Finance Act 2013

2013 Chapter 29

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.

[17th July 2013]

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 1Income Tax, Corporation Tax and Capital Gains Tax

CHAPTER 1Charges, rates etc

Income tax

Corporation tax is charged for the financial year 2014.

2

For that year the rate of corporation tax is—

a

21% 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 same meaning as in Part 8 of CTA 2010 (see section 276 of that Act).

5Small profits rate and fractions for financial year 2013

1

For the financial year 2013 the small profits rate is—

a

20% on profits of companies other than ring fence profits, and

The non-residence condition is that—

a

the accredited competitor is non-UK resident for the tax year 2013-14, or

b

the accredited competitor is UK resident for the tax year 2013-14 but the year is a split year as respects the competitor and the activity is performed in the overseas part of the year.

4

Section 966 of ITA 2007 (deduction of sums representing income tax) does not apply to any payment or transfer which gives rise to income benefiting from the exemption under subsection (1).

5

In this section—

“accredited competitor” means a person to whom an accreditation card in the athletes’ category has been issued by the company named UK Athletics Limited which was incorporated on 16 December 1998;

“the Anniversary Games” means the British Athletics London Anniversary Games held at the Olympic Stadium in London in July 2013;

“the games period” means the period—

beginning with 21 July 2013, and

ending with 29 July 2013;

“income” means employment income or profits of a trade, profession or vocation (including profits treated as arising as a result of section 13 of ITTOIA 2005).

6

This section is treated as having come into force on 6 April 2013.

9Glasgow Commonwealth Games

1

An accredited competitor who performs a Commonwealth Games activity is not liable to income tax in respect of any income arising from the activity if the non-residence condition is met.

2

The following are Commonwealth Games activities—

a

competing at the Glasgow Commonwealth Games, and

b

any activity that is performed during the games period the main purpose of which is to support or promote the Glasgow Commonwealth Games or any future Commonwealth Games.

3

The non-residence condition is that—

a

the accredited competitor is non-UK resident for the tax year in which the Commonwealth Games activity is performed, or

b

the accredited competitor is UK resident for the tax year in which the activity is performed but the year is a split year as respects the competitor and the activity is performed in the overseas part of the year.

4

Section 966 of ITA 2007 (deduction of sums representing income tax) does not apply to any payment or transfer which gives rise to income benefiting from the exemption under subsection (1).

5

In this section—

“accredited competitor” means a person to whom a Glasgow 2014 accreditation card in the athletes’ category has been issued by the company named Glasgow 2014 Limited which was incorporated on 11 June 2007;

“the games period” means the period—

beginning with 4 March 2014, and

ending with 3 September 2014;

“the Glasgow Commonwealth Games” means the Commonwealth Games held in Scotland in 2014;

“income” means employment income or profits of a trade, profession or vocation (including profits treated as arising as a result of section 13 of ITTOIA 2005).

10Expenses of elected representatives

1

After section 293A of ITEPA 2003 insert—

293BUK travel expenses of other elected representatives

1

No liability to income tax arises in respect of a payment to which this section applies if it is expressed to be made in respect of relevant UK travel expenses.

2

This section applies to payments—

a

made to members of the Scottish Parliament under section 81(2) of the Scotland Act 1998,

b

made to members of the National Assembly for Wales under section 20(2) of the Government of Wales Act 2006 or to a member of the Welsh Assembly Government under section 53(2) of that Act, or

c

made to members of the Northern Ireland Assembly under section 47(2) of the Northern Ireland Act 1998.

3

In this section “relevant UK travel expenses” means expenses necessarily incurred on journeys of the following kinds within the United Kingdom—

a

journeys within subsection (4) made by the member that are necessary for the performance of his or her duties as a member;

b

if the member shares caring responsibilities with a spouse or partner, journeys made by the spouse or partner between the constituency or region and the member’s parliamentary home.

4

The journeys referred to in subsection (3)(a) are those—

a

between the constituency or region and the Parliament or Assembly to which the member belongs,

b

between the constituency or region and the member’s parliamentary home, or

c

within the constituency or region, but not excluded by subsection (5).

5

A journey is excluded if—

a

in the case of a member who has only one local office, it is between the member’s local home and that office, and

b

in any other case, it is between the member’s local home and the principal local office.

6

In this section—

“constituency or region”, in relation to a member, means the constituency or region which the member represents and the area within 20 miles of the boundary of that constituency or region;

“local office”, in relation to a member, means an office which is situated in the constituency or region and occupied by the member for the purposes of performing duties as a member;

“the member’s local home” means a residence of the member situated in the constituency or region;

“the member’s parliamentary home” means the member’s only or main residence in the area comprising—

a

the main site of the Parliament or Assembly to which the member belongs, and

b

the area within 20 miles of that site;

“principal local office”, in relation to a member, means the local office most frequently occupied by the member for the purposes of performing duties as a member.

