

5 Regulations under sub-paragraph (4) may, in particular, in the case of a transaction that is one of a series of transactions, include provision attributing to the transaction the value of other transactions in the series.

6 Regulations under this paragraph may—

a make provision by reference to standards or other documents issued by any person, or

b make different provision for different cases or purposes.

7 The Commissioners may by order amend sub-paragraph (1)(a) so as to substitute a higher amount for the amount for the time being mentioned there.

Excluded transactions¶

1 For the purposes of this Schedule a transaction is “excluded” if—

a it is carried out in the ordinary course of a trade,

b all the parties to the transaction are, at the time the transaction is carried out, resident in the same territory,

c it consists in giving to the bankers of a foreign subsidiary any security for the payment of any sum due or to become due from it to them by reason of any transaction entered into with it by them in the ordinary course of their business as bankers,

d it consists in a foreign subsidiary giving to an insurance company any security for the payment of any sum due or to become due from that subsidiary to that company by reason of any transaction entered into with that subsidiary by that company in the ordinary course of that company's business by way of investment of its funds, or

e it is of a description specified in regulations made by the Commissioners.

2 Regulations under sub-paragraph (1)(e)—

a may make provision by reference to standards or other documents issued by any person, and

b may make different provision for different cases or purposes.

Penalty for failure to comply with reporting requirement¶

10In section 98 of TMA 1970 (special returns etc), in the second column of the Table, insert at the end “paragraph 4 of Schedule 17 to FA 2009.”

Regulations and orders¶

1 Regulations and orders under this Schedule are to be made by statutory instrument.

2 A statutory instrument containing regulations or an order under this Schedule is subject to annulment in pursuance of a resolution of the House of Commons.

Interpretation¶

1 For the purposes of this Schedule “control”, in relation to a body corporate, means the power of a person to secure—

a by means of the holding of shares or the possession of voting power in or in relation to the body or any other body corporate, or

b by virtue of any powers conferred by the articles of association or other document regulating the body or any other body corporate,

that the affairs of the body are conducted in accordance with that person's wishes.

2 Where two or more persons, taken together, have the power mentioned in sub-paragraph (1), they are taken for the purposes of this Schedule to control the body corporate.

3 For the purposes of this Schedule “control” in relation to a partnership, means the right to a share of more than 50% of the assets, or of more than 50% of the income, of the partnership.

4 In this Schedule—

“foreign” means resident outside the United Kingdom;
“partnership” includes an entity established under the law of a country or territory outside the United Kingdom of a similar character to a partnership, and “partner” is to be read accordingly;
“subsidiary”, in relation to a reporting body, means a body corporate that is controlled by—
1. the reporting body, or
2. where the reporting body is a party to an arrangement under paragraph 6, any party to the arrangement.

5 Section 150 of TIOPA 2010 (meaning of “transaction” and “series of transactions”) applies for the purposes of this Schedule.

Part 3 Commencement etc¶

Commencement¶

13This Schedule has effect in relation to events taking place and transactions carried out on or after 1 July 2009.

Transitional provision¶

1 In its application in relation to an event taking place or a transaction carried out before 1 October 2009, paragraph 4(1) has effect as if it required any report under that provision to be made before 1 April 2010.

2 Any regulations under this Schedule that are made within the period of one year beginning on the day on which this Act is passed may be made so as to have effect from any time on or after 1 July 2009.

^F289SCHEDULE 18 ¶

Corporation tax: foreign currency accounting

Section 38

^F289Amendments of FA 1993¶

^F2891. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F2892. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F2893. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F2894. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F2895. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F2896. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F289Commencement and transitional provision¶

^F2897. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F289Sterling equivalent if amount carried back to pre-commencement accounting period¶

^F2898. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F289Sterling equivalent if amount carried forward from earlier period¶

^F2899. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F289Adjustment of sterling loss if amount carried back to pre-commencement accounting period¶

^F28910. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F289Adjustment of sterling loss if amount carried forward from earlier period¶

^F28911. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F289Interpretation¶

^F28912. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F289Right of company to elect for different commencement and transitional provision to apply¶

^F28913. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SCHEDULE 19 ¶

Income tax credits for foreign distributions

Section 40

ITTOIA 2005¶

1ITTOIA 2005 is amended as follows.

1 Section 397A (tax credits for distributions of non-UK resident companies: UK residents and eligible non-UK residents) is amended as follows.

^F2202 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F2203 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4 In subsection (7), omit the definition of “minority shareholder”.

^F2473. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F1484. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F1025. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 Section 397C (meaning of “minority shareholder”) is amended as follows.

2 In subsection (1)—

^F135a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

b omit “non-UK resident”.

^F1323 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F1324 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F1467. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8In section 873 (orders and regulations), after subsection (3) insert—

Consequential amendments of other Acts¶

^F299. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10In ICTA—

^F18a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

b in section 840ZA(3)(b) (meaning of “tax advantage”), after “397(1)” insert “ or 397A(1) ”.

^F16011. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F11112. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13In ITA 2007—

^F272a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F34b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F203c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

for “397A(2)” substitute “ 397A(1) ”.

Commencement¶

1 The amendments made by this Schedule have effect in relation to—

a qualifying distributions arising on or after 22 April 2009,

b cash dividends paid over to a person under paragraph 68(4) of Schedule 2 of ITEPA 2003 on or after 22 April 2009,

c dividends treated under section 407 of ITTOIA 2005 as paid to a person on or after 22 April 2009, and

d manufactured overseas dividends that are representative of a distribution within paragraph (a), (b) or (c).

2 In this paragraph—

“manufactured overseas dividend” has the same meaning as in Chapter 2 of Part 11 of ITA 2007;
“qualifying distribution” has the meaning given in section 989 of ITA 2007.

3 Section 873(4) of ITTOIA 2005 (inserted by paragraph 8), so far as relating to any order or regulations made after the passing of FA 2016 under any provision of ITTOIA 2005 other than section 397BA of that Act, has effect as if sub-paragraph (1) did not apply in relation to it.

SCHEDULE 20 ¶

Loan relationships: connected parties

Section 41

Introduction¶

1Part 5 of CTA 2009 (loan relationships) is amended as follows.

Section 374¶

1 Section 374 (late interest: connection between debtor and person standing in position of creditor) is amended as follows.

2 In subsection (1)—

a in paragraph (b), after “company” insert “ ( ”, and

b insert at the end (not as part of paragraph (b))— “ and the condition in subsection (1A) is met. ”

3 After that subsection insert—

4 Insert at the end—

Sections 375 and 376¶

1 Section 375 (late interest: loans to close companies by participators etc) is amended as follows.

2 In subsection (1), insert at the end (not as part of paragraph (b))— “ and, where subsection (4A) applies, the non-qualifying territory condition is met. ”

3 In subsections (3)(b) and (4)(b), after “resident” insert “ for tax purposes ”.

4 After subsection (4) insert—

1 Section 376 (interpretation of section 375) is amended as follows.

2 In subsection (5), for the definition of “resident” substitute—

3 Insert at the end—

Section 377¶

1 Section 377 (late interest: party to loan relationship having major interest in other party) is amended as follows.

2 The existing provision becomes subsection (1) of that section.

3 In that subsection, omit the “and” at the end of paragraph (a) and insert at the end

4 After that subsection insert—

Section 407¶

1 Section 407 (postponement until redemption of debits for connected companies' deeply discounted securities) is amended as follows.

2 In subsection (1)—

a in paragraph (b), after “company” insert “ (“the creditor company” ,

b omit the “and” at the end of paragraph (d), and

c insert at the end

3 After that subsection insert—

4 Insert at the end—

Sections 409 and 410¶

7Section 409(1) (postponement until redemption of debits for close companies' deeply discounted securities)—

a in paragraph (b), after “there is a person” insert “ ( ”, and

b insert at the end (not as part of paragraph (d))— “ and, where it applies, the non-qualifying territory condition is met. ”

1 Section 410 (interpretation of section 409) is amended as follows.

2 In subsections (3)(b) and (4)(b), after “resident” insert “ for tax purposes ”.

3 After subsection (4) insert—

4 In subsection (5), for the definition of “resident” substitute—

5 After that subsection insert—

Commencement and transitional provision¶

1 The amendments made by this Schedule have effect where the actual accrual period (within the meaning of Chapter 8 of Part 5 of CTA 2009), or the relevant period (within the meaning of section 407(1) or 409(1) of that Act), begins on or after 1 April 2009.

2 But a company may elect that any or all of the amendments made by this Schedule do not have effect in relation to the first accounting period for which they would otherwise apply.

3 However, no election may be made under sub-paragraph (2) in relation to an accounting period ending after 31 March 2011.

4 An election under sub-paragraph (2) must be made in the corporation tax return for the accounting period in relation to which the election is to have effect.

SCHEDULE 21 ¶

Foreign exchange: anti-avoidance

Section 43

Loan relationships¶

^F1781. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F1782. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F1783. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Derivative contracts¶

4Chapter 3 of Part 7 of CTA 2009 (derivative contracts: credits and debits to be brought into account) is amended as follows.

5For the heading before section 606 (exchange gains and losses) substitute— “ Exchange gains and losses ”.

1 Section 606 is amended as follows

2 In subsection (3), for paragraph (a) (together with the “and” at the end) substitute—

3 In subsection (4), for the words from “so much” to “currency as” substitute

4 After that subsection insert—

4A Condition A is that the exchange gain or loss arises in relation to a derivative contract whose underlying subject matter consists wholly or partly of currency.

4B Condition B is that the exchange gain or loss arises as a result of the translation from one currency to another of the profit or loss of part of the company's business.

4C Subsection (4D) applies where—

a condition A is met, and

b the amount that is recognised in respect of the exchange gain or loss as mentioned in subsection (3)(b) (“the recognised gain or loss”) is not calculated by reference to spot rates of exchange.

4D Where this subsection applies—

a the recognised gain or loss is to be treated for the purposes of this Part as comprising two separate exchange gains or losses, namely—

i an exchange gain or loss calculated by reference to spot rates of exchange, and

ii a residual exchange gain or loss, and

b subsections (3) and (4) do not have effect in relation to the residual exchange gain or loss.

5 After subsection (4D) (inserted by sub-paragraph (4) above) insert—

^F847. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8Immediately before section 607 (pre-contract or abortive expenses) insert— “ Miscellaneous ”.

Interpretation¶

^F2949. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consequential revocation¶

10The Loan Relationships and Derivative Contracts (Disregard and Bringing into Account of Profits and Losses) Regulations 2006 (S.I. 2006/843) are revoked.

Commencement¶

1 The amendments made by this Schedule have effect—

a in relation to exchange gains and losses arising in accounting periods beginning on or after 22 April 2009, and

b subject to the following provisions of this paragraph, in relation to exchange gains and losses arising in straddling accounting periods.

2 In this paragraph “straddling accounting period” means an accounting period that—

a begins before 22 April 2009, and

b ends on or after that date.

3 An exchange gain or loss that arises in a straddling accounting period in relation to—

a an asset or liability representing a loan relationship, or

b a derivative contract,

is to be treated for the purposes of this paragraph as if it were made up of two amounts.

4 Those two amounts are the exchange gains or losses that would arise in relation to the loan relationship or derivative contract in—

a that part of the period that falls before 22 April 2009, and

b that part of the period that falls on or after that date,

if those parts were separate accounting periods.

5 The amendments made by this Schedule have effect, in relation to an exchange gain or loss of the kind mentioned in sub-paragraph (3), as if the gain or loss were the amount determined in relation to it under sub-paragraph (4)(b).

SCHEDULE 22 ¶

Offshore funds

Section 44

Part 1 Meaning of “offshore fund”¶

FA 2008¶

1FA 2008 is amended as follows.

2Before section 41 (tax treatment of participants in offshore funds) insert—

40A Meaning of “offshore fund”

1 This section and sections 40B to 40G have effect for this group of sections.

2 “Offshore fund” means—

a a mutual fund constituted by a body corporate resident outside the United Kingdom,

b a mutual fund under which property is held on trust for the participants where the trustees of the property are not resident in the United Kingdom, or

c a mutual fund constituted by other arrangements that create rights in the nature of co-ownership where the arrangements take effect by virtue of the law of a territory outside the United Kingdom (but see subsection (3)).

3 Subsection (2)(c) does not include a mutual fund constituted by two or more persons carrying on a trade or business in partnership.

4 “This group of sections” means this section and sections 40B to 42A.

5 References to participants in arrangements (or a fund) are to persons taking part in the arrangements (or the arrangements constituting the fund), whether by becoming the owner of, or of any part of, the property that is the subject of the arrangements or otherwise (and references to participation in arrangements or a fund, however expressed, are to be read accordingly).

6 In this section—

“body corporate” does not include a limited liability partnership;
“co-ownership” is not restricted to the meaning of that term in the law of any part of the United Kingdom.

40B Meaning of “mutual fund” etc

1 “Mutual fund” means arrangements with respect to property of any description, including money, that meet conditions A to C, subject to—

a sections 40C and 40D, and

b the exceptions made by or under sections 40E to 40G.

2 Condition A is that the purpose or effect of the arrangements is to enable the participants—

a to participate in the acquisition, holding, management or disposal of the property, or

b to receive profits or income arising from the acquisition, holding, management or disposal of the property or sums paid out of such profits or income.

3 Condition B is that the participants do not have day-to-day control of the management of the property.

4 For the purpose of condition B a participant does not have day-to-day control of the management of property by virtue of having a right to be consulted or to give directions.

5 Condition C is that, under the terms of the arrangements, a reasonable investor participating in the arrangements would expect to be able to realise all or part of an investment in the arrangements on a basis calculated entirely, or almost entirely, by reference to—

a the net asset value of the property that is the subject of the arrangements, or

b an index of any description.

6 The Treasury may by regulations amend condition C.

40C Umbrella arrangements

1 In the case of umbrella arrangements—

a each part of the umbrella arrangements is to be treated as separate arrangements (subject to section 40D), and

b the umbrella arrangements are to be disregarded.

2 “Umbrella arrangements” means arrangements which provide for separate pooling of the contributions of the participants and the profits or income out of which payments are made to them.

3 References to a part of umbrella arrangements are to the arrangements relating to a separate pool.

40D Arrangements comprising more than one class of interest

1 Where there is more than one class of interest in arrangements (the “main arrangements”)—

a the arrangements relating to each class of interest are to be treated as separate arrangements, and

b the main arrangements are to be disregarded.

2 In relation to umbrella arrangements, “class of interest” does not include a part of the umbrella arrangements (but there may be more than one class of interest in a part of umbrella arrangements).

40E Meaning of “mutual fund”: exceptions

1 Arrangements are not a mutual fund if—

a under the terms of the arrangements, a reasonable investor participating in the arrangements would expect to be able to realise all or part of an investment in the arrangements on a basis mentioned in condition C in section 40B only in the event of the winding up, dissolution or termination of the arrangements, and

b condition X or Y is met.

2 Condition X is that the arrangements are not designed to wind up, dissolve or terminate on a date stated in or determinable under the arrangements.

3 Condition Y is that—

a the arrangements are designed to wind up, dissolve or terminate on a date stated in or determinable under the arrangements, and

b condition Y1, Y2 or Y3 is met.

4 Condition Y1 is that none of the assets that are the subject of the arrangements are relevant income-producing assets.

5 Condition Y2 is that, under the terms of the arrangements, the participants in the arrangements are not entitled to the income from the assets that are the subject of the arrangements or any benefit arising from such income.

6 Condition Y3 is that—

a under the terms of the arrangements, after deductions for reasonable expenses, any income produced by the assets that are the subject of the arrangements is required to be paid or credited to the participants, and

b a participant who is an individual resident in the United Kingdom would be charged to income tax on the amounts paid or credited.

7 Condition Y is not met if the arrangements are designed to produce a return for participants that equates, in substance, to the return on an investment of money at interest.

8 For the purposes of this section, the fact that arrangements provide for a vote or other action that may lead to the winding up, dissolution or termination of the arrangements does not, by itself, mean that the arrangements are designed to wind up, dissolve or terminate on a date stated in or determinable under the arrangements.

40F Meaning of “relevant income-producing assets”

1 “Relevant income-producing assets” means assets that produce income on which, if they were held directly by an individual resident in the United Kingdom, the individual would be charged to income tax (subject to the following provisions of this section).

2 An asset is not a relevant income-producing asset if the asset is hedged, provided that no income is expected to arise from—

a the asset (taking account of the hedging), or

b any product of the hedging arrangements.

3 Cash awaiting investment is not a relevant income-producing asset, provided that the cash, and any income that it produces while awaiting investment, is invested as soon as reasonably practicable in assets that are not relevant income-producing assets.

40G Meaning of “mutual fund”: powers to vary exceptions

1 The Treasury may by regulations amend or repeal any provision of section 40E or 40F.

2 The Treasury may by regulations provide that arrangements are not a mutual fund—

a in specified circumstances, or

b if they are of a specified description.

3 Regulations under this section may include provision having effect in relation to the tax year and accounting periods current on the day on which the regulations are made.

1 Section 41 (tax treatment of participants in offshore funds) is amended as follows.

2 In subsection (2), omit the definition of “offshore fund” (and the “and” before it).

3 Omit subsections (3) to (9).

1 Section 42 (regulations under section 41: supplementary) is amended as follows.

2 In subsection (2), for paragraphs (a) and (b) substitute—

3 In subsection (3), for the words from “may” to the end substitute

4 In subsection (4)(e), insert at the end “and savings”.

5 For subsection (5) substitute—

6 In subsection (6), for “and “offshore fund” have” substitute “ has ”.

5After that section insert—

Restriction on regulation-making power under section 41 of FA 2008¶

^F1776. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part 2 Application of TCGA 1992 to offshore funds¶

TCGA 1992¶

7TCGA 1992 is amended as follows.

^F818. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^C699Accordingly, in the title of Part 3 and in the title of Chapter 3 of that Part, insert at the end “etc”.

^C2510In section 288(1) (interpretation), in the definition of “company”, for “section 99” substitute “ sections 99 and 103A ”.

Consequential provision¶

1 In TMA 1970, in—

a section 25(9) (issuing houses, stockbrokers, auctioneers, etc), and

^C88b section 28(2) (non-resident companies and trusts),

after “sections 99” insert “ , 103A ”.

2 In section 1165 of CTA 2010—

a in subsection (1) for “section 99 of TCGA 1992 (application of that Act to unit trust schemes)” substitute “ sections 99 and 103A of TCGA 1992 (application of that Act to unit trust schemes and to certain offshore funds) ”, and

b in subsection (3) for “section 99 of TCGA 1992” substitute “ sections 99 and 103A of TCGA 1992 ”.

^C883 In ITTOIA 2005—

a in section 149(4) (taxation of amounts taken to reserves), at the end of paragraph (b) (before the “and”) insert—

, and

b in section 150(8) (conversion etc of securities held as circulating capital), after paragraph (c) insert—

4 In section 834(5) of the Companies Act 2006 (investment company: condition as to holdings in other companies), in the definition of “company” and “shares”, after “sections 99” insert “ , 103A ”.

^F2745 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commencement: general¶

1 The amendments made by this Part of this Schedule have effect in relation to the acquisition, holding and disposal of rights in a relevant offshore fund on or after the commencement day, subject to paragraphs 13 and 15.

2 In this paragraph and paragraphs 15 to 18 “the commencement day” means—

a in relation to the acquisition, holding and disposal of rights by a person subject to the charge to capital gains tax, 1 December 2009, and

^C80b in relation to the acquisition, holding and disposal of rights by a person subject to the charge to corporation tax, such day as the Treasury may by order appoint.

Commencement: certain consequential amendments¶

1 The amendment made by sub-paragraph (1)(a) of paragraph 11 comes into force on 1 December 2009 (and has effect as if section 103A of TCGA 1992 had effect from that date in relation to the issue, placing, acquisition, holding and disposal of rights in relevant offshore funds by any person).

2 The amendments made by sub-paragraphs (2), (4) and (5) of paragraph 11 come into force in accordance with an order made by the Treasury.

Commencement orders¶

1 An order under paragraph 12(2)(b) or 13(2)—

a may make different provision for different cases or different purposes, and

b may include transitional provision and savings.

2 Section 1171(4) of CTA 2010, section 287(3) of TCGA 1992 and section 1014(4) of ITA 2007 (orders etc subject to annulment) do not apply in relation to such an order.

Election modifying commencement¶

1 This paragraph applies if a person makes an election—

a for capital gains tax purposes, in respect of a relevant tax year, or

b for corporation tax purposes, in respect of a relevant accounting period.

2 The amendments made by this Part of this Schedule (other than the amendments made by paragraph 11(1)(a), (2), (4) and (5)) have effect, and are to be treated as always having had effect, in relation to the acquisition, holding and disposal by the person of rights in a relevant offshore fund on or after the first day of that tax year or accounting period (“the election day”).

3 Sub-paragraph (4) applies if, in respect of any time on or after the election day but before the commencement day, the relevant offshore fund was not certified as a distributing fund under Part 3 of Schedule 27 to ICTA (distributing funds: certification procedure).

4 The acquisition, holding or disposal by the person of rights in the fund at that time is to be treated as the acquisition, holding or disposal of rights in an offshore fund that is so certified.

5 In this paragraph and paragraph 16—

“relevant accounting period” means an accounting period beginning on or after 1 April 2003 but before the day appointed under paragraph 12(2)(b);
“relevant tax year” means the tax year 2003-04 and any subsequent tax year up to and including the tax year 2009-2010.

Making an election¶

1 An election under paragraph 15 must be made—

a for capital gains tax purposes, by being included in a relevant return under TMA 1970, and

b for corporation tax purposes, by being included in a relevant company tax return.

2 A return under TMA 1970 is relevant if it is for—

a the tax year in respect of which the election is made, or

b a subsequent relevant tax year.

3 A company tax return is relevant if it is for—

a the accounting period in respect of which the election is made, or

b a subsequent relevant accounting period.

4 The references in sub-paragraph (1) to an election being included in a return include an election being included by virtue of an amendment of the return.

5 An election under paragraph 15 is irrevocable.

Giving effect to elections¶

17If, in order to give effect to an election under paragraph 15, any adjustments are required, whether by the discharge or repayment of tax, the making of assessments or otherwise—

a the adjustments must be made, and

b any time limit for making the adjustments is to be disregarded.

Modification of acquisition cost¶

1 This paragraph applies where a participant in a relevant offshore fund—

a holds rights in a relevant offshore fund immediately before the effective date, and

b disposes of those rights on or after that date.

2 For the purposes of TCGA 1992 the participant is to be treated as if the acquisition cost for those rights were the pre-commencement acquisition cost.

3 “The effective date” means—

a if the participant has made an election under paragraph 15, the election day, or

b otherwise, the commencement day.

4 “Acquisition cost” means the total of the consideration, costs and expenditure described in section 38(1)(a) and (b) of TCGA 1992 (acquisition and disposal costs etc).

5 “Pre-commencement acquisition cost” means the total of the consideration, costs and expenditure that would have been allowable as a deduction under section 38(1)(a) and (b) of TCGA 1992 if the participant had disposed of the rights immediately before the effective date.

SCHEDULE 23 ¶

Insurance companies

Section 46

Transfer from non technical account not to be receipt¶

1 In section 83 of FA 1989 (receipts to be taken into account), after subsection (2) insert—

2 The amendment made by sub-paragraph (1) has effect in relation to periods of account ending on or after 22 April 2009.

3 But, in relation to a period of account of a company beginning before that date, that amendment has effect only insofar as the amount shown as transfer from non technical account in line 32 of Form 58 covering the whole of the company's long-term business in the periodical return for the period of account is attributable to transfers made on or after that date.

No deduction for capital allocations to with-profits policy holders¶

1 In section 82 of FA 1989 (calculation of profits), after subsection (2) insert—

2 The amendment made by sub-paragraph (1) has effect in relation to amounts allocated on or after 22 April 2009 to holders of policies under which they are eligible to participate in surplus.

Limits on loss relief for addition to non-profit funds¶

1 In ICTA, after section 434A insert—

434AZA Reduced loss relief for additions to non-profit funds

1 Where this section applies in the case of a company carrying on life assurance business, relief allowable under section 393A or Chapter 4 of Part 10 in respect of losses incurred by the company in the life assurance business in an accounting period is reduced in accordance with section 434AZB.

2 This section applies in the case of a company where—

a there has been a relevant addition to one or more non-profit funds in a period of account ending no later than the accounting period (“the relevant period of account”) (see subsection (3)),

b the company is not a non-profit company in relation to the relevant period of account and has not elected under subsection (9) of section 83YA of the Finance Act 1989 to be treated for the purposes of that section as if it were, and

c condition A or B is met,

and, if the relevant period of account is not the period of account ending with the accounting period (“the current period of account”), condition C is also met.

3 For the purposes of subsection (2), there is a relevant addition to a non-profit fund in the relevant period of account if an amount is shown as a transfer from non-technical account in line 32 of the Form 58 of the non-profit fund in the periodical return for that period of account.

4 Condition A is that there is a relevant book value election in relation to assets of a non-profit fund of the company.

5 For the purposes of subsection (4), there is a relevant book value election in relation to assets of a non-profit fund if an amount is shown in relation to the non-profit fund as the excess of the value of net admissible assets in line 51 of the Form 14 of the non-profit fund in the periodical return for the current period of account.

6 Condition B is that the company is party to arrangements the main purpose, or one of the main purposes, of which is to reduce the relevant admissible value of assets of a non-profit fund of the company, other than any structural assets.

7 For the purposes of subsection (6) (and section 434AZB), the “relevant admissible value” means the value reflected in line 89 of Form 13 of the periodical return for the current period of account.

8 Condition C is that the surplus arising since the last valuation shown in line 34 of the Form 58 of the non-profit fund, or any of the non-profit funds, in relation to which condition A or B is met in the periodical return for the current period of account is a negative amount.

434AZB Additions to non-profit funds: amount of loss reduction

1 The amount of the relief allowable as mentioned in section 434AZA(1) is reduced by whichever of the following is the least—

a the amount of the loss,

b the amount specified in subsection (2), and

c the amount specified in subsection (4).

2 The amount mentioned in subsection (1)(b) is—

a where only condition A in section 434AZA is met, the relevant amount relating to the non-profit fund in relation to which it is met or (where it is met in relation to more than one non-profit fund) the sum of the relevant amounts relating to them,

b where only condition B is met, the amount of the relevant reduction relating to the non-profit fund in relation to which it is met or (where it is met in relation to more than one non-profit fund) the sum of the relevant reductions relating to them, and

c where both condition A and condition B are met, the aggregate of the amounts in paragraphs (a) and (b).

3 In subsection (2)—

a “relevant amount”, in relation to a non-profit fund, means the amount shown in relation to the non-profit fund as the excess of the value of net admissible assets in line 51 of the Form 14 of the non-profit fund in the periodical return for the current period of account (as reduced by any amount which has had effect to reduce relief for losses for a previous accounting period), and

b “relevant reduction”, in relation to a non-profit fund, means the reduction of the relevant admissible value of assets of the non-profit fund (other than structural assets) which is attributable to the arrangements (as so reduced).

4 The amount mentioned in subsection (1)(c) is—

a if the relevant period of account is the current period of account, the amount referred to in section 434AZA(3) in the case of the non-profit fund, or of each of the non-profit funds, to which there has been a relevant addition in the relevant period of account, and

b otherwise, so much of the amount shown in line 31 of the Form 58 of the non-profit fund or non-profit funds in the periodical return for the current period of account as is attributable to the amount so referred to.

434AZC Sections 434AZA and 434AZB: supplementary

1 For the purposes of sections 434AZA and 434AZB, a non-profit fund required to support a with-profits fund is to be treated as not being a non-profit fund.

2 Sections 434AZA and 434AZB apply to a non-profit part of a with-profits fund as if references to something shown in the Form 14 or Form 58 of the non-profit fund in a periodical return were to what would be so shown if there were a Form 14 or Form 58 of the non-profit part of the with-profits fund in the periodical return.

3 In sections 434AZA and 434AZB—

“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable), and
“structural assets” has the same meaning as in section 83XA of the Finance Act 1989 (see subsection (3) of that section and any regulations made under it).

2 The amendment made by sub-paragraph (1) has effect in relation to accounting periods ending on or after 22 April 2009 unless—

a to the extent that section 434AZA would otherwise apply because condition A in that section is met in relation to a non-profit fund, the relevant addition to the non-profit fund was made before that date, or

b to the extent that section 434AZA would otherwise apply because condition B in that section is so met, the relevant addition to the non-profit fund and the arrangements were both made before that date.

FAFTS and contingent loans¶

1 In paragraph 4(5) of Schedule 17 to FA 2008 (financing-arrangement-funded transfers: companies with unrepaid contingent loan liabilities before first period of account beginning on or after 1 January 2008), in the definition of “R”, after “(7)(a) of that section” insert “ in respect of amounts brought into account as transfers to non-technical account for periods of account beginning on or after 1 January 2008 ”.

2 The amendment made by sub-paragraph (1) has effect in relation to periods of account beginning on or after 1 January 2008.

Apportionment: foreign business assets¶

1 Section 432E of ICTA (section 432B apportionment: participating funds) is amended as follows.

2 In subsection (3)(a), omit “and foreign business assets”.

3 In subsection (4), in the definition of “A”, omit “and foreign business assets”.

4 In subsection (4A), omit “or foreign business assets”.

6In consequence of the amendments made by paragraph 5, omit—

a paragraph 19(4)(a) and (6) of Schedule 7 to FA 2007, and

b paragraph 10(3)(c) of Schedule 17 to FA 2008.

1 The amendments made by paragraphs 5 and 6 have effect in relation to periods of account beginning on or after 1 January 2009 and ending on or after 22 April 2009.

2 But an insurance company may, in its company tax return for—

a an accounting period beginning on or after 1 January 2008 but before 1 January 2009, or

b an accounting period beginning on or after 1 January 2009 and ending before 22 April 2009,

elect that the amendments made by paragraphs 5 and 6 have effect in relation to that accounting period.

Value shifting attributable to transfer of business¶

^F2518. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SCHEDULE 24 ¶

Disguised interest

Section 48

Amendments of Part 6 of CTA 2009¶

1Part 6 of CTA 2009 (relationships treated as loan relationships etc) is amended as follows.

1 Section 477(2) (overview of Part 6) is amended as follows.

2 After paragraph (a) insert—

3 For paragraph (f) substitute—

3After Chapter 2 insert—

Chapter 2A Disguised interest

486A Overview

1 This Chapter provides for Part 5 to apply in relation to returns which are economically equivalent to interest (see section 486B).

2 For exclusions from this Chapter, see—

a section 486C (return otherwise taxable),

b section 486D (arrangement having no tax avoidance purpose), and

c section 486E (excluded shares).

486B Disguised interest to be regarded as profit from loan relationship

1 Where a company is party to an arrangement which produces for the company a return in relation to any amount which is economically equivalent to interest, Part 5 applies as if the return were a profit arising to the company from a loan relationship.

2 For the purposes of this Chapter a return produced for a company by an arrangement in relation to any amount is “economically equivalent to interest” if (and only if)—

a it is reasonable to assume that it is a return by reference to the time value of that amount of money,

b it is at a rate reasonably comparable to what is (in all the circumstances) a commercial rate of interest, and

c at the relevant time there is no practical likelihood that it will cease to be produced in accordance with the arrangement unless the person by whom it falls to be produced is prevented (by reason of insolvency or otherwise) from producing it.

3 In subsection (2)(c) “the relevant time” means the time when the company becomes party to the arrangement or, if later, when the arrangement begins to produce a return for the company.

4 The credits and debits to be brought into account for the purposes of Part 5 in respect of the return must be determined on an amortised cost basis of accounting.

5 But if any of the return is not recognised in determining the company's profit or loss for any period it is to be treated as recognised using an amortised cost basis of accounting.

6 Where two or more persons are party to an arrangement which produces a return such as is mentioned in subsection (1)—

a for the persons (when taken together), but

b not for either (or any) of them individually,

this section applies as if there were a profit arising to such (if any) of them as are companies from a loan relationship of so much of the return as is just and reasonable.

7 The only amounts which may be brought into account for corporation tax purposes in relation to a return such as is mentioned in subsection (1) in the case of any company are those which are brought into account in accordance with this section (but see section 486C).

8 In subsection (4) “credits” and “debits” include exchange gains and losses arising as a result of translating at different times the carrying value of the return or the amount by reference to which the return falls to be produced.

9 In this Chapter “arrangement” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable), other than one which constitutes a finance lease (within the meaning given by section 219 of CAA 2001).

486C Exclusion where return otherwise taxable

1 This Chapter does not apply to an arrangement which produces a return for a company if or to the extent that the return—

a is charged to corporation tax as income of the company or brought into account as income of the company for corporation tax purposes no later than the time when amounts are brought into account in relation to the return in accordance with section 486B,

b arises from anything that would produce credits or debits in relation to the company under Part 7 (derivative contracts) or Part 8 (intangible fixed assets) but for any exception relating to particular credits or debits, or

c arises from anything that would produce credits or debits in relation to the company under Part 5 apart from this Chapter but for any exception relating to particular credits or debits.

2 Subsection (1)(b) does not disapply this Chapter in the case of a return in relation to which section 641 (derivative contracts taxed on chargeable gains basis) applies.

486D Exclusion where arrangement has no tax avoidance purpose

1 This Chapter does not apply in relation to a return produced by an arrangement to which a company is a party unless it is reasonable to assume that the main purpose, or one of the main purposes, of the company being a party to the arrangement is to obtain a relevant tax advantage.

2 But a company for which a return is produced by an arrangement to which this Chapter would otherwise be prevented from applying by subsection (1) may elect that this Chapter is to apply in relation to the return.

3 An election under subsection (2)—

a may not be made by a company if section 486B applies to the company in relation to the return in accordance with subsection (6) of that section,

b must be made no later than the time when the arrangement begins to produce a return for the company, and

c is irrevocable.

4 In this section “obtain a relevant tax advantage” means secure that the return (or any part of it) is produced in a way which means that its treatment for corporation tax purposes is more advantageous to the company than it would be if it were—

a charged to corporation tax as income of the company, or

b brought into account as income of the company for corporation tax purposes,

at the time when amounts would be brought into account in relation to the return in accordance with section 486B.

5 Nothing in this section applies in relation to a company for an accounting period if the company is an excluded controlled foreign company.

6 For this purpose a company is an excluded controlled foreign company if any of its chargeable profits (within the meaning of Chapter 4 of Part 17 of ICTA)—

a are apportioned for the accounting period in accordance with section 752 of ICTA by virtue of section 747(3) of that Act, or

b are not so apportioned because of section 748(1) of that Act.

486E Excluded shares

1 This Chapter does not apply in relation to an accounting period (“the relevant accounting period”) of a company (“the holding company”) for which an arrangement produces a return for the company if the arrangement involves only relevant shares held by the company throughout the relevant period.

2 In this section “the relevant period” means the period—

a beginning with the later of—

i the time when the holding company becomes party to the arrangement, and

ii the time when the arrangement begins to produce a return for the company, and

b ending with the earliest of—

i the end of the relevant accounting period,

ii the time when the holding company ceases to be party to the arrangement, and

iii the time when the arrangement ceases to produce a return for the company.