7

A person has “caring responsibilities” if the person—

a

has parental responsibility for a dependent child aged under 17 or for a child aged 17 or 18 who is in full-time education, or

b

is the primary carer for a family member in receipt of—

i

attendance allowance,

ii

disability living allowance at the middle or highest rate for personal care,

iii

the daily living component of personal independence payment, or

iv

constant attendance allowance at or above the maximum rate with an industrial injuries disablement benefit, or the basic (full day) rate with a war disablement pension.

8

The Treasury may by order amend the definition of “caring responsibilities” in subsection (7).

Universal credit

WRA 2012

Part 1

Any provision made for Northern Ireland which corresponds to Part 1 of WRA 2012

2

The amendment made by this section has effect for the tax year 2013-14 and subsequent tax years.

14Tax advantaged employee share schemes

Schedule 2 amends the SIP code, the SAYE code, the CSOP code and the EMI code.

15Abolition of tax relief for patent royalties

1

Chapter 4 of Part 8 of ITA 2007 (reliefs: annual payments and patent royalties) is amended in accordance with subsections (2) and (3).

2

In section 448 (relief for individuals), in subsection (1)(b) omit “or 903(5)” and “and patent royalties”.

3

In section 449 (relief for other persons), in subsection (1)(b) omit “or 903(6)” and “and patent royalties”.

4

Accordingly, that Act is amended as follows—

a

in section 2 (overview of Act), in subsection (8)(c) omit “and patent royalties”,

b

in section 24 (reliefs deductible at Step 2), in subsection (1)(b) omit “and patent royalties”, and

c

in the heading for Chapter 4 of Part 8 of that Act omit “AND PATENT ROYALTIES”.

5

The amendments made by this section have effect in relation to payments made on or after 5 December 2012.

16Limit on income tax reliefs

Schedule 3 contains provision limiting the deductions which may be made at Step 2 of the calculation in section 23 of ITA 2007 (calculation of income tax liability).

Trade profits

17Cash basis for small businesses

Schedule 4 contains provision enabling the profits of a trade, profession or vocation to be calculated on the cash basis.

18Deductions allowable at a fixed rate

Schedule 5 contains provision enabling persons carrying on a trade, profession or vocation to claim deductions for certain expenses at a fixed rate.

Other provisions

19Employment income: duties performed in the UK and overseas

Schedule 6 contains provision about employment income in cases where duties are performed in the UK and overseas.

20Remittance basis: exempt property

Schedule 7 contains provision about the application of the remittance basis in relation to exempt property.

21Payments on account

1

ITA 2007 is amended as follows.

2

In section 809K (sections 809L to 809Z6: introduction), in subsection (2)(e), for “809V” substitute “809UA”.

3

Before section 809V (but after the italic heading) insert—

809UAMoney used for payments on account

1

Subsection (2) applies to income or chargeable gains of an individual if—

a

the income or gains would (but for subsection (2)) be regarded as remitted to the United Kingdom by virtue of the bringing of money to the United Kingdom,

b

the money is brought to the United Kingdom by way of direct payments to the Commissioners on account of income tax,

c

the tax year (“tax year 2”) in respect of which the payments on account are made is a tax year for which section 809H (remittance basis charge for long-term UK resident) does not apply as respects the individual, and

d

that section applied as respects the individual for the previous tax year (“tax year 1”).

2

The relevant amount of income or chargeable gains is to be treated as not remitted to the United Kingdom if money equal to the relevant amount is taken offshore by—

a

the 15 March following the end of tax year 2, or

b

such later date as the Commissioners may allow on a claim made by the individual.

3

A claim under subsection (2)(b)—

a

may be made only if the individual has made and delivered a return under section 8 of TMA 1970 for tax year 2 and reasonably expects to receive from the Commissioners a repayment of tax paid in respect of that tax year, and

b

may be made no later than the 5 April following the end of tax year 2.

4

Money that is taken offshore in accordance with subsection (2) is to be treated as having the same composition of kinds of income and capital as the money used to make the payments on account.

5

In this section “the relevant amount” means the lower of the following—

a

the amount brought to the United Kingdom as mentioned in subsection (1)(b), and

b

the applicable amount (as defined in section 809H) for tax year 1.

4

In section 809Z9(11) (taking proceeds etc offshore or investing them: modification of general provisions)—

a

for “section 809VB(2) but in that case” substitute “sections 809UA(2) and 809VB(2), but in those cases”, and

b

at the beginning of paragraph (b) insert “in the case of section 809VB(2),”.

5

The amendments made by this section have effect in relation to payments on account made in respect of the tax year 2012-13 and subsequent tax years.