3 For the purposes of this section an arrangement “involves only” relevant shares if (and only if) the return produced reflects only an increase in the fair value of the shares.

4 For the purposes of subsection (3)—

a “fair value”, in relation to relevant shares held by the holding company, means an amount which the company would obtain from a knowledgeable and willing purchaser of the shares dealing at arm's length, and

b there is an increase in the fair value of shares even if the increase is realised by the payment of a distribution in respect of the shares.

5 In this section “relevant shares” means shares which, throughout the relevant period, are—

a fully paid-up shares of a relevant company, or

b shares of a company, other than a relevant company, which would be accounted for as a liability by the company in which they are shares in accordance with generally accepted accounting practice and which produce for the holding company a return in relation to any amount which is economically equivalent to interest (as to which see Chapter 6A).

6 For the purposes of subsection (5)(a) shares are fully paid-up if there are no actual or contingent obligations—

a to meet unpaid calls on the shares, or

b to make a contribution to the capital of the company in which they are shares that could affect the value of the shares.

7 For the purposes of subsection (5) a company is “a relevant company” if—

a it and the holding company are connected companies,

b it is a relevant joint venture company, or

c it is a relevant controlled foreign company.

8 Section 466 (companies connected for an accounting period) applies for the purposes of subsection (7)(a).

9 For the purposes of subsection (7)(b) a company is a relevant joint venture company if—

a the holding company is one of two persons who, taken together, control it,

b the holding company is a person in whose case the 40% test in section 755D(3) of ICTA is satisfied, and

c the other is a person in whose case the 40% test in section 755D(4) of ICTA is satisfied.

10 Section 755D of ICTA (meaning of “control” etc) applies for the purposes of subsection (9)(a) as for those of Chapter 4 of Part 17 of that Act (controlled foreign companies), except that no rights and powers are attributed to a person by subsection (6)(c) or (d) of that section.

11 For the purposes of subsection (7)(c) a company is a relevant controlled foreign company if any of its chargeable profits (within the meaning of Chapter 4 of Part 17 of ICTA)—

a are apportioned to the holding company for the relevant accounting period in accordance with section 752 of ICTA by virtue of section 747(3) of that Act, or

b are not so apportioned because of section 748(1) or (3) of that Act.

12 Section 550(3) (repos: ignoring effect on borrower of sale of securities) does not apply for the purposes of this section.

4After Chapter 6 insert—

Chapter 6A Shares accounted for as liabilities

521A Introduction to Chapter

1 This Chapter contains rules for Part 5 (and the other provisions of the Corporation Tax Acts) to apply in some cases as if at some times in the accounting period of a company (“A”) which holds shares of a certain kind in another company (“B”) the shares were rights under a creditor relationship of A.

2 See, in particular—

a section 521B (application of Part 5 to some shares as rights under creditor relationship), and

b section 521C (which describes the shares to which the rules apply).

3 In this Chapter references to the investing company are to A and references to the issuing company are to B.

4 For the purposes of this Chapter, the definition of “share” in section 476(1) only applies so far as it provides that “share” does not include a share in a building society.

5 Section 550(3) (repos: ignoring effect on borrower of sale of securities) does not apply for the purposes of this Chapter.

6 See section 116B of TCGA 1992 for the effect for chargeable gains purposes of shares beginning or ceasing to be shares to which section 521C applies.

521B Application of Part 5 to certain shares as rights under creditor relationship

1 This section applies in relation to the times in a company's accounting period when—

a the company holds a share in another company, and

b section 521C (shares accounted for as liabilities) applies to the share.

2 Part 5 (and the other provisions of the Corporation Tax Acts) apply as if at those times—

a the share were rights under a creditor relationship of the investing company, and

b any distribution in respect of the share were not a distribution (and accordingly is within Part 5).

3 Where Part 5 applies in relation to the investing company in accordance with subsection (2) it so applies as if the issuing company stood in the position of debtor as respects the debt in question.

4 No debits are to be brought into account by the investing company as respects the share but this does not affect debits to be brought into account in respect of exchange gains or losses.

5 Subsection (2)(b) does not affect the operation of Part 1 of Schedule 25 of ICTA (controlled foreign companies: acceptable distribution policy) (including as it continues to have effect in accordance with paragraph 8(1) of Schedule 16 to FA 2009).

6 In this Chapter references to “the share” are to the share mentioned in subsection (1).

521C Shares accounted for as liabilities

1 This section applies to the share if—

a the share would be accounted for by the issuing company as a liability in accordance with generally accepted accounting practice,

b the share produces for the investing company a return in relation to any amount which is economically equivalent to interest,

c the issuing company and the investing company are not connected companies,

d the condition in subsection (4) is met,

e the share is not an excepted share (see section 521D), and

f the investing company holds the share for an unallowable purpose (see section 521E).

2 For the purposes of this section a return produced for a company by an arrangement in relation to any amount is “economically equivalent to interest” if (and only if)—

a it is reasonable to assume that it is a return by reference to the time value of that amount of money,

b it is at a rate reasonably comparable to what is (in all the circumstances) a commercial rate of interest, and

3 In subsection (2)(c) “the relevant time” means the time when the investing company first holds the share or, if later, when the share begins to produce a return for the investing company.

4 The condition mentioned in subsection (1)(d) is that the share does not fall to be treated for the accounting period in question as if it were rights under a creditor relationship of the investing company because of section 490 (holdings in OEICs, unit trusts and offshore funds treated as creditor relationship rights).

5 Section 466 (companies connected for an accounting period) applies for the purposes of this section.

521D Excepted shares

1 A share is an excepted share for the purposes of section 521C if it is—

a a qualifying publicly-issued share (see subsection (2)), or

b a share which mirrors a public issue (see subsections (3) and (4)).

2 A share is a “qualifying publicly-issued share” if—

a it was issued by a company as part of an issue of shares to persons not connected with the company, and

b less than 10% of the shares in that issue are held by the investing company or persons connected with it.

3 The first case where shares (“the mirroring shares”) mirror a public issue is where—

a a company (“company A”) issues shares (“the public issue”) to persons not connected with the company,

b within 7 days of that issue, one or more other companies (“companies BB”) issue the mirroring shares to company A on the same terms as the public issue or substantially the same terms,

c company A and companies BB are associated companies (see subsection (5)), and

d the total nominal value of the mirroring shares does not exceed the nominal value of the public issue.

4 The second case where shares (“the second level mirroring shares”) mirror a public issue is where, in the circumstances of the first case—

a within 7 days of the public issue, one or more other companies (“companies CC”) issue the second level mirroring shares to one or more of companies BB on the same terms as the public issue or substantially the same terms,

b company A, companies BB and companies CC are associated companies (see subsection (5)), and

c the total nominal value of the second-level mirroring shares does not exceed the nominal value of the public issue.

5 For the purposes of subsections (3) and (4) companies are associated companies if they are members of the same group of companies for the purposes of Chapter 4 of Part 10 of ICTA (group relief) (see section 413(3)(a) of that Act).

521E Unallowable purpose

1 For the purposes of section 521C, the investing company holds the share for an unallowable purpose if the main purpose, or one of the main purposes for which the company holds the share is to obtain a relevant tax advantage.

2 But the investing company may elect that this Chapter is to apply in relation to the share even though it would otherwise be prevented from applying by subsection (1)(f) of that section.

3 An election under subsection (2)—

a must be made no later than the time when the investing company first holds the share or, if later, when the share begins to produce a return for the investing company, and

b is irrevocable.

4 In this section “obtain a relevant tax advantage” means secure that the return produced by the share (or any part of it) is received in a way that means that its treatment for corporation tax purpose is more advantageous to the investing company than it would be if it were—

a charged to corporation tax as income of the investing company, or

b brought into account as income of the investing company for corporation tax purposes,

at the time when amounts would be brought into account in relation to the return in accordance with section 521B.

5 Nothing in this section applies in relation to the investing company for an accounting period if it is an excluded controlled foreign company.

6 For this purpose the investing company is an excluded controlled foreign company if any of its chargeable profits (within the meaning of Chapter 4 of Part 17 of ICTA)—

a are apportioned for the accounting period in accordance with section 752 of ICTA by virtue of section 747(3) of that Act, or

b are not so apportioned because of section 748(1) of that Act.

521F Shares becoming or ceasing to be shares to which section 521B applies

1 This section applies if at any time section 521B begins or ceases to apply in the case of a share held by the investing company.

2 The investing company is treated for the purposes of Part 5—

a as having disposed of the share immediately before that time for consideration of an amount equal to the notional carrying value of the share at that time, and

b as having immediately reacquired it for consideration of the same amount.

3 In subsection (2) “notional carrying value”, in relation to the share, means the amount which would have been its carrying value in the accounts of the investing company if a period of account had ended immediately before section 521B began or ceased to apply in the case of the share and the investing company.

4 For the purposes of subsection (3) “carrying value” has the same meaning as it has for the purposes of section 316 (see section 317).

Amendments and repeals¶

1 Section 116B of TCGA 1992 (shares beginning or ceasing to be shares to which section 523 of CTA 2009 applies) is amended as follows.

2 In subsection (1) and the heading, for “522” substitute “ 521B ”.

3 In subsection (1)(b), for “its fair value” substitute “ the notional carrying value of the share ”.

4 In subsection (2), for the definition of “fair value” substitute—

5 In that subsection, in the definition of “investing company”—

a for “7” substitute “ 6A ”, and

b for “with guaranteed returns) (see section 522(3)” substitute “ accounted for as liabilities) (see section 521A(3) ”.

^F1166. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 Schedule 4 to CTA 2009 (index of expressions) is amended as follows.

2 After the entry relating to “approved, approval (in relation to a share incentive plan) (in Chapter 1 of Part 11)” insert—

3 Omit the entry relating to “the associated transactions condition (in Chapter 7 of Part 6)”.

4 After the entry relating to “effective 51% subsidiary (in Part 8)” insert—

5 For the entry relating to “the investing company (in Chapter 7 of Part 5)” substitute—

6 For the entry relating to “the investing company (in Chapter 7 of Part 5)” substitute—

7 Omit the entries relating to “the increasing value condition (in Chapter 7 of Part 6)” and “the redemption return condition (in Chapter 7 of Part 6)”.

8 In the entry relating to “share (in Part 5 and in Part 6 except for Chapter 7 of that Part)”, for “7” substitute “ 6A ”.

9 For the entries relating to “share (in Chapter 7 of Part 6)” and “the share (in Chapter 7 of Part 6) substitute—

Repeals¶

8In consequence of the amendments made by this Schedule, omit—

a in ICTA—

i section 736C (deemed interest: cash collateral under stock lending arrangement), and

ii section 736D (quasi-stock lending arrangements and quasi-cash collateral),

b in FA 2004, sections 131 to 133 (companies in partnership), and

c in CTA 2009—

i Chapter 7 of Part 6 (shares with guaranteed returns etc),

ii Chapter 8 of that Part (returns from partnerships), and

iii section 547 (repo under arrangement designed to produce quasi-interest: tax avoidance).

9Omit the following provisions (which relate to the provisions repealed by paragraph 8)—

a in ICTA, sections 736B(4) and 807A(2B),

b in TCGA 1992, section 171(3A),

c in F(No.2)A 2005, in Schedule 7, paragraphs 5 and 9,

d in FA 2006, in Schedule 6, paragraphs 3 and 4,

e in ITA 2007, in Schedule 1, paragraphs 172 and 373, and

f in CTA 2009, in Schedule 1, paragraphs 215 and 571.

10In section 542(2) of CTA 2009 (introduction to Chapter 10 of Part 6), for “547” substitute “ 546 ”.

Commencement¶

11The amendments made by paragraphs 2(2) and 3 have effect in relation to any arrangement which produces for a company a return which is economically equivalent to interest if the company becomes a party to the arrangement on or after 22 April 2009.

12The amendments (and repeals) made by paragraphs 2(3) and 4 to 10 come into force on 22 April 2009.

1 This paragraph applies where any of the provisions repealed by paragraph 8 applies in relation to anything done by a company before 22 April 2009 which amounts to becoming party to an arrangement (within the meaning given by section 486B(9) of CTA 2009).

2 The company is to be treated for the purposes of Chapter 2A of Part 6 of CTA 2009 as having become a party to the arrangement on that date.

3 But this paragraph does not apply in circumstances in which paragraph 15 does.

1 This paragraph applies where Chapter 7 of Part 6 of CTA 2009 applies in relation to a share held by a company immediately before 22 April 2009.

2 Section 116B(1) of TCGA 1992 is to be treated as applying as if section 523 of CTA 2009 ceased to apply in relation to the share on that date.

3 But this paragraph does not apply if paragraph 15 applies in relation to the share and the company.

1 This paragraph applies where—

a Chapter 7 of Part 6 of CTA 2009 applies in relation to a share held by a company immediately before 22 April 2009 by reason of the redemption return condition being met (see section 529 of that Act) (or would so apply but for the share not being designed to produce a return which equates in substance to the return on an investment of money at a commercial rate of interest), and

b section 521B of CTA 2009 applies in relation to the share and the company on 22 April 2009.

2 Part 5 of CTA 2009 applies as if the company had acquired the share on 22 April 2009 for an amount equal to the notional carrying value of the share on that date.

3 In sub-paragraph (2) “notional carrying value” has the same meaning as in section 521F(2) of CTA 2009 (see subsection (3) of that section).

4 Section 521F of CTA 2009 does not apply by virtue of the coming into force of section 521B of that Act.

16An election under—

a section 486D(2) of CTA 2009, or

b section 521E(2) of that Act,

relating to a return which begins to be produced before 1 August 2009 can be made at any time before that date but only in relation to any return produced on or after the day on which the election is made.

SCHEDULE 25 ¶

Transfers of income streams

Section 49

Part 1 Company transferors¶

Application of Part¶

^F1411. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Value of transferred income stream treated as income¶

^F1412. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exception: amount otherwise taxed¶

^F1413. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exception: transfer by way of security¶

^F1414. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Partnership shares¶

^F1415. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interpretation¶

^F1416. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part 2 Non-corporate transferors¶

7In ITA 2007, after section 809 insert—

Chapter 5A Transfers of income streams

809AZA Application of Chapter

1 This Chapter applies where—

a a person within the charge to income tax (“the transferor”) makes a transfer to another person (“the transferee”) of a right to relevant receipts (see subsection (2)), and

b (subject to subsection (3)) the transfer of the right is not a consequence of the transfer to the transferee of an asset from which the right to relevant receipts arises.

2 “Relevant receipts” means any income—

a which (but for the transfer) would be charged to income tax as income of the transferor, or

b which (but for the transfer) would be brought into account in calculating profits of the transferor for the purposes of income tax.

3 Despite paragraph (b) of subsection (1), this Chapter applies if the transfer of the right is a consequence of the transfer to the transferee of all rights under an agreement for annual payments; and for the purposes of that paragraph the transfer of an asset under a sale and repurchase agreement is not to be regarded as a transfer of the asset.

4 Section 809AZB makes provision as to the consequences of this Chapter applying.

5 For exclusions from this Chapter, see—

a section 809AZC (amount otherwise taxed),

b section 809AZD (certain annuities), and

c section 809AZE (transfer by way of security).

6 Section 809AZF makes special provision about transfers of partnership shares.

7 Section 809AZG contains supplementary provisions.

809AZB Value of transferred income stream treated as income

1 The relevant amount (see subsection (2)) is to be treated as income of the transferor chargeable to income tax in the same way and to the same extent as that in which the relevant receipts—

a would have been chargeable to income tax, or

b would have been brought into account in calculating any profits for the purposes of income tax,

but for the transfer of the right to relevant receipts.

2 The relevant amount is—

a (except where paragraph (b) applies) the amount of the consideration for the transfer of the right, or

b where the amount of any such consideration is substantially less than the market value of the right at the time when the transfer takes place (or where there is no consideration for the transfer of the right), the market value of the right at that time.

3 The income under subsection (1) is to be treated as arising in the chargeable period of the transferor in which the transfer takes place.

4 But subsection (5) applies if (apart from the transfer) any of the relevant receipts—

a would have been brought into account in accordance with Part 2 or 3 of ITTOIA 2005 (trading income and property income) in calculating any profits for the purposes of income tax, and

b in accordance with generally accepted accounting practice, would have been recognised otherwise than wholly in the chargeable period in which the transfer takes place.

5 If this subsection applies, the income under subsection (1) is to be treated as arising—

a to the extent that it does not exceed the amount of the consideration for the transfer of the right, in the chargeable period or periods for which, in accordance with generally accepted accounting practice, the consideration for the transfer is recognised for accounting purposes in a profit and loss account or income statement of the transferor, and

b otherwise, in the chargeable period or periods for which, in accordance with generally accepted accounting practice, the consideration for the transfer would be so recognised if it were of an amount equal to the market value of the right at the time when the transfer takes place.

6 But if in a case where the transferor is a company it at any time becomes reasonable to assume that the income (to any extent) is not, or would not be, treated by subsection (5) as arising in an accounting period of the transferor, the income is to that extent to be treated as arising immediately before that time.

809AZC Exception: amount otherwise taxed

This Chapter does not apply if and to the extent that the income under section 809AZB(1) is (apart from this Chapter)—

a charged to tax as income of the transferor,

b brought into account in calculating the profits of the transferor, or

c brought into account under CAA 2001.

809AZD Exception: certain annuities

This Chapter does not apply to a transfer of a right to—

a annual payments under a life annuity as defined in section 473(2) of ITTOIA 2005, or

b annual payments under an annuity which is pension income within the meaning of Part 9 of ITEPA 2003 (see section 566(2) of that Act).

809AZE Exception: transfer by way of security

This Chapter does not apply if the consideration for the transfer is the advance under an arrangement that is a structured finance arrangement for the purposes of section 774A or 774C of ICTA in relation to the transferor or a partnership in which the transferor is a partner.

809AZF Partnership shares

1 For the purposes of this Chapter a transfer of a right to relevant receipts consisting of the reduction in a transferor's share in the profits or losses of a partnership is to be regarded as a consequence of a transfer of an asset from which the right arose (that is, the partnership property) if condition A or B is met.

2 Condition A is that there is a reduction of the transferor's share in the partnership property and the reduction in the transferor's share in the profits or losses is proportionate to that reduction.

3 Condition B is that it is not the main purpose, or one of the main purposes, of the transfer to secure that the relevant receipts are not charged to income tax or corporation tax as income of any partner or brought into account as income of any partner for the purpose of either of those taxes.

809AZG Interpretation

1 For the purposes of this Chapter—

a the grant or surrender of a lease of land is to be regarded as a transfer of the land, and

b the disposal of an interest in an oil licence (within the meaning of section 809 of CTA 2009) is to be regarded as a transfer of the oil licence.

2 The Treasury may by order make other provision for securing that other transactions are to be regarded as transfers of assets for those purposes.

3 In this Chapter—

a references to a transfer include sale, exchange, gift and assignment (or assignation) and any other arrangement which equates in substance to a transfer, and

b references to a transfer taking place are, in the case of an arrangement other than a sale, exchange, gift or assignment (or assignation), to the making of the arrangement.

4 A transfer to or by any partnership of which the transferor or transferee is a member, and a transfer to the trustees of any trust of which the transferor is a beneficiary, counts as a transfer in relation to which this Chapter applies.

Part 3 Company transferees¶

1 Part 6 of CTA 2009 (relationships treated as loan relationships etc) is amended as follows.

2 In section 477(2) (overview of Part 6), after paragraph (aa) (inserted by Schedule 24) insert—

3 After Chapter 2A (inserted by Schedule 24) insert—

Chapter 2B Transferred income streams

486F Introduction to Chapter

1 This Chapter provides for Part 5 to apply in relation to a company to which an income stream transfer is made (“the transferee”).

2 An “income stream transfer” is a transfer by a person (“the transferor”) to which either of the following provisions applies—

a Part 1 of Schedule 25 to FA 2009 (transfers of income streams by companies), or

b Chapter 5A of Part 13 of ITA 2007 (transfers of income streams by individuals).

486G Consideration to be treated as loan relationship

1 For the purposes of this Part—

a the consideration for the transfer of the right to relevant receipts is to be treated as a money debt which is owed to the transferee by the person by whom the relevant receipts fall to be paid, and

b the transfer is to be treated as a transaction for the lending of money from which that debt is treated as arising.

2 For the meaning of “relevant receipts” see paragraph 1(2) of Schedule 25 to FA 2009 or section 809AZA(2) of ITA 2007.

Part 4 Consequential amendments and repeals¶

1 In ICTA, omit—

a section 730 (transfers of rights to receive distributions in respect of shares),

b section 775A (transfers of rights to receive annual payments),

c section 785A (rent factoring of leases of plant or machinery), and

d in section 786 (transactions associated with loans or credit)—

i in subsection (5), “assigns,”, “(without a sale or transfer of the property)” and “assigned,”,

ii in subsection (5ZA), “assigned,”, and

iii in subsection (5A), “assigned,”.

2 In ITTOIA 2005, omit—

a in Chapter 11 of Part 4 (transactions in deposits)—

i in section 551(2), the words after “of it”, and

ii in section 552(1), paragraph (e) and the “and” before it, and

b Chapter 13 of Part 4 (sales of foreign dividend coupons).

3 Omit the following provisions (which relate to the provisions repealed by sub-paragraphs (1) and (2))—

a in TMA 1970, in section 98, in column 1 of the Table, the entry relating to section 730(8) of ICTA,

b in ICTA, in section 774E(1), the second sentence,

c in FA 1996, in Schedule 7, paragraph 23,

d in FA 2004, section 135,

e in ITTOIA 2005, in Schedule 1, paragraph 300,

f in F(No.2)A 2005, in Schedule 7, paragraphs 2 and 4,

g in FA 2006, in Schedule 6, paragraph 7,

h in ITA 2007—

i in section 1016, in Part 3 of the table, the entry relating to section 730(4) of ICTA, and

ii in Schedule 1, paragraphs 183 and 545, and

i in CTA 2009, in Schedule 1, paragraphs 214 and 230.

^F824 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5 In section 2(13) of ITA 2007, omit the “and” at the end of paragraph (d) and insert at the end

6 Schedule 4 to that Act (index of defined expressions) is amended as follows.

7 After the entry relating to “transfer (in Chapter 2 of Part 13)” insert—

8 After the entry relating to “transferor (in Part 12)” insert—

Part 5 Commencement¶

10This Schedule has effect in relation to transfers on or after 22 April 2009.

SCHEDULE 26 ¶

Certification of SAYE savings arrangements

Section 50

1Chapter 4 of Part 6 of ITTOIA 2005 (SAYE interest) is amended as follows.

Transfer of certain functions from Treasury to HMRC¶

1 Section 705 (certification of arrangements) is amended as follows.

2 In subsections (1) and (2), for “Treasury” (in each place) substitute “ Commissioners ”.

3 After subsection (4) insert—

3In section 706(1) and (2) (withdrawal and variation of certifications etc), for “Treasury” substitute “ Commissioners ”.

4In section 707(1) (authorisation of providers), for “Treasury” substitute “ Commissioners ”.

1 Section 708 (withdrawal and variation of authorisations) is amended as follows.

2 In subsections (1) and (2), for “Treasury” substitute “ Commissioners ”.

3 In subsection (4), for “Treasury of its” substitute “ Commissioners of their ”.

Removal of requirement that notice be sent by post¶

6In the following provisions omit “by post”—

a section 706(2)(b) (notification of withdrawal and variation of certifications etc), and

b section 708(2)(b) (notification of withdrawal and variation of authorisations).

Reduction of notice period for withdrawals and variations¶

7In section 706(2)(b) (notification of withdrawal and variation of certifications etc), for “28 days” substitute “ 15 days ”.

Power to provide for withdrawals and variations not to affect certain contracts¶

8In section 706(3) (transitional provision for withdrawals and variations of certifications), for the words from “the operation of” to the end substitute—

SCHEDULE 27 ¶

Remittance basis

Section 51

Part 1 Amendments of ITA 2007¶

1Chapter A1 of Part 14 of ITA 2007 (remittance basis) is amended as follows.

2In section 809C (claim for remittance basis by long-term UK resident: nomination of foreign income and gains to which section 809H(2) is to apply), after subsection (5) insert—

1 Section 809D (application of remittance basis without claim where unremitted foreign income and gains under £2,000) is amended as follows.

2 In subsection (1), insert at the end (not as part of paragraph (c))— “ unless condition A or condition B is met. ”

3 After that subsection insert—

1 Section 809E (application of remittance basis without claim: other cases) is amended as follows.

2 In subsection (1), for paragraph (c) substitute—

3 In that subsection, insert at the end (not as part of paragraph (e))— “ unless the individual gives notice in a return under section 8 of TMA 1970 that this section is not to apply in relation to the individual for that year. ”

4 After subsection (2) insert—

5In section 809H (claim for remittance basis by long-term UK resident: charge), after subsection (5) insert—

1 Section 809L (meaning of “remitted to the United Kingdom”) is amended as follows.

2 Omit subsection (8).

3 In subsection (9), for “income or chargeable gains are used in respect of a debt include cases where income or chargeable gains are” substitute “ property (including income or chargeable gains) is used in respect of a debt include cases where the property is ”.

1 Section 809M (meaning of “relevant person” for purposes of sections 809L, 809N and 809O) is amended as follows.

2 In subsection (2)(e), insert at the end “or a company which is a 51% subsidiary of such a close company”.

3 In subsection (3), after paragraph (c) insert—

8In section 809P (amount remitted), insert at the end—

1 Section 809T (foreign chargeable gains accruing on disposals made other than for full consideration) is amended as follows.

2 In subsection (1)(b), after “amount” insert “ at least ”.

3 In the heading, for “other” substitute “ otherwise ”.

1 Section 809X (property which is exempt property) is amended as follows.

2 In subsection (4), omit “that derive from relevant foreign income”.

3 In subsection (5), omit “of any description that derives from relevant foreign income”.

1 Section 809Z5 (notional remitted amount) is amended as follows.

2 In subsection (1), omit “of income”.

3 Omit subsections (2) and (3).

Part 2 Amendments of other Acts¶

TCGA 1992¶

12In section 14A(3)(b) of TCGA 1992 (section 13: non-UK domiciled individuals), after “amount” insert “ at least ”.

ITTOIA 2005¶

13In section 648 of ITTOIA 2005 (income arising under a settlement), for subsections (2) to (5) substitute—

2 But if, in a tax year, the settlor is not UK resident, references in this Chapter to income arising under a settlement do not include income arising under the settlement in that tax year in respect of which the settlor, if actually entitled to it, would not be chargeable to income tax by deduction or otherwise because of not being UK resident.

3 And if, for a tax year, section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the settlor, references in this Chapter to income arising under a settlement include in relation to any relevant foreign income arising under the settlement in that tax year only such of it as is remitted to the United Kingdom (in that tax year or any subsequent tax year) in circumstances such that, if the settlor remitted it, the settlor would be chargeable to income tax.

4 See Chapter A1 of Part 14 of ITA 2007 for the meaning of “remitted to the United Kingdom” etc.

5 Where subsection (3) applies the remitted income is treated for the purposes of this Chapter as arising under the settlement in the tax year in which it is remitted.

FA 2008¶

14In paragraph 86 of Schedule 7 to FA 2008 (remittance basis: transitional provisions), after sub-paragraph (4) insert—

Part 3 Commencement¶

1 The amendments made by paragraphs 2 to 5, 10, 11(2) and 14 have effect for the tax year 2008-09 and subsequent tax years.

2 The other amendments made by this Schedule come into force on 22 April 2009.

SCHEDULE 28 ¶

Taxable benefits: cars

Section 53

Introduction¶

1Chapter 6 of Part 3 of ITEPA 2003 (taxable benefits: cars) is amended as follows.

Abolition of “price cap”¶

1 Section 121(1) (method of calculating cash equivalent of benefit of car) is amended as follows.

2 In step 3, insert at the end— “ The resulting amount is the interim sum. ”

3 Omit step 4 (interim sum to be £80,000 if step 3 amount exceeds £80,000).

3In section 145(5) (modifications of provisions where car temporarily replaced), for “step 4” substitute “ step 3 ”.

4In section 147(1) and (2) (classic cars), for “amount carried forward from” substitute “ interim sum calculated under ”.

5In section 170(1) (Treasury orders increasing various amounts), omit paragraph (a) (amount in step 4 of section 121(1)).

Cars with CO₂ emissions figures: the appropriate percentage¶

^F2846. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Electrically propelled cars: the appropriate percentage¶

^F2677. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8In section 142 (special provision for cars registered before 1998)—

a in subsection (3) (cars without internal combustion engine with reciprocating pistons), for the words after “year is” substitute “ 32% ”, and

b omit subsection (4) (definition of electrically propelled car).

Consequential repeal¶

^F1799. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commencement¶

^F981 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2 The other amendments made by this Schedule have effect for the tax year 2011-12 and subsequent tax years.

^F65SCHEDULE 29 ¶

Manufactured overseas dividends

Section 58

^F65Repos¶

^F651. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F65Stock lending¶

^F652. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F65Commencement¶

^F653. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SCHEDULE 30 ¶

Financial arrangements avoidance

Section 61

Interest payments: arrangements appearing very likely to produce post-tax advantage¶

1 In ITA 2007, after section 384 insert—

384A Restriction on relief where arrangements minimise risk to borrower

1 Relief is not to be given under this Chapter for interest paid by a person on a loan if—

a the loan is made to the person (“the borrower”) as part of arrangements which appear very likely to produce a post-tax advantage, and

b the arrangements seem to have been designed to reduce any income tax or capital gains tax to which the borrower (or any person whose circumstances are like those of the borrower) would be liable apart from the arrangements.

2 Arrangements “appear very likely” to produce a post-tax advantage if (and only if) it would be reasonable to assume from either or both of—

a the likely effect of the arrangements, and

b the circumstances in which the arrangements, or any parts of the arrangements, are entered into or effected,

that there is no risk, or only an insignificant risk, that they will not produce a post-tax advantage.

3 “Produce a post-tax advantage” means give rise to a sum or sums—

a payable to the borrower or a person connected with the borrower, or

b payable to any other person for the benefit of the borrower or a person connected with the borrower,

of an amount (or aggregate amount) which, after making the appropriate tax adjustments, is equal to or greater than the relevant amount.

4 “The relevant amount” is the aggregate of—

a the amount required to meet the borrower's obligations in respect of the loan, and

b any amount which is used by the borrower in the same way as that which entitles the borrower to relief under this Chapter in respect of the loan and is not money lent to the borrower under any loan.

5 If, with a view to securing that the condition in subsection (1)(a) is not met, the arrangements make provision for securing that, in all or any circumstances in which they do not produce a post-tax advantage, they will produce a broadly compensatory amount, the arrangements are to be regarded for the purposes of subsection (2) as making provision for securing the production of a post-tax advantage in those circumstances.

6 “Produce a broadly compensatory amount” means give rise to a sum or sums payable as mentioned in subsection (3) of an amount (or aggregate amount) which, after making the appropriate tax adjustments, is not significantly less than the relevant amount.

7 For the purposes of subsections (3) and (6) causing the value of an asset to be obtainable, directly or indirectly, by a person is to be treated as equivalent to giving rise to a sum payable to the person of an amount equal to that value.

8 To make the appropriate tax adjustments for the purpose of subsection (3) or (6)—

a if A exceeds B, deduct the amount of the excess from the amount (or aggregate amount), and

b if B exceeds A, add the amount of the excess to the amount (or aggregate amount).

9 For the purposes of subsection (8)—

A is the amount of any income tax, any capital gains tax and any tax under the law of a territory outside the United Kingdom to which the borrower is liable in consequence of the arrangements, and
B is the amount by which the borrower's liability to income tax and capital gains tax is (or apart from subsection (1) would be) reduced in consequence of the arrangements.

10 Arrangements seem to have been designed to reduce any income tax or capital gains tax to which the borrower (or any person whose circumstances are like those of the borrower) would be liable apart from the arrangements if (and only if) it would be reasonable to assume from either or both of—

a the likely effect of the arrangements, and

b the circumstances in which the arrangements, or any parts of the arrangements, are entered into or effected,

that the arrangements, or any parts of the arrangements, are designed to do so.

11 In this section “arrangements” means arrangements consisting of any number of agreements, understandings, schemes, transactions or other arrangements (whether or not legally enforceable); but in subsections (1)(a), (2), (5) and (9) the references to arrangements also include any related transactions.

12 In subsection (11) “related transactions” means transactions in the case of which it is reasonable to assume from either or both of—

a the likely effect of the transactions, and

b the circumstances in which the transactions are entered into or effected,

that the transactions would not have been entered into or effected independently of the arrangements.

13 Transactions are not prevented from being related transactions just because the transactions—

a are not between the same parties, or

b are not between parties to the arrangements.

2 The amendment made by sub-paragraph (1) has effect in relation to interest paid on or after 19 March 2009.

Amounts not fully recognised for accounting purposes¶

^F2431 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F2432 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F2433 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F2434 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F2435 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F2436 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7 In section 317(5) of CTA 2009 (carrying value), before paragraph (a) insert—

8 The amendments made by this paragraph have effect in relation to periods of account beginning on or after 22 April 2009.

9 But for the purposes of sub-paragraph (8) a period of account beginning before, and ending on or after, 22 April 2009 is to be treated as if so much of the period as falls before that date, and so much of the period as falls on or after that date, were separate periods of account.

1 In CTA 2009, after section 599 insert—

599A Amounts not fully recognised for accounting purposes: introduction

1 Section 599B applies for the purpose of determining the credits and debits which a company is to bring into account for a period for the purposes of this Part in the following case.

2 The case is where—

a the company is, or is treated as, a party to a derivative contract in the period,

b condition A or B is met, and

c an amount is not fully recognised for the period in respect of the contract as a result of the application of generally accepted accounting practice in relation to the contract and the contribution or securities referred to in the condition that is met.

3 Condition A is that—

a an amount (a “relevant capital contribution”) has at any time been contributed to the company which forms part of its capital for the period, and

b an amount is not fully recognised for the period in respect of the relevant capital contribution as a result of the application of generally accepted accounting practice in relation to the derivative contract and the relevant contribution.

4 It does not matter for the purposes of subsection (3) whether the contribution forms part of the company's share capital or other capital for the period.

5 Condition B is that—

a the company has issued securities that form part of its capital for the period, and

b an amount is not fully recognised for the period in respect of the securities as a result of the application of generally accepted accounting practice in relation to the derivative contract and the securities.

6 For the purposes of this section an amount is not fully recognised for a period in respect of a contract of a company, a contribution to it or securities issued by it if—

a no amount in respect of the contract, contribution or securities is recognised in determining its profit or loss for the period, or

b an amount is so recognised in respect of only part of the contract, contribution or securities.

599B Determination of credits and debits where amounts not fully recognised

1 In determining the credits and debits which a company is to bring into account for the period referred to in section 599A(1) for the purposes of this Part in respect of the derivative contract mentioned in section 599A(2), the assumption in subsection (2) is to be made.

2 The assumption is that an amount in respect of the whole of the contract in question is recognised in determining the company's profit or loss for the period.

3 The credits and debits which are to be brought into account for the purposes of this Part by the company in respect of the contract are to be determined on the basis of fair value accounting.