22Arrangements made by intermediaries

1

In Chapter 8 of Part 2 of ITEPA 2003 (application of provisions to workers under arrangements made by intermediaries), in section 49 (engagements to which Chapter applies), for subsection (1)(c) substitute—

c

the circumstances are such that—

i

if the services were provided under a contract directly between the client and the worker, the worker would be regarded for income tax purposes as an employee of the client or the holder of an office under the client, or

ii

the worker is an office-holder who holds that office under the client and the services relate to the office.

2

This section has effect for the tax year 2013-14 and subsequent tax years.

23Taxable benefit of cars: the appropriate percentage

1

Section 139 of ITEPA 2003 (car with CO2 figure: the appropriate percentage) is amended in accordance with subsections (2) to (6).

2

In subsection (2), after “the relevant threshold” omit “for the year”.

3

For subsection (2)(a) substitute—

a

if the car’s CO2 emissions figure does not exceed 50 grams per kilometre driven, 5%,

aa

if the car’s CO2 emissions figure exceeds 50 grams per kilometre driven but does not exceed 75 grams per kilometre driven, 9%, and

4

In subsection (2)(b), for “11%” substitute “13%”.

5

In subsection (3)—

a

after “the relevant threshold” omit “for the year”, and

b

for “12%” substitute “14%”.

6

In subsection (4)—

a

after “the relevant threshold” (in both places) omit “for the year”, and

b

in paragraph (b), for “35%” substitute “37%”.

7

Section 140 of that Act (car without CO2 figure: the appropriate percentage) is amended in accordance with subsections (8) to (11).

8

In the Table in subsection (2), for “35%” substitute “37%”.

9

For subsection (3)(a) substitute—

a

5% if the car cannot in any circumstances emit CO2 by being driven, and

10

In subsection (3)(b), for “35%” substitute “37%”.

11

Omit subsection (3A).

12

The amendments made by this section have effect for the tax year 2015-16 and subsequent tax years.

24Gains from contracts for life insurance etc

Schedule 8 amends Chapter 9 of Part 4 of ITTOIA 2005 (gains from contracts for life insurance etc).

25Qualifying insurance policies

Schedule 9 amends Schedule 15 to ICTA (qualifying insurance policies) and makes other provision relating to qualifying policies under Schedule 15 to ICTA.

26Transfer of assets abroad

Schedule 10 amends Chapter 2 of Part 13 of ITA 2007 (tax avoidance: transfer of assets abroad).

27Payments of interest

Schedule 11 contains provision in connection with the payment of interest for the purposes of income tax.

28Disguised interest

Schedule 12 contains provision about returns which are economically equivalent to interest.

CHAPTER 3Corporation tax: general

Losses, other reliefs and deductions

29Restriction on surrender of losses: controlled foreign company cases

1

Section 105 of CTA 2010 (restriction on surrender of losses etc within section 99(1)(d) to (g)) is amended as follows.

2

In subsection (2), for “the surrendering company’s gross profits of the surrender period” substitute “the profit-related threshold”.

3

In subsection (3), for “those gross profits” substitute “the profit-related threshold”.

4

After subsection (3) insert—

3A

The profit-related threshold” is the sum of—

a

the surrendering company’s gross profits of the surrender period, and

b

where chargeable profits of a CFC for an accounting period ending in the surrender period are apportioned to the surrendering company in accordance with step 3 in subsection (1) of 371BC of TIOPA 2010 and the surrendering company is in relation to that accounting period of the CFC a chargeable company for the purposes of step 4 in that subsection, the total of the chargeable profits so apportioned.

3B

Where—

a

an accounting period of a CFC ending in the surrender period is one to which (because of paragraph 50 of Schedule 20 of FA 2012) the repeal of Chapter 4 of Part 17 of ICTA does not apply,

b

chargeable profits of the CFC for that accounting period are apportioned to the surrendering company in accordance with sections 747(3) and 752 of ICTA, and

c

the surrendering company is not prevented by section 747(5) of ICTA from being chargeable to tax in respect of the CFC for that accounting period,

the profit-related threshold also includes the total of the chargeable profits so apportioned.

5

After subsection (5) insert—

5A

For the purposes of this section—

“CFC” has the same meaning as in Part 9A of TIOPA 2010, except that in subsection (3B) it means a controlled foreign company as defined by section 747(2) of ICTA;

“chargeable profits”, in relation to a CFC, is to be read in accordance with section 371BA(3) of TIOPA 2010, except that in subsection (3B) it is to be read in accordance with section 747(6) of ICTA.

6

The amendments made by this section have effect where the surrender period of the surrendering company ends on or after 20 March 2013, but subject to the following.

7

For the purposes of section 105(3A)(b) and (3B)(b) of CTA 2010, chargeable profits do not include—

a

chargeable profits for an accounting period within the meaning of Part 9A of TIOPA 2010 ending before 20 March 2013, or

b

chargeable profits for an accounting period within the meaning of Chapter 4 of Part 17 of ICTA ending before that date.