2 In section 702(3) of CTA 2009 (carrying value), before paragraph (c) insert—

3 The amendments made by this paragraph have effect in relation to periods of account beginning on or after 22 April 2009.

4 But for the purposes of sub-paragraph (3) a period of account beginning before, and ending on or after, 22 April 2009 is to be treated as if so much of the period as falls before that date, and so much of the period as falls on or after that date, were separate periods of account.

Loan relationships involving connected debtor and creditor where debits exceed credits¶

^F124. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Credits and debits for manufactured interest¶

1 In section 540(3) of CTA 2009 (manufactured interest treated as interest under loan relationship), insert at the end “and the credits and debits to be brought into account in respect of manufactured interest for any period are those that are recognised in determining the company's profit or loss for the period in accordance with generally accepted accounting practice (but subject to the provisions of Part 5, including, in particular, section 307(3) and to paragraph 7A of Schedule 23A to ICTA).”

2 In section 97(2) of FA 1996 (equivalent provision for accounting periods ending before 1 April 2009), insert at the end “and the credits and debits to be brought into account in respect of manufactured interest for any period are those that are recognised in determining the company's profit or loss for the period in accordance with generally accepted accounting practice (but subject to the provisions of this Chapter (including, in particular, section 84(1)) and to paragraph 7A of Schedule 23A to the Taxes Act 1988).”

3 The amendments made by this paragraph have effect in relation to manufactured interest whenever paid, apart from payments treated under section 737A(5) of ICTA as made before 27 January 2009.

^F32SCHEDULE 31 ¶

Sale of lessor companies etc: anti-avoidance

Section 63

^F32Introduction¶

^F321. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F32Paragraph 6¶

^F322. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F32Paragraph 7¶

^F323. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F32Paragraph 7A¶

^F324. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F32Paragraph 17¶

^F325. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F32Paragraph 17A¶

^F326. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F32Paragraph 22¶

^F327. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F32Paragraph 40¶

^F328. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F32Paragraph 41¶

^F329. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F32Paragraph 42¶

^F3210. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F32Consequential repeal¶

^F3211. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F32Commencement¶

^F3212. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SCHEDULE 32 ¶

Leases of plant or machinery

Section 64

Disposal values: commencement of long funding finance leases¶

1 Section 61 of CAA 2001 (disposal events and disposal values) is amended as follows.

2 In the Table in subsection (2), for item 5A substitute—

3 After subsection (5) insert—

4 Omit subsections (6) to (9).

2Accordingly, in FA 2008, in Schedule 20, omit paragraph 4.

1 Section 25A of TCGA 1992 (long funding leases of plant or machinery: deemed disposals) is amended as follows.

2 In subsection (2)(a), for “the value described in subsection (4)(a) or (b)” substitute “ the relevant disposal value ”.

3 For subsections (4) to (4D) substitute—

4 In subsection (5), omit “ “market value”,”.

4Accordingly, in FA 2008, in Schedule 20, omit paragraph 5.

1 The amendments made by paragraphs 1 and 2 have effect in relation to leases whose inception is on or after 13 November 2008.

2 The amendments made by paragraphs 3 and 4 have effect in relation to leases whose inception is on or after 22 April 2009.

Disposal values: termination etc of long funding leases¶

6In section 66 of CAA 2001 (list of provisions outside Chapter 5 of Part 2 of that Act about disposal values), in the list, insert at the appropriate place—

1 Section 70E of CAA 2001 (long funding leases: disposal events and disposal values) is amended as follows.

2 In subsection (1), for paragraph (c) substitute—

3 After that subsection insert—

4 In subsection (2)(a), for “termination of the lease” substitute “ relevant event ”.

5 For subsections (3) to (8) substitute—

2A The amount of the disposal value is—

(QE - QA) + R

where—

QE is the person's qualifying expenditure on the provision of the plant or machinery,

QA is the qualifying amount (see subsections (2B) to (2E)), and

R is any relevant rebate (see subsections (2F) and (2G)).

2B In the case of a long funding operating lease, “the qualifying amount” means the aggregate amount of the reductions made under section 502K of ICTA or section 148I of ITTOIA 2005 for periods of account in which the person was the lessee.

2C In the case of a long funding finance lease, “the qualifying amount” means the aggregate of—

a the payments made to the lessor by the person under the lease (including any initial payment), and

b the payments made to the lessor by the person under a guarantee of any residual amount (as defined in section 70YE),

subject to subsection (2D).

2D The following are excluded from the “qualifying amount” under subsection (2C)—

a so much of any payment as, in accordance with generally accepted accounting practice, falls (or would fall) to be shown in the person's accounts as finance charges in respect of the lease,

b so much of any payment as represents charges for services, and

c so much of any payment as represents qualifying UK or foreign tax (within the meaning of section 70YE) to be paid by the lessor.

2E In the case of a long funding finance lease that is not a transaction at arm's length, “the qualifying amount” includes only so much of the amounts described in subsection (2C) as would reasonably be expected to have been paid if the lease had been such a transaction.

2F “Relevant rebate” means—

a in a case falling within subsection (1A)(a), any amount calculated by reference to the termination value that is payable for the benefit (directly or indirectly) of the person or another person connected with that person, or

b in a case falling within subsection (1A)(b) or (c), any such amount that would have been so payable if, when the relevant event occurred, the lease had terminated and the plant or machinery had been sold for its market value at that time.

2G In the case of a lease that is not a transaction at arm's length, “relevant rebate” includes any amount that would reasonably be expected to have fallen within subsection (2F) if the lease had been such a transaction.

2H The amount of the disposal value brought into account under this section cannot be less than nil.

6 In subsection (9), for “termination of the lease” substitute “ relevant event ”.

8The amendments made by paragraphs 6 and 7 have effect in relation to cases where the relevant event occurs on or after 13 November 2008.

Capital receipts treated as income¶

^F529. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F5210. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F5211. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transfer and long funding leaseback: restrictions on lessee's allowances¶

12In section 51A(10) of CAA 2001 (annual investment allowances), insert at the appropriate place— “ section 70DA(2) (transfer and long funding leaseback: no annual investment allowance for lessee), ”.

13In section 52(5) of CAA 2001 (first-year allowances), insert at the appropriate place— “ section 70DA(2) (transfer and long funding leaseback: no first-year allowance for lessee), ”.

14In section 57(3) of CAA 2001 (available qualifying expenditure), insert at the appropriate place— “ section 70DA (transfer and long funding leaseback); ”.

15In CAA 2001, after section 70D insert—

70DA Transfer and long funding leaseback: restrictions on lessee's allowances

1 This section applies where—

a a person (“S”) transfers plant or machinery to another person (“B”),

b at any time after the date of the transfer, the plant or machinery is available to be used by S, or a person (other than B) who is connected with S (“CS”), under a plant or machinery lease, and

c that lease is a long funding lease.

2 No annual investment allowance or first-year allowance is to be made in respect of the expenditure of S or CS under the lease.

3 The amount, if any, by which E exceeds D is to be left out of account in determining the available qualifying expenditure of S or CS.

4 E is the capital expenditure of S or CS on the provision of the plant or machinery under the long funding lease.

5 If S is required to bring a disposal value into account under this Part because of the transfer referred to in subsection (1)(a), D is that disposal value.

6 Otherwise, D is whichever of the following is the smallest—

a the market value of the plant or machinery;

b if S incurred capital expenditure on the provision of the plant or machinery before the transfer referred to in subsection (1)(a), the amount of that expenditure;

c if a person connected with S incurred capital expenditure on the provision of the plant or machinery before that transfer, the amount of that expenditure.

7 Section 70Y(3) applies to references in this section to a transfer of plant or machinery by a person.

8 For the purposes of this section a transfer involving the grant of a lease takes place on the commencement of the term of the lease.

16In section 70H of CAA 2001 (lessee: requirement for tax return treating lease as long funding lease), after subsection (1B) insert—

17The amendments made by paragraphs 12 to 16 have effect in relation to cases where the commencement of the term of the lease referred to in subsection (1)(b) of section 70DA of CAA 2001 is on or after 13 November 2008.

Transfer followed by hire-purchase etc: restrictions on hirer's allowances¶

18In section 51A(10) of CAA 2001 (annual investment allowances), after “218A” insert “ , 229A(2) ”.

19In section 52(5) of CAA 2001 (first-year allowances), after “217” insert “ , 229A(2) ”.

20In section 57(3) of CAA 2001 (available qualifying expenditure), after “228(2)” insert “ , 229A ”.

21In CAA 2001, after section 229 insert—

229A Transfer followed by hire-purchase etc: restrictions on hirer's allowances

1 This section applies where—

a a person (“S”) transfers plant or machinery to another person (“B”),

b at any time after the date of the transfer, the plant or machinery is available to be used by S, or a person (other than B) who is connected with S (“CS”),

c it is available to be so used under a contract which provides that S or CS is to or may become the owner of the plant or machinery on the performance of the contract, and

d S or CS incurs capital expenditure on the provision of the plant or machinery under that contract.

2 No annual investment allowance or first-year allowance is to be made in respect of the expenditure of S or CS under the contract.

3 The amount, if any, by which E exceeds D is to be left out of account in determining the available qualifying expenditure of S or CS.

4 E is the capital expenditure of S or CS on the provision of the plant or machinery under the contract referred to in subsection (1)(c).

5 If S is required to bring a disposal value into account under this Part because of the transfer referred to in subsection (1)(a), D is that disposal value.

6 Otherwise, D is whichever of the following is the smallest—

a the market value of the plant or machinery;

b if S incurred capital expenditure on the provision of the plant or machinery before the transfer referred to in subsection (1)(a), the amount of that expenditure;

c if a person connected with S incurred capital expenditure on the provision of the plant or machinery before that transfer, the amount of that expenditure.

7 Sections 214 and 215 do not apply in relation to the contract referred to in subsection (1)(c).

8 Section 70Y(3) applies to references in this section to a transfer of plant or machinery by a person.

9 For the purposes of this section a transfer involving the grant of a lease takes place on the commencement of the term of the lease.

22The amendments made by paragraphs 18 to 21 have effect in relation to cases where the contract referred to in subsection (1)(c) of section 229A of CAA 2001 is entered into on or after 13 November 2008.

Finance leaseback¶

23In section 216(1)(b)(i) of CAA 2001 (sale and leaseback etc), after “S” insert “ or by a person (other than B) who is connected with S ”.

24In section 221(1)(b)(i) of CAA 2001 (meaning of “sale and finance leaseback”), for “a qualifying activity carried on by S” substitute “ an activity carried on by S or by a person (other than B) who is connected with S, ”.

25The amendment made by paragraph 23 has effect—

a where the date of the transaction referred to in section 216(1)(a) of CAA 2001 is on or after 22 April 2009, and

b for the purposes of section 227 of that Act (which applies section 216(1)(b) of that Act), where the date of the transaction referred to in section 227(1)(a) is on or after 22 April 2009.

26The amendment made by paragraph 24 has effect—

a where the date of the transaction referred to in section 221(1)(a) of CAA 2001 is on or after 22 April 2009, and

b for the purposes of section 228A of that Act (which applies section 221(1)(b) of that Act), where the date of the transaction referred to in section 228A(2)(a) is on or after 22 April 2009.

Interpretation¶

27In this Schedule “commencement” and “inception” have the meaning given in section 70YI(1) of CAA 2001.

SCHEDULE 33 ¶

Long funding leases of films

Section 65

^F501. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2In ITTOIA 2005, after section 148FC insert—

3The amendments made by paragraph 2 have effect where the inception of the long funding lease is on or after 13 November 2008 (“the relevant date”).

4Paragraphs 5 to 8 apply in respect of a long funding finance lease of a film—

a whose inception is before the relevant date, and

b which has not terminated before that date.

1 ^F195...section 148A of ITTOIA 2005 (rental earnings) does not apply to a period of account within sub-paragraph (2).

2 A period of account is within this sub-paragraph if—

a it begins on or after the relevant date, and

b no rentals due (wholly or partly) in respect of any part of the period of account were due under the lease before the relevant date.

1 For the purpose of calculating the profits of the lessor under the lease for a period of account—

a that ends on or after the relevant date, and

b that is not within paragraph 5(2),

treat the lessor as receiving for that period of account income attributable to the lease of an amount equal to the relevant amount (in addition to any amount brought into account under ^F83... section 148A(2) of ITTOIA 2005).

2 The “relevant amount” is an amount equal to so much of the rentals as—

a become due on or after the relevant date, and

b are due wholly or partly in respect of the period of account,

as would not reasonably be regarded as reflected in the rental earnings for that period of account.

3 If any rental is paid for a period (“the rental period”) which—

a begins before the relevant date, or

b is not wholly within the period of account,

for the purposes of sub-paragraph (2) treat the amount of that rental as equal to the amount apportioned (on a time basis) in respect of so much of the rental period as falls on or after the relevant date and within the period of account.

7^F90... section 148B of ITTOIA 2005 (exceptional items) does not apply in relation to any profit or loss arising on or after the relevant date.

1 If ^F166...section 148C of ITTOIA 2005 (lessor making termination payment) applies in respect of the termination of the lease on or after the relevant date, a deduction is allowed (in calculating the profits of the lessor) in respect of any sum calculated by reference to the termination value paid to the lessee.

2 The amount of the deduction is (if it would otherwise exceed that amount) limited to the total amount brought into account in respect of the lease by virtue of paragraph 5 or 6.

9For the purposes of paragraphs 3 to 8—

a “film” has the same meaning as in Part 15 of CTA 2009 (see section 1181 of that Act),

b “rental earnings” has the same meaning as in ^F279... section 148A of ITTOIA 2005, and

c Chapter 6A of Part 2 of CAA 2001 (interpretation of provisions about long funding leases) applies.

^F193SCHEDULE 34 ¶

Real Estate Investment Trusts

Section 66

^F193Introduction¶

^F1931. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F193Property rental business¶

^F1932. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F193Conditions for company¶

^F1933. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F193Conditions for balance of business¶

^F1934. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F193Entry notice: conditions for company¶

^F1935. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F193Profit: financing-cost ratio¶

^F1936. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F193Funds awaiting re-investment¶

^F1937. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F193Connected persons¶

^F1938. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^C87SCHEDULE 35 ¶

Pensions: special annual allowance charge

Section 72

Special annual allowance charge¶

1 A charge to income tax, to be known as the special annual allowance charge, arises where—

a the total adjusted pension input amount for a tax year in the case of a high-income individual who is a member of one or more registered pension schemes, exceeds

b the amount of the special annual allowance.

2 The individual is a high-income individual if the individual's relevant income for the tax year is £150,000 or more.Paragraph 2 makes provision for calculating the individual's relevant income.

3 Paragraphs 3 to 16 explain what is the total adjusted pension input amount.

4 The special annual allowance is £20,000 (but subject to paragraph 17).

5 But if, in calculating the total adjusted pension input amount of the individual for the tax year, a deduction is made in respect of—

a protected pension input amounts (see paragraphs 7 to 14), or

b a pre-22 April 2009 pension input amount that is such an amount by virtue of paragraph 16(3),

(or both) the special annual allowance is £20,000 less the amount of the deduction or, if the deduction is £20,000 or more, is nil.

6 The person liable to the special annual allowance charge is the individual.

7 The individual is liable to the special annual allowance charge whether or not—

a the individual, and

b the scheme administrator of the pension scheme or schemes concerned,

are UK resident, ordinarily UK resident or domiciled in the United Kingdom.

8 The special annual allowance charge is a charge at the appropriate rate in respect of the amount by which—

a the total adjusted pension input amount, exceeds

b the amount of the special annual allowance.

For this purpose “the appropriate rate” is—

a 0% in relation to so much (if any) of the chargeable amount as, when added to the reduced net income amount, does not exceed the basic rate limit,

b 20% in relation to so much (if any) of the chargeable amount, as when so added, exceeds the basic rate limit but does not exceed the higher rate limit, and

c 30% in relation to so much (if any) of the chargeable amount as, when so added, exceeds the higher rate limit.

In this sub-paragraph—

“chargeable amount” means the amount in respect of which the special annual allowance charge is charged, and
“the reduced net income amount” means the amount after taking step 3 in section 23 of ITA 2007 in the case of the individual for the tax year.

9 But where—

a the individual's total pension input amount under section 229 of FA 2004 (annual allowance charge) for the tax year, exceeds

b the amount of the annual allowance for the tax year (see section 228 of that Act and orders made under it),

the amount in respect of which the special annual allowance charge is charged is reduced by the amount of the excess.

10 In calculating the individual's liability to income tax for the tax year the amount of any income tax to which the individual is liable under this section is to be added at Step 7 of the calculation in section 23 of ITA 2007 (which applies as if this Schedule were a provision listed in section 30 of that Act).

11 The amount in respect of which the special annual allowance charge is charged is not to be treated as income for any purpose of the Tax Acts.

Calculation of relevant income¶

1 To find the individual's relevant income for the tax year take the following steps—Step 1Identify the individual's total income.Step 2Add the amount of any deductions made from any employment income of the individual for the tax year under section 193(2) of FA 2004 or made under Chapter 2 of Part 5 of ITEPA 2003 in accordance with paragraph 51 of Schedule 36 to FA 2004.Step 3Deduct the amount of any relief under the provisions listed in section 24 of ITA 2007, other than sections 193(4) and 194(1) of FA 2004, to which the individual is entitled for the tax year.Step 4Deduct the aggregate amount of any relevant contributions, but subject to a maximum of £20,000.Step 5Add any amount by which what would otherwise be general earnings or specific employment income of the individual for the tax year has been reduced by a post-22 April 2009 salary sacrifice scheme.Step 6If in the tax year the individual makes, or is treated under section 426 of ITA 2007 as making, a gift that is a qualifying donation for the purposes of Chapter 2 of Part 8 of that Act (gift aid), deduct the grossed up amount of the gift (that is, the amount of the gift grossed up by reference to the basic rate for the tax year).The result is the individual's relevant income for the tax year unless the result is less than £150,000 and the following provisions provide that the individual's relevant income is to be a different amount.

2 If the amount arrived at under sub-paragraph (1) is less than £150,000, take the steps in that sub-paragraph in relation to—

a the tax year before the tax year concerned, and

b the tax year before that.

If the result is £150,000 or more for either or both of those earlier tax years the individual's relevant income for the tax year is to be assumed to be £150,000.

3 If there is a scheme the main purpose, or one of the main purposes, of which is to secure that the individual's relevant income for the tax year is less than £150,000, it is to be assumed to be £150,000.

4 In step 4 in sub-paragraph (1) “relevant contributions” are—

a contributions which are relievable pension contributions in relation to the individual and are paid in the tax year,

b contributions in respect of which the individual is entitled to a tax reduction under section 788 of ICTA and which are paid in the tax year, and

c contributions paid by the individual for which a deduction is given under Chapter 2 of Part 5 of ITEPA 2003 for the tax year in accordance with paragraph 51 of Schedule 36 to FA 2004.

5 In step 5 in sub-paragraph (1) “a post-22 April 2009 salary sacrifice scheme” is a scheme made on or after 22 April 2009 in pursuance of which—

a the individual gives up the right to receive general earnings or specific employment income, and

b an employer of the individual or any other person agrees to pay contributions (or additional contributions) to a pension scheme in respect of the individual or otherwise to secure an increase in the amount of benefits to which the individual or any person who is a dependant of, or is connected with, the individual is actually or prospectively entitled under a pension scheme.

6 Section 993 of ITA 2007 (meaning of “connected” person) applies for the purposes of sub-paragraph (5).

Total adjusted pension input amount: general¶

1 The total adjusted pension input amount is to be calculated as follows.

2 Arrive at an amount in the same way as the total pension input amount would be arrived at for the purposes of the annual allowance charge in accordance with sections 229 to 237 of FA 2004 (assuming that it were necessary to arrive at it for that purpose) but subject to—

a the modifications of those sections specified in paragraphs 4 and 5, and

b where paragraph 6 applies, the provisions of that paragraph.

3 Then reduce the amount so arrived at by the aggregate of—

a any protected pension input amounts (see paragraphs 7 to 14), and

b any relevant refunded amounts (see paragraph 15),

and, if the tax year is the tax year 2009-10, any pre-22 April 2009 pension input amount (see paragraph 16).

Total adjusted pension input amount: modifications of sections 229 to 237 of FA 2004¶

1 Section 229(3) of FA 2004 (no pension input amount for year in which individual becomes entitled to all benefits under arrangement or dies) has effect for arriving at an amount under paragraph 3(2) in relation to an arrangement only if condition A or B is met.

2 Condition A is that—

a the arrangement is a defined benefits arrangement under a pension scheme,

b at the time when the individual becomes entitled to all the benefits that may be provided to the individual under the arrangement or dies, there are at least 20 persons in respect of whom defined benefits arrangements subsist under the pension scheme under which benefits are accruing or scheme pensions are being paid, and

c the individual's becoming entitled to any of the benefits that may be provided to or in respect of the individual under the arrangement is not part of a scheme the main purpose, or one of the main purposes, of which is to avoid or reduce liability to the special annual allowance charge, the annual allowance charge or the lifetime allowance charge.

3 Condition B is that—

a the arrangement is under an occupational pension scheme, a public service pension scheme or a group personal pension scheme,

b the individual's entitlement to the benefits mentioned in section 229(3)(a) of FA 2004 arises only because the ill-health condition is satisfied, and

1 Sections 230(1), 233(1) and 234(1) of FA 2004 have effect for arriving at an amount under paragraph 3(2) as if “the pension input period of the arrangement that ends in” were omitted.

2 Sections 230 to 237 of FA 2004 have effect for arriving at an amount under paragraph 3(2) as if “tax year” were substituted for “ pension input period ” in all other places.

Total adjusted pension input amount: modification in cases of avoidance scheme¶

1 This paragraph applies if there is a scheme the main purpose, or one of the main purposes, of which is to avoid or reduce liability to the special annual allowance charge, the annual allowance charge or the lifetime allowance charge by reducing the amount arrived at in accordance with paragraph 3(2) in relation to an arrangement under a pension scheme for the tax year (or for reducing that amount and the amount so arrived at for other tax years).

2 If the amount calculated under sub-paragraph (3) exceeds that arrived at in accordance with paragraph 3(2) in relation to the arrangement for the tax year, the amount so calculated is to be treated as if it were the amount so arrived at.

3 The amount is calculated by deducting—

a the amount of the consideration that might be expected to be received in respect of an assignment (or assignation) of the benefits to which the individual or any dependant of the individual has a prospective entitlement under the arrangement at the beginning of the tax year, from

b the amount of the consideration that might be expected to be received in respect of an assignment (or assignation) of the benefits to which the individual or any dependant of the individual has a prospective entitlement under the arrangement at the end of the tax year.

4 That calculation is to be made on the assumptions that—

a the benefits are capable of assignment (or assignation),

b the assignment (or assignation) is by a transaction between parties at arm's length, and

c any power to reduce entitlement to the benefits does not exist.

5 If the arrangement ceases to exist during the tax year, the reference in sub-paragraph (3)(b) to the end of the tax year is to the time immediately before it ceases to exist.

6 Section 236 of FA 2004 applies for adjusting the amount in sub-paragraph (3)(b) as for adjusting the closing value of an individual's rights as calculated under section 234(5) of that Act (but as if references to the pension input period were to the tax year and whether or not the arrangement is a defined benefits arrangement).

Protected pension input amounts: general¶

1 The following paragraphs make provision for protected pension input amounts in respect of arrangements under registered pension schemes—

a paragraph 8 makes provision about existing defined benefits arrangements,

b paragraph 9 makes provision about existing cash balance arrangements,

c paragraph 10 makes provision about other existing money purchase arrangements under occupational pension schemes and public service pension schemes,

d paragraph 11 makes provision about other existing money purchase arrangements under other schemes,

e paragraph 12 makes provision about existing hybrid arrangements, ^F115... , and

g paragraph 13A makes provision about single contributions made in accordance with agreements entered into not later than 22 April 2009.

f paragraph 13 makes provision about new and re-activated arrangements.

2 Paragraph 14 makes anti-avoidance provision in relation to all the varieties of arrangements covered by paragraphs 8 to 13A.

Protected pension input amounts: existing defined benefits arrangements¶

1 This paragraph applies in respect of a defined benefits arrangement if the arrangement is under an occupational pension scheme or a public service pension scheme.

2 If the individual pays relevant added years contributions under the arrangement in the tax year, the amount arrived at under paragraph 3(2) in relation to the arrangement is a protected pension input amount to the extent that it is attributable to those contributions.

3 Relevant added years contributions are contributions paid—

a with a view to securing that the calculation of benefits under the arrangement is by reference to a period of service in excess of pensionable service by the individual,

b in pursuance of an agreement which was made before noon on 22 April 2009 or made pursuant to a written application received by or on behalf of the scheme administrator of the pension scheme before that time,

c on a quarterly or more frequent basis during the period beginning with that date or (if later) when they first became payable and ending with the relevant end date without any failure to pay contributions payable during that period on more than an insignificant number of occasions, and

d at a rate which has not increased during that period otherwise than in accordance with an agreement made before noon on 22 April 2009 or made pursuant to a written application received by or on behalf of the scheme administrator of the pension scheme before that time.

4 To the extent that the amount arrived at under paragraph 3(2) in relation to the arrangement is attributable otherwise than to the paying of relevant added years contributions it is a protected pension input amount if the conditions set out in sub-paragraph (4A) or (4B) are met.

4A The conditions in this sub-paragraph are that—

a benefits have been accruing to or in respect of the individual under the arrangement since before 22 April 2009 and until the relevant end date, and

b there is no material change in the rules of the pension scheme under which benefits to or in respect of the individual are calculated under the arrangement in the period beginning with 22 April 2009 and ending with the relevant end date.

4B The conditions in this sub-paragraph are that—

a benefits began accruing to or in respect of the individual under the arrangement on or after 22 April 2009 but before the relevant end date and continued until that date,

b the arrangement was made in accordance with the terms of a written agreement between the individual and the employer made not later than 22 April 2009, and

c there is no material change in the rules of the pension scheme under which benefits to or in respect of the individual are calculated under the arrangement in the period beginning with the date on which benefits began accruing under that arrangement and ending with the relevant end date.

4C If the conditions in sub-paragraph (4D) are met, the amount arrived at under paragraph 3(2) in relation to the arrangement which is attributable otherwise than to the paying of relevant added years contributions is a protected pension input amount to the extent specified in sub-paragraph (4F).

4D The conditions in this sub-paragraph are that—

a the arrangement was made no later than the end of the period of 3 months beginning with the date on which the individual ceased being an active member of a pension scheme other than that under which it is an arrangement (“the cessation date”),

b the cessation date was on or after 22 April 2009,

c the arrangement under that other pension scheme by reference to which the individual was an active member of that pension scheme (“the old arrangement”) was one in the case of which some or all of the benefits accruing under the arrangement were accruing in circumstances in which the amount arrived at under paragraph 3(2) in relation to the old arrangement was to any extent a protected pension input amount by virtue of this paragraph,

d the individual does not make more than one arrangement under a pension scheme other than that under which the old arrangement was an arrangement in the period of 3 months beginning with the cessation date,

e the individual made the arrangement for one of the reasons set out in sub-paragraph (4E),

f the old arrangement has not been re-activated within the meaning of paragraph 13(7) on or after the cessation date,

g there is no material difference between the rules of the pension scheme under which benefits to or in respect of the individual are calculated under the arrangement and the rules of the pension scheme under which such benefits were calculated under the old arrangement, and

h there is no material change in the rules of the pension scheme under which benefits to or in respect of the individual are calculated under the arrangement in the period beginning with the date on which benefits began accruing under the arrangement and ending with the relevant end date.

4E The reasons referred to in sub-paragraph (4D)(e) are that—

a the individual’s employer had entered into a re-organisation of its pension provisions and the making of the arrangement was a consequence of that re-organisation, or

b the making of the arrangement was due to a relevant business transfer within the meaning of paragraph 12(8A) of Schedule 36 to FA 2004 .

4F The amount arrived at under paragraph 3(2) in relation to the arrangement is a protected pension input amount to the extent that it does not exceed the amount which would have been a protected pension input amount in respect of the old arrangement for the accrual period had the old arrangement continued during that period.

4G The accrual period is the period in the tax year—

a beginning with the date on which the individual became an active member of a pension scheme by reference to the arrangement (“the joining date”) or, if the joining date was in an earlier tax year, the first day of the tax year, and

b ending with the last day of the tax year or, if earlier, the date on which the individual ceased being an active member of the pension scheme by reference to the arrangement.

5 If—

a there is a material change in the rules of the pension scheme under which benefits are calculated under the arrangement during a period referred to in sub-paragraph (4A)(b), (4B)(c) or (4D)(h), and

b the amount arrived at under paragraph 3(2) in relation to the arrangement would have been a protected pension input amount under sub-paragraph (4) or (4C) had it not been for the material change,the amount so arrived at, to the extent that it is attributable otherwise than to the paying of relevant added years contributions, is a protected pension input amount to the extent that it is not attributable to that change.

6 But even in that case the whole of the amount so arrived at, to the extent that it is so attributable, is a protected pension input amount if the material change affects at least 50 active members of the pension scheme.

7 In this paragraph “the relevant end date” means the end of the tax year or, if earlier, the time when benefits cease to accrue to or in respect of the individual under the arrangement.

Protected pension input amounts: existing cash balance arrangements¶

1 This paragraph applies in respect of a cash balance arrangement if the arrangement is under an occupational pension scheme or a public service pension scheme.

2 If the individual pays relevant additional voluntary contributions under the arrangement in the tax year, the amount arrived at under paragraph 3(2) in relation to the arrangement is a protected pension input amount to the extent that it is attributable to those contributions.

3 Relevant additional voluntary contributions are additional voluntary contributions paid—

a in pursuance of an agreement which was made before noon on 22 April 2009 or made pursuant to a written application received by or on behalf of the scheme administrator of the pension scheme before that time,

b on a quarterly or more frequent basis during the period beginning with that date or (if later) when they first became payable and ending with the relevant end date without any failure to pay contributions payable during that period on more than an insignificant number of occasions, and

c at a rate which has not increased during that period otherwise than in accordance with an agreement made before noon on 22 April 2009 or made pursuant to a written application received by or on behalf of the scheme administrator of the pension scheme before that time.

4 To the extent that the amount arrived at under paragraph 3(2) in relation to the arrangement is attributable otherwise than to the paying of relevant additional voluntary contributions it is a protected pension input amount if the conditions set out in sub-paragraph (4A) or (4B) are met.

4A The conditions in this sub-paragraph are that—

a benefits have been accruing to or in respect of the individual under the arrangement since before 22 April 2009 and until the relevant end date, and

4B The conditions in this sub-paragraph are that—

a benefits began accruing to or in respect of the individual under the arrangement on or after 22 April 2009 but before the relevant end date and continued until that date,

b the arrangement was made in accordance with the terms of a written agreement between the individual and the employer made not later than 22 April 2009, and

4C If the conditions in sub-paragraph (4D) are met, the amount arrived at under paragraph 3(2) in relation to the arrangement which is attributable otherwise than to the paying of relevant additional voluntary contributions is a protected pension input amount to the extent specified in sub-paragraph (4E).

4D The conditions in this sub-paragraph are that—

b the cessation date was on or after 22 April 2009,

e the individual made the arrangement for one of the reasons set out in paragraph 8(4E),

f the old arrangement has not been re-activated within the meaning of paragraph 13(7) on or after the cessation date,

h there is no material change in the rules of the pension scheme under which benefits to or in respect of the individual are calculated under the arrangement in the period beginning with the date on which benefits started accruing under the arrangement and ending with the relevant end date.

4E The amount arrived at under paragraph 3(2) is a protected pension input amount to the extent that it does not exceed the amount which would have been a protected pension input amount in respect of the old arrangement for the accrual period had the old arrangement continued during that period.

4F For the purposes of sub-paragraph (4E) the accrual period has the meaning set out in paragraph 8(4G).

5 If—

a there is a material change in the rules of a pension scheme under which benefits are calculated under an arrangement during a period referred to in sub-paragraph (4A)(b), (4B)(c) or (4D)(h), and

b the amount arrived at under paragraph 3(2) in relation to the arrangement would have been a protected pension input amount under sub-paragraph (4) or (4C) had it not been for the material change,the amount so arrived at, to the extent that it is attributable otherwise than to the paying of relevant additional voluntary contributions, is a protected pension input amount to the extent that it is not attributable to that change.

7 In this paragraph “the relevant end date” means the end of the tax year or, if earlier, the time when benefits cease to accrue to or in respect of the individual under the arrangement.

Protected pension input amounts: other existing money purchase arrangements under occupational and public service pension schemes¶

1 This paragraph applies in respect of a money purchase arrangement, other than a cash balance arrangement, if the arrangement is under an occupational pension scheme or a public service pension scheme or forms part of a group personal pension scheme.

3 Relevant additional voluntary contributions are additional voluntary contributions paid—

b on a quarterly or more frequent basis during the period beginning with that date of (if later) when they first became payable and ending with the relevant end date without any failure to pay contributions payable during that period on more than an insignificant number of occasions, and

4 To the extent that the amount arrived at under paragraph 3(2) in relation to the arrangement is attributable to contributions other than relevant additional voluntary contributions it is a protected pension input amount to the extent specified in—

a sub-paragraph (5) if the individual has been an active member of the pension scheme by reference to the arrangement since before 22 April 2009 and until the relevant end date, or

b sub-paragraph (5A) if the individual has been an active member of the pension scheme by reference to the arrangement since on or after 22 April 2009 (“the joining date”) and until the relevant end date and the arrangement was entered into in accordance with the terms of a written agreement between the individual and the employer made not later than 22 April 2009.

5 That amount is a protected pension input amount to the extent that it is attributable to contributions paid—

a on a quarterly or more frequent basis since before 22 April 2009 without any failure to pay contributions payable on or after that date on more than an insignificant number of occasions, and

b at a rate which has not increased during the period beginning with that date and ending with the relevant end date otherwise than in accordance with an agreement made before noon on 22 April 2009 or made pursuant to a written application received by or on behalf of the scheme administrator of the pension scheme before that time.

5A That amount is a protected pension input amount to the extent that it is attributable to contributions paid—

a on a quarterly or more frequent basis without any failure to pay contributions on or after the joining date on more than an insignificant number of occasions, and

b at a rate which has not increased during the period beginning with the joining date and ending with the relevant end date otherwise than in accordance with the agreement referred to in sub-paragraph (4)(b).

5B To the extent that the amount arrived at under paragraph 3(2) in relation to the arrangement is attributable to contributions other than relevant additional voluntary contributions it is a protected pension input amount to the extent specified in sub-paragraph (5C) if—

b the cessation date was on or after 22 April 2009,

c the arrangement under that other pension scheme by reference to which the individual was an active member of that pension scheme (“the old arrangement”) was one in the case of which the amount arrived at under paragraph 3(2) in relation to the old arrangement was to any extent a protected pension input amount by virtue of this paragraph,

d the individual did not make more than one such new arrangement in the period of one month beginning with the cessation date,

e the individual made the new arrangement for one of the reasons set out in paragraph 8(4E), and

f the old arrangement has not been re-activated within the meaning of paragraph 13(7) on or after the cessation date.