8

Subsection (9) applies where—

a

an accounting period within the meaning of Part 9A of TIOPA 2010, or

b

an accounting period within the meaning of Chapter 4 of Part 17 of ICTA,

falls partly before and partly on or after 20 March 2013.

9

For the purposes of section 105 of CTA 2010, the chargeable profits of the CFC for that period, so far as apportioned to the surrendering company as mentioned in subsection (3A)(b) or (3B)(b) of that section (as the case requires), are to be further apportioned on a just and reasonable basis between the two parts of the period, and the chargeable profits referred to in subsection (3A)(b) or (3B)(b) are not to include the chargeable profits apportioned to the part ending before 20 March 2013.

30Loss relief surrenderable by non-UK resident established in EEA state

1

Section 107 of CTA 2010 (surrender of losses etc) is amended as follows.

2

After subsection (1) insert—

1A

If the surrendering company is established in the EEA (within the meaning of section 134A), it may surrender a loss or other amount under this Chapter only so far as conditions A and B are met.

Subsection (6A) imposes restrictions on a surrender under this subsection.

3

In subsection (2) for “The” substitute “In any other case, the”.

4

After subsection (6) insert—

6A

A loss or other amount may not be surrendered by virtue of subsection (1A) if and to the extent that it, or any amount brought into account in calculating it, corresponds to, or is represented in, amounts within subsection (6B).

6B

An amount is within this subsection if, for the purposes of non-UK tax chargeable under the law of a territory, the amount is (in any period) deducted from or otherwise allowed against non-UK profits of any person.

5

In subsection (7), after “subsection (6)” insert “or (6B)”.

6

The amendments made by this section have effect in relation to accounting periods beginning on or after 1 April 2013.

7

But for this purpose an accounting period beginning before, and ending on or after, 1 April 2013 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.

8

An apportionment for the purposes of subsection (7) must be made in accordance with section 1172 of CTA 2010 (time basis) or, if that method produces a result that is unjust or unreasonable, on a just and reasonable basis.

31Arrangements for transfers of companies

1

In section 156 of CTA 2010 (definition of “arrangements” for purposes of sections 154 to 155B, etc)—

a

in subsection (2), in paragraph (b), after “include” insert

—

i

b

at the end of that paragraph insert

, or

ii

a condition or requirement imposed by, or agreed with, a Minister of the Crown, the Scottish Ministers, a Northern Ireland department or a statutory body.

c

after that subsection insert—

2A

In subsection (2) “statutory body” means a body (other than a company as defined by section 1(1) of the Companies Act 2006) established by or under a statutory provision for the purpose of carrying out functions conferred on it by or under a statutory provision, except that the Treasury may, by order, specify that a body is or is not to be a statutory body for this purpose.

2

In sections 154(3) and 155(3) of that Act (arrangements for transfers), for “154A” substitute “155A”.

3

In section 188 of that Act (other definitions for Part 5), in subsection (1), after ““company”” insert “(except in section 156(2A)”.

4

The amendments made by this section have effect in relation to accounting periods ending on or after 1 April 2013.

32Change in company ownership: company reconstructions

1

For section 676 of CTA 2010 (disallowance of trading losses where company reconstruction without a change of ownership) substitute—

676Company reconstructions

1

Subsection (2) applies if, before the change in ownership—

a

a trade carried on by another company (“the predecessor company”) is transferred to the company, and

b

the transfer is a transfer to which Chapter 1 of Part 22 applies (transfers of trade without a change of ownership).

2

In determining any relief available to the company by virtue of section 944(3) (carry forward of trading losses in successor company), this Chapter applies as if—

a

references to a trade carried on by the company included the trade as carried on by the predecessor company or by any predecessor of that company, and

b

any loss sustained by the predecessor company or any predecessor of that company had been sustained by the company.

3

Subsection (4) applies if, after the change in ownership—

a

a trade carried on by the company is transferred to another company (“the successor company”), and

b

the transfer is a transfer to which Chapter 1 of Part 22 applies.

4

In determining—

a

any relief available to the company under section 45 (carry forward of trading losses), or

b

any relief available to the successor company or any successor of that company by virtue of section 944(3),

this Chapter applies as if references to a trade carried on by the company included the trade as carried on by the successor company or by any successor of that company.

5

For the purposes of this section a company (“company A”) is a predecessor of another company (“company B”), and company B is a successor of company A, if the first or second condition is met.

6

The first condition is that Chapter 1 of Part 22 applies in relation to company A and company B as respectively the predecessor and the successor within the meaning of that Chapter.

7

The second condition is that—

a

Chapter 1 of Part 22 applies in relation to company A and a third company (“company C”) as respectively the predecessor and the successor within the meaning