5C The amount is a protected pension input amount to the extent that it is attributable to contributions paid under the arrangement which—

a do not exceed the amount which would have been a protected pension input amount as a result of contributions made under the old arrangement for the accrual period had that arrangement continued during that period,

b are paid on a quarterly or more frequent basis from the date (“the joining date”) on which the individual became an active member of the pension scheme by reference to the arrangement without any failure to pay contributions payable on or after that date on more than an insignificant number of occasions, and

c are paid at a rate which is no higher than the rate at which the contributions under the old arrangement were paid and which has not increased during the period from the joining date and ending with the relevant end date.

5D For the purposes of sub-paragraph (5C) the accrual period has the meaning set out in paragraph 8(4G).

6 In this paragraph “the relevant end date” means the end of the tax year or, if earlier, the time when the individual ceases to be an active member of the pension scheme by reference to the arrangement.

Protected pension input amounts: other existing money purchase arrangements under other pension schemes¶

1 Sub-paragraph (2) applies in respect of a money purchase arrangement, other than a cash balance arrangement, if—

a the arrangement is under a scheme other than an occupational pension scheme or a public service pension scheme and does not form part of a group personal pension scheme, and

b the individual has been an active member of the pension scheme by reference to the arrangement since before 22 April 2009 and until the relevant end date.

2 The amount arrived at under paragraph 3(2) in relation to the arrangement is a protected pension input amount to the extent that it is attributable to contributions paid—

a on a quarterly or more frequent basis since before 22 April 2009 without any failure to pay contributions payable on or after that date on more than an insignificant number of occasions, and

b at a rate which has not increased during the period beginning with that date and ending with the relevant end date otherwise than in accordance with an agreement made before that date.

3 If the individual—

a was not an active member of the pension scheme by reference to the arrangement immediately before 22 April 2009, but

b a written application to become such an active member was received by or on behalf of the scheme administrator of the pension scheme before noon on 22 April,

the references to before 22 April 2009 (and to that date) in sub-paragraphs (1)(b) and (2) are to the date on which the individual became such an active member pursuant to the application.

3A If the individual—

a has been an active member of a pension scheme by reference to an arrangement (“the old arrangement”) in circumstances in which the amount arrived at under paragraph 3(2) in relation to the arrangement has been to any extent a protected pension input amount by virtue of this paragraph, and

b no later than the end of the period of 3 months beginning with the date on which the individual ceased being an active member of the pension scheme by reference to the old arrangement, made an arrangement (“the new arrangement”) which is a money purchase arrangement other than a cash balance arrangement under a different pension scheme which is neither an occupational pension scheme nor a public service pension scheme and does not form part of a group personal pension scheme,

the amount arrived at under paragraph 3(2) in relation to the new arrangement is a protected pension input amount to the extent specified in sub-paragraph (3B).

3B The amount is a protected pension input amount to the extent that it is attributable to contributions paid under the new arrangement which—

a are paid on a quarterly or more frequent basis from the date (“the joining date”) on which the individual became an active member of the pension scheme by reference to the new arrangement without any failure to pay contributions payable on or after that date on more than an insignificant number of occasions, and

b are paid at a rate which is no higher than the rate at which contributions under the old arrangement were paid and which has not increased during the period beginning with the joining date and ending with the relevant end date.

3C Sub-paragraph (3B) does not apply in relation to any contributions made under the new arrangement if—

a the old arrangement has been re-activated within the meaning of paragraph 13(7) on or after the joining date, or

b the individual has made more than one new arrangement on or after the joining date.

4 In this paragraph “the relevant end date” means the end of the tax year or, if earlier, the time when the individual ceases to be an active member of the pension scheme by reference to the arrangement.

Protected pension input amounts: existing hybrid arrangements¶

1 This paragraph applies in respect of a hybrid arrangement under a pension scheme if any one or more of paragraphs 8 to 11 would be applicable in relation to it.

2 The amount arrived at under paragraph 3(2) in relation to the arrangement is a protected pension input amount if and to the extent of the greater or greatest amount that it would be if the arrangement were an arrangement under whichever (if any) of paragraphs 8 to 11 are applicable in relation to it.

3 Paragraph 8 is applicable in relation to it as in relation to a defined benefits arrangement if, in any circumstances, the benefits that may be provided to or in respect of the individual under it are defined benefits.

4 Paragraph 9 is applicable in relation to it as in relation to a cash balance arrangement if, in any circumstances, the benefits that may be provided to or in respect of the individual under it are cash balance benefits.

5 Paragraph 10 or 11 is applicable in relation to it as in relation to a money purchase arrangement other than a cash balance arrangement if, in any circumstances, the benefits that may be provided to or in respect of the individual under it are other money purchase benefits.

Protected pension input amounts: new and re-activated arrangements¶

1 This paragraph applies in respect of an arrangement if—

a the arrangement is made or re-activated on or after 22 April 2009,

b the arrangement—

i is under an occupational pension scheme or forms part of a group personal pension scheme and (in either case) relates to an employment of the individual, or

ii is a public service pension scheme,

c there is no material change in the rules of the pension scheme under which benefits are calculated under the arrangement in the relevant period or any such material change in the relevant period affects at least 50 active members of the pension scheme, and

d throughout the relevant period there are at least 20 persons in respect of whom arrangements subsist under the pension scheme under which benefits are accruing on the same basis as those under the arrangement.

2 If the arrangement falls within sub-paragraph (1)(b)(i), this paragraph does not apply in respect of it if—

a the provision of benefits under it is not part of the normal pattern of pension provision made by the person who is the employer in relation to the employment of the individual for the employees of the employer generally, or

b the persons mentioned in sub-paragraph (1)(d) are not employees of that person.

3 “The relevant period” is the period—

a beginning when the arrangement is made or re-activated, and

b ending at the same time as the tax year or, if earlier, the time when the individual ceases to be an active member of the pension scheme by reference to the arrangement.

4 The amount arrived at under paragraph 3(2) in relation to the arrangement is a protected pension input amount except to the extent that it is attributable to the payment of added years contributions or additional voluntary contributions.

5 “Added years contributions” are contributions paid with a view to securing that the calculation of benefits under the arrangement is by reference to a period of service in excess of pensionable service by the individual.

6 An arrangement relates to an employment of the individual if—

a the earnings by reference to which benefits under the arrangement are calculated are earnings from the employment, or

b the person who is the employer in relation to the employment pays contributions under the arrangement in respect of the individual.

7 An arrangement is “re-activated” if the individual, having ceased to be an active member of the pension scheme by reference to the arrangement, again becomes such a member.

Protected pension input amounts: contribution paid in accordance with agreement entered into on or before 22 April 2009¶

13AThe amount arrived at under paragraph 3(2) in relation to an arrangement which relates to an employment of the individual is a protected lump sum input amount if it is attributable to a single contribution which—

a is paid on or after 22 April 2009, and

b is paid, in accordance with the terms of a written agreement between the individual and the employer made not later than 22 April 2009, not later than the date specified for payment in the agreement.

Protected pension input amounts: anti-avoidance¶

14No amount is a protected pension input amount by virtue of any of paragraphs 8 to 13A if the individual is during the tax year a party to a scheme the main purpose, or one of the main purposes, of which is to avoid or reduce liability to the special annual allowance charge, the annual allowance charge or the lifetime allowance charge.

Relevant refunded amounts¶

1 The amount arrived at under paragraph 3(2) in relation to an arrangement is a relevant refunded amount to the extent that it does not exceed the amount of a contributions refund lump sum paid to the individual (or the personal representatives of the individual).

2 A lump sum is a contributions refund lump sum if—

a it is paid to the individual by a pension scheme in respect of an arrangement,

b it is not a lump sum of any of the descriptions listed in section 166(1) of FA 2004,

c it is paid during the period of one year beginning immediately after the end of the tax year,

d its amount does not exceed the adjusted contributions amount for the tax year, and

e the individual is a high-income individual for the tax year.

3 The adjusted contributions amount for the tax year is the amount of any relevant relievable pension contributions less any relevant deductions.

4 “Relevant relievable pension contributions” are contributions which—

a are relievable pension contributions in relation to the individual, and

b are paid to the pension scheme under the arrangement in the tax year,

but subject as follows.

5 If the pension scheme is an occupational pension scheme or a public service pension scheme or forms part of a group personal pension scheme, contributions are relevant relievable pension contributions only if they—

a are additional voluntary contributions, and

b are not relevant additional voluntary contributions within the meaning of paragraph 9(3) or 10(3).

6 If the pension scheme is not an occupational pension scheme or a public service pension scheme and does not form part of a group personal pension scheme—

a contributions are not relevant relievable pension contributions if they fall within paragraph 11(2), and

b if the tax year is the tax year 2009-10, contributions paid before 22 April 2009 are not relevant relievable pension contributions if they were paid pursuant to an agreement for the payment of contributions on a quarterly or more frequent basis.

7 “Relevant deductions” are—

a the amount of any previous contributions refund lump sum previously paid by the pension scheme since the end of the tax year in respect of the arrangement,

b the amount of any pension debit to which the rights of the individual under the arrangement became subject in the tax year,

c where during the tax year there was a transfer relating to the individual of any sums or assets held for the purposes of, or representing accrued rights under, the arrangement so as to become held for the purposes of, or to represent rights under any other pension scheme that is a registered pension scheme or a qualifying recognised overseas pension scheme, the amount of any sums, and the market value of any assets, transferred, and

d the amount crystallised by any benefit crystallisation events which occurred in relation to the individual and the arrangement in the tax year.

Pre-22 April 2009 pension input amount¶

1 This paragraph makes provision for the extent (if any) to which the amount arrived at under paragraph 3(2) in relation to an arrangement is a pre-22 April 2009 pension input amount.

2 In relation to a defined benefits arrangement or cash balance arrangement, a pre-22 April 2009 pension input amount is such proportion of what would otherwise be the amount arrived at under paragraph 3(2) as, on a just and reasonable apportionment, relates to the period beginning with 6 April 2009 and ending with 21 April 2009.

3 In relation to a money purchase arrangement that is not a cash balance arrangement, a pre-22 April 2009 pension input amount is so much of the amount of the contributions within section 233 of FA 2004 as are paid in the period beginning with 6 April 2009 and ending with 22 April 2009, other than any contributions paid pursuant to an agreement for the payment of contributions on a quarterly or more frequent basis.

4 In relation to a hybrid arrangement, a pre-22 April 2009 pension input amount is the greater or greatest of the amounts under the sub-paragraph or sub-paragraphs applicable in relation to it.

5 For this purpose—

a sub-paragraph (2) is applicable in relation to the arrangement if, in any circumstances, the benefits that may be provided to or in respect of the individual under it are defined benefits or cash balance benefits, and

b sub-paragraph (3) is applicable in relation to the arrangement if, in any circumstances, the benefits that may be provided to or in respect of the individual under it are other money purchase benefits.

Increased special annual allowance¶

1 This paragraph has effect where the mean of the infrequent money purchase contributions amount for the tax years 2006-07, 2007-08 and 2008-09 (“the relevant mean”) exceeds £20,000.

2 Where the relevant mean is less than £30,000, this Schedule has effect as if the references in paragraph 1(4) and (5) to £20,000 were instead to the relevant mean.

3 Where the relevant mean is £30,000 or more, this Schedule has effect as if those references were instead to £30,000.

4 The “infrequent money purchase contributions amount” for a tax year is the aggregate of any relevant contributions paid in the tax year—

a under money purchase arrangements, other than cash balance arrangements, under registered pension schemes, and

b less frequently than on a quarterly basis;

(and so is nil if no such contributions were so paid).

5 But if the infrequent money purchase contributions amount for a tax year would otherwise be greater than the annual allowance for the tax year, it is to be taken to be the annual allowance for the tax year.

6 “Relevant contributions” means contributions which are—

a relievable pension contributions by or on behalf of the individual, or

b contributions paid by an employer of the individual in respect of the individual.

Taxation of contributions refund lump sums¶

18Part 4 of FA 2004 applies in relation to a contributions refund lump sum as if it were a short service refund lump sum in excess of the limit specified in section 205(4)(a) of that Act (so that it is not an unauthorised payment and is liable to tax at the rate chargeable on a short service refund lump sum).

Power to amend¶

1 The Treasury may by order made by statutory instrument amend paragraph 1(8) so as to vary the rate of the special annual allowance charge.

2 An order under sub-paragraph (1) may make provision for there to be different rates in different circumstances.

3 The Treasury may by order made by statutory instrument amend paragraphs 2 to 18.

4 An order under sub-paragraph (3) may make provision having effect in relation to times before it is made if it does not increase any person's liability to tax.

5 No order may be made under sub-paragraph (1) unless a draft of the statutory instrument containing it has been laid before, and approved by a resolution of, the House of Commons.

6 A statutory instrument containing an order under sub-paragraph (3) is subject to annulment in pursuance of a resolution of the House of Commons.

Currently-relieved non-UK pension schemes¶

1 The Treasury may by order made by statutory instrument make provision for this Schedule to apply in relation to individuals who—

a are or have been members of currently-relieved non-UK pension schemes, or

b have been members of overseas pension schemes that were not currently-relieved non-UK pension schemes,

subject to such modifications as are specified in the order.

2 An order under sub-paragraph (1) may—

a include provision having effect in relation to times before it is made,

b confer discretion on the Commissioners for Her Majesty's Revenue and Customs or officers of Revenue and Customs, and

c make different provision for different cases.

3 A statutory instrument containing an order under sub-paragraph (1) is subject to annulment in pursuance of a resolution of the House of Commons.

Tax years to which Schedule applies¶

1 This Schedule has effect for the tax year 2009-10 and subsequent tax years (with the result that paragraph 18 has effect for the tax year 2010-11 and subsequent tax years).

2 But the Treasury may by order make provision for this Schedule to cease to have effect after the tax year specified in the order (but so that paragraph 18 continues to have effect for the following tax year).

Minor amendment¶

22In paragraph 49 of Schedule 36 to FA 2004 (annual allowance charge: enhanced protection), insert at the end—

Interpretation¶

1 In this Schedule—

“group personal pension scheme” means arrangements administered on a group basis under a personal pension scheme which are available to employees of the same employer or of employers which are members of the same group of companies;
“personal pension scheme” means a pension scheme that is neither an occupational pension scheme nor a public service pension scheme;
“scheme” (otherwise than in the expression “pension scheme”) includes any arrangement, agreement, understanding, transaction or series of transactions (whether or not legally enforceable).

2 For the purposes of the definition of “group personal pension scheme” a company and all of its 75% subsidiaries form a group; and if any of those subsidiaries have 75% subsidiaries the group includes them and their 75% subsidiaries, and so on; and for this purpose “75% subsidiary” has the meaning given by section 838 of ICTA.

3 Expressions used in this Schedule and in any provisions of Part 4 of FA 2004 have the same meaning in this Schedule as they have in the provisions of that Part in which they are used.

SCHEDULE 36 ¶

VAT: place of supply of services etc

Section 76

Part 1 Amendments coming into force in 2010¶

1VATA 1994 is amended as follows.

2In section 6(14A) (time of supply), omit “In relation to any services of a description specified in an order under section 7(11),”.

1 Section 7 (place of supply) is amended as follows.

2 In subsection (1), omit “or services”.

3 Omit subsection (10).

4 In subsection (11), omit “or services” (in each place).

5 In the heading, insert at the end “ of goods ”.

4After that section insert—

7A Place of supply of services

1 This section applies for determining, for the purposes of this Act, the country in which services are supplied.

2 A supply of services is to be treated as made—

a in a case in which the person to whom the services are supplied is a relevant business person, in the country in which the recipient belongs, and

b otherwise, in the country in which the supplier belongs.

3 The place of supply of a right to services is the same as that in which the supply of the services would be treated as made if made by the supplier of the right to the recipient of the right (whether or not the right is exercised); and for this purpose a right to services includes any right, option or priority with respect to the supply of services and an interest deriving from a right to services.

4 For the purposes of this Act a person is a relevant business person in relation to a supply of services if the person—

a is a taxable person within the meaning of Article 9 of Council Directive 2006/112/EC,

b is registered under this Act,

c is identified for the purposes of VAT in accordance with the law of a member State other than the United Kingdom, or

d is registered under an Act of Tynwald for the purposes of any tax imposed by or under an Act of Tynwald which corresponds to value added tax,

and the services are received by the person otherwise than wholly for private purposes.

5 Subsection (2) has effect subject to Schedule 4A.

6 The Treasury may by order—

a amend subsection (4),

b amend Schedule 4A, or

c otherwise make provision for exceptions from either or both of the paragraphs of subsection (2).

7 An order under subsection (6) may include incidental, supplemental, consequential and transitional provision.

1 Section 8 (reverse charge on supplies received from abroad) is amended as follows.

2 For subsections (1) and (2) substitute—

3 After subsection (4) insert—

4 In subsection (5), for “add to, or vary, Schedule 5” substitute “ amend subsection (4A) by altering the descriptions of services specified in that subsection ”.

5 Omit subsection (6).

6 In subsection (7)—

a for “add to or vary Schedule 5” substitute “ amend subsection (4A) ”, and

b for “addition to or variation of that Schedule” substitute “ amendment of that subsection ”.

7 In subsection (8)—

a for “addition to or variation of that Schedule” substitute “ amendment of subsection (4A) ”, and

b for “the Schedule” substitute “ that subsection ”.

6For section 9 substitute—

9 Place where supplier or recipient of services belongs

1 This section has effect for determining for the purposes of section 7A (or Schedule 4A) or section 8, in relation to any supply of services, whether a person who is the supplier or recipient belongs in one country or another.

2 A person who is a relevant business person is to be treated as belonging in the relevant country.

3 In subsection (2) “the relevant country” means—

a if the person has a business establishment, or some other fixed establishment, in a country (and none in any other country), that country,

b if the person has a business establishment, or some other fixed establishment or establishments, in more than one country, the country in which the relevant establishment is, and

c otherwise, the country in which the person's usual place of residence is.

4 In subsection (3)(b) “relevant establishment” means whichever of the person's business establishment, or other fixed establishments, is most directly concerned with the supply.

5 A person who is not a relevant business person is to be treated as belonging in the country in which the person's usual place of residence is.

6 In this section “usual place of residence”, in relation to a body corporate, means the place where it is legally constituted.

1 Section 43 (groups of companies) is amended as follows.

2 In subsection (2A)—

a in paragraph (a), for “falling within Schedule 5” substitute “ to which section 7A(2)(a) applies made ”, and

b in paragraph (c)—

i omit “falling within paragraphs 1 to 8 of Schedule 5”, and

ii insert at the end “and section 7A(2)(a) applied to the supply”.

3 In subsection (2D)—

a in paragraph (c)—

i omit “falling within paragraphs 1 to 8 of Schedule 5”, and

ii insert at the end “ and section 7A(2)(a) applied to the supply ”, and

b in the words after the paragraphs, for “falling within that Schedule,” substitute “ to which section 7A(2)(a) applies, ”.

4 In subsection (2E)(b), for “there are services falling within paragraphs 1 to 8 of Schedule 5 which, if used by the transferor for making supplies falling within that Schedule,” substitute “ there is a supply to which section 7A(2)(a) applies of services which, if used by the transferor for making such a supply, ”.

1 Section 96 (interpretation) is amended as follows.

2 In subsection (1), after the definition of “regulations” insert—

3 In subsection (8), omit “(subject to any provision made under section 8(6))”.

9Section 97(4)(a) (orders subject to requirement of Parliamentary approval after making), after “5(4)” insert “ , 7A(6) ”.

10Section 97A(1) (place of supply orders: transitional provision), for “on or after 17th March 1998 under section 7(11)” substitute “ under section 7A(6) ”.

11After Schedule 4 insert—

SCHEDULE 4A

Place of supply of services: special rules

Section 7A

Part 1 General exceptions

Services relating to land

1 A supply of services to which this paragraph applies is to be treated as made in the country in which the land in connection with which the supply is made is situated.

2 This paragraph applies to—

a the grant, assignment or surrender of any interest in or right over land,

b the grant, assignment or surrender of a personal right to call for or be granted any interest in or right over land,

c the grant, assignment or surrender of a licence to occupy land or any other contractual right exercisable over or in relation to land (including the provision of holiday accommodation, seasonal pitches for caravans and facilities at caravan parks for persons for whom such pitches are provided and pitches for tents and camping facilities),

d the provision in an hotel, inn, boarding house or similar establishment of sleeping accommodation or of accommodation in rooms which are provided in conjunction with sleeping accommodation or for the purpose of a supply of catering,

e any works of construction, demolition, conversion, reconstruction, alteration, enlargement, repair or maintenance of a building or civil engineering work, and

f services such as are supplied by estate agents, auctioneers, architects, surveyors, engineers and others involved in matters relating to land.

3 In sub-paragraph (2)(c) “holiday accommodation” includes any accommodation in a building, hut (including a beach hut or chalet), caravan, houseboat or tent which is advertised or held out as holiday accommodation or as suitable for holiday or leisure use.

4 In sub-paragraph (2)(d) “similar establishment” includes premises in which there is provided furnished sleeping accommodation, whether with or without the provision of board or facilities for the preparation of food, which are used by, or held out as being suitable for use by, visitors or travellers.

Passenger transport

1 A supply of services consisting of the transportation of passengers (or of any luggage or motor vehicles accompanying passengers) is to be treated as made in the country in which the transportation takes place, and (in a case where it takes place in more than one country) in proportion to the distances covered in each.

2 For the purposes of sub-paragraph (1) transportation which takes place partly outside the territorial jurisdiction of a country is to be treated as taking place wholly in the country if—

a it takes place in the course of a journey between two points in the country (whether or not as part of a longer journey involving travel to or from another country), and

b the means of transport used does not (except in an emergency or involuntarily) stop, put in or land in another country in the course of the journey between those two points.

3 For the purposes of sub-paragraph (1) a pleasure cruise is to be regarded as the transportation of passengers (so that services provided as part of a pleasure cruise are to be treated as supplied in the same place as the transportation of the passengers).

4 In sub-paragraph (3) “pleasure cruise” includes a cruise wholly or partly for education or training.

Hiring of means of transport

1 A supply of services consisting of the short-term hiring of a means of transport is to be treated as made in the country in which the means of transport is actually put at the disposal of the person by whom it is hired.But this is subject to sub-paragraphs (3) and (4).

2 For the purposes of this Schedule the hiring of a means of transport is “short-term” if it is hired for a continuous period not exceeding—

a if the means of transport is a vessel, 90 days, and

b otherwise, 30 days.

3 Where—

a a supply of services consisting of the hiring of a means of transport would otherwise be treated as made in the United Kingdom, and

b the services are to any extent effectively used and enjoyed in a country which is not a member State,

the supply is to be treated to that extent as made in that country.

4 Where—

a a supply of services consisting of the hiring of a means of transport would otherwise be treated as made in a country which is not a member State, and

b the services are to any extent effectively used and enjoyed in the United Kingdom,

the supply is to be treated to that extent as made in the United Kingdom.

Cultural, educational and entertainment services etc

1 A supply of services to which this paragraph applies is to be treated as made in the country in which the services are physically carried out.

2 This paragraph applies to the provision of—

a services relating to cultural, artistic, sporting, scientific, educational, entertainment or similar activities (including fairs and exhibitions), and

b ancillary services relating to such activities, including services of organisers of such activities.

Restaurant and catering services: general

1 A supply of services to which this paragraph applies is to be treated as made in the country in which the services are physically carried out.

2 This paragraph applies to the provision of restaurant services and the provision of catering services, other than the provision of services to which paragraph 6 applies.

the European Union on-board restaurant and catering services

1 A supply of services consisting of

a the provision of restaurant services, or

b the provision of catering services,

on board a ship, aircraft or train in connection with the transportation of passengers during an intra-EC passenger transport operation is to be treated as made in the country in which the relevant point of departure is located.

2 An intra-EC passenger transport operation is a passenger transport operation which, or so much of a passenger transport operation as,—

a has as the first place at which passengers can embark a place which is within the European Union ,

b has as the last place at which passengers who embarked in a member State can disembark a place which is within the the European Union , and

c does not include a stop at a place which is not within the European Union and at which passengers can embark or passengers who embarked in a member State can disembark.

3 “Relevant point of departure”, in relation to an intra-EC passenger transport operation, is the first place in the intra-EC passenger transport operation at which passengers can embark.

4 A place is within the the European Union if it is within any member State.

5 For the purposes of this paragraph the return stage of a return passenger transport operation is to be regarded as a separate passenger transport operation; and for this purpose—

a a return passenger transport operation is one which takes place in more than one country but is expected to end in the country in which it begins, and

b the return stage of a return passenger transport operation is the part of it which ends in the country in which it began and begins with the last stop at a place at which there has not been a previous stop during it.

Hiring of goods

1 Where—

a a supply of services consisting of the hiring of any goods other than a means of transport would otherwise be treated as made in the United Kingdom, and

b the services are to any extent effectively used and enjoyed in a country which is not a member State,

the supply is to be treated to that extent as made in that country.

2 Where—

a a supply of services consisting of the hiring of any goods other than a means of transport would otherwise be treated as made in a country which is not a member State, and

b the services are to any extent effectively used and enjoyed in the United Kingdom,

the supply is to be treated to that extent as made in the United Kingdom.

Telecommunication and broadcasting services

1 This paragraph applies to a supply of services consisting of the provision of—

a telecommunication services, or

b radio or television broadcasting services.

2 In this Schedule “telecommunication services” means services relating to the transmission, emission or reception of signals, writing, images and sounds or information of any nature by wire, radio, optical or other electromagnetic systems, including—

a the related transfer or assignment of the right to use capacity for such transmission, emission or reception, and

b the provision of access to global information networks.

3 Where—

a a supply of services to which this paragraph applies would otherwise be treated as made in the United Kingdom, and

b the services are to any extent effectively used and enjoyed in a country which is not a member State,

the supply is to be treated to that extent as made in that country.

4 Where—

a a supply of services to which this paragraph applies would otherwise be treated as made in a country which is not a member State, and

b the services are to any extent effectively used and enjoyed in the United Kingdom,

the supply is to be treated to that extent as made in the United Kingdom.

Part 2 Exceptions relating to supplies made to relevant business person

Electronically-supplied services

1 Where—

a a supply of services consisting of the provision of electronically supplied services to a relevant business person would otherwise be treated as made in the United Kingdom, and

b the services are to any extent effectively used and enjoyed in a country which is not a member State,

the supply is to be treated to that extent as made in that country.

2 Where—

a a supply of services consisting of the provision of electronically supplied services to a relevant business person would otherwise be treated as made in a country which is not a member State, and

b the services are to any extent effectively used and enjoyed in the United Kingdom,

the supply is to be treated to that extent as made in the United Kingdom.

3 Examples of what are electronically supplied services for the purposes of this Schedule include—

a website supply, web-hosting and distance maintenance of programmes and equipment,

b the supply of software and the updating of software,

c the supply of images, text and information, and the making available of databases,

d the supply of music, films and games (including games of chance and gambling games),

e the supply of political, cultural, artistic, sporting, scientific, educational or entertainment broadcasts (including broadcasts of events), and

f the supply of distance teaching.

4 But where the supplier of a service and the supplier's customer communicate via electronic mail, this does not of itself mean that the service provided is an electronically supplied service for the purposes of this Schedule.

Part 3 Exceptions relating to supplies not made to relevant business person

Intermediaries

1 A supply of services to which this paragraph applies is to be treated as made in the same country as the supply to which it relates.

2 This paragraph applies to a supply to a person who is not a relevant business person consisting of the making of arrangements for a supply by or to another person or of any other activity intended to facilitate the making of such a supply.

Transport of goods: general

1 A supply of services to a person who is not a relevant business person consisting of the transportation of goods is to be treated as made in the country in which the transportation takes place, and (in a case where it takes place in more than one country) in proportion to the distances covered in each.

2 For the purposes of sub-paragraph (1) transportation which takes place partly outside the territorial jurisdiction of a country is to be treated as taking place wholly in the country if—

a it takes place in the course of a journey between two points in the country (whether or not as part of a longer journey involving travel to or from another country), and

b the means of transport used does not (except in an emergency or involuntarily) stop, put in or land in another country in the course of the journey between those two points.

3 This paragraph does not apply to a transportation of goods beginning in one member State and ending in another (see paragraph 12).

Intra-Community transport of goods

12A supply of services to a person who is not a relevant business person consisting of the transportation of goods which begins in one member State and ends in another is to be treated as made in the member State in which the transportation begins.

Ancillary transport services

1 A supply to a person who is not a relevant business person of ancillary transport services is to be treated as made where the services are physically performed.

2 “Ancillary transport services” means loading, unloading handling and similar activities.

Valuation services etc

14A supply to a person who is not a relevant business person of services consisting of the valuation of, or carrying out of work on, goods is to be treated as made where the services are physically performed.

Electronic services

15A supply consisting of the provision by a person who belongs in a country which is not a member State (other than the Isle of Man) of electronically supplied services (as to the meaning of which see paragraph 9(3) and (4)) to a person (“the recipient”) who—

a is not a relevant business person, and

b belongs in a member State,

is to be treated as made in the country in which the recipient belongs.

Other services provided to recipient belonging outside EC

1 A supply consisting of the provision to a person (“the recipient”) who—

a is not a relevant business person, and

b belongs in a country which is not a member State (other than the Isle of Man),

of services to which this paragraph applies is to be treated as made in the country in which the recipient belongs.

2 This paragraph applies to—

a transfers and assignments of copyright, patents, licences, trademarks and similar rights,

b the acceptance of any obligation to refrain from pursuing or exercising (in whole or in part) any business activity or any rights within paragraph (a),

c advertising services,

d services of consultants, engineers, consultancy bureaux, lawyers, accountants, and similar services, data processing and provision of information, other than any services relating to land,

e banking, financial and insurance services (including reinsurance), other than the provision of safe deposit facilities,

f the provision of access to, and of transport or transmission through, natural gas and electricity distribution systems and the provision of other directly linked services,

g the supply of staff,

h the letting on hire of goods other than means of transport,

i telecommunication services (as to the meaning of which see paragraph 8(2)),

j radio and television broadcasting services, and

k electronically supplied services (as to the meaning of which see paragraph 9(3) and (4)).

12Omit Schedule 5 (services supplied where received).

13In Article 5 of the Value Added Tax (Tour Operators) Order 1987 (S.I. 1987/1806)—

a omit paragraph (1), and

b in paragraph (2) after “treated” insert “ for the purposes of this Act ”,

and treat that article as made under section 7A(6)(c) of VATA 1994 (inserted by paragraph 4).

1 The powers contained in section 7A(6) of VATA 1994 (inserted by paragraph 4) may be exercised at any time on or after the day on which this Act is passed.

2 The amendments made by paragraph 7 come into force on 1 January 2010; but the references in section 43 of VATA 1994 (as amended by that paragraph) to a supply to which section 7A(2) of that Act applies includes a supply of services falling within paragraphs 1 to 8 of Schedule 5 made before that date.

3 Subject to that, the amendments made by this Part have effect in relation to supplies made on or after 1 January 2010.

Part 2 Amendments coming into force in 2011¶

Admission to cultural, educational and entertainment activities etc¶

1 Schedule 4A to VATA 1994 (inserted by paragraph 11) is amended as follows.

2 Omit paragraph 4.

3 After paragraph 9 insert—

4 After paragraph 14 insert—

16The amendments made by this Part have effect in relation to supplies made on or after 1 January 2011.

Part 3 Amendments coming into force in 2013¶

17In Schedule 4A to VATA 1994 (inserted by paragraph 11), after paragraph 13 insert—

Long-term hiring of means of transport

13A

1 A supply to a person who is not a relevant business person (“the recipient”) of services consisting of the long-term hiring of a means of transport is to be treated as made in the country in which the recipient belongs.But this is subject to sub-paragraph (2) and paragraph 3(3) and (4).

2 A supply to a person who is not a relevant business person (“the recipient”) of services consisting of the long-term hiring of a pleasure boat which is actually put at the disposal of the recipient at the supplier's business establishment, or some other fixed establishment of the supplier, is to be treated as made in the country where the pleasure boat is actually put at the disposal of the recipient.

3 For the purposes of this Schedule, the hiring of a means of transport is “long-term” if it is not short-term (as to the meaning of which see paragraph 3(2)).

18The amendment made by this Part has effect in relation to supplies made on or after 1 January 2013.

Part 4 Transitional provisions¶

1 This paragraph applies where—

a amendments made by this Schedule provide for a supply of services to be treated as made in the United Kingdom,

b the supply would not have fallen to be so treated apart from the amendments, and

c the services are treated under the law of a member State other than the United Kingdom as supplied in that member State before the commencement date.

2 The supply is not to be treated as made in the United Kingdom.

3 “The commencement date” means the date specified by this Schedule as that on or after which a supply must be made if it is to be treated as made in the United Kingdom by virtue of the amendments.

SCHEDULE 37 ¶

Stock lending: stamp taxes in the event of insolvency

Section 83

Part 1 Stamp duty¶

^C21FA 1986 is amended as follows.

^C32In Part 3 (stamp duty), after section 80C insert—

80D Repurchases and stock lending: replacement stock on insolvency

1 This section applies where—

a A and B have entered into an arrangement falling within section 80C(1),

b the conditions in subsection (2A) or (3) of that section are met,

c stock is transferred to A or A's nominee, and

d the conditions in subsection (2) below are met.

2 The conditions in this subsection are that—

a A and B are not connected persons within the meaning of section 839 of the Taxes Act 1988,

b after B has transferred stock under the arrangement, A or B becomes insolvent,

c it becomes apparent (whether before or after the insolvency occurs) that, as a result of the insolvency, stock will not be transferred to B or B's nominee in accordance with the arrangement,

d the party who does not become insolvent (“the solvent party”) or the solvent party's nominee acquires replacement stock, and

e the replacement stock is acquired before the end of the period of 30 days beginning with the day on which the insolvency occurs (“the insolvency date”).

3 Where collateral is provided under the arrangement (or under arrangements of which that arrangement forms part), stamp duty is not chargeable on any instrument transferring to the solvent party or the solvent party's nominee—

a replacement stock acquired using the collateral (whether directly or indirectly), or

b where the solvent party uses the whole of the value of the collateral to acquire replacement stock, any further replacement stock.

4 Where no collateral is provided as mentioned in subsection (3), stamp duty is not chargeable on any instrument transferring replacement stock to the solvent party or the solvent party's nominee.

5 Subsections (3) and (4) may apply as regards more than one instrument (and where those subsections apply as regards more than one instrument, the instruments may be executed by different persons).

6 But those subsections apply only as regards replacement stock up to the amount of stock which will not be transferred as a result of the insolvency.

7 An instrument on which stamp duty is not chargeable by virtue only of subsection (3) or (4) is not to be deemed to be duly stamped unless it has been stamped with a stamp denoting that it is not chargeable with any duty.

8 Despite section 122(1) of the Stamp Act 1891, the stamp mentioned in subsection (7) may be a stamp of such kind as the Commissioners for Her Majesty's Revenue and Customs may prescribe.

9 For the purposes of this section a person becomes insolvent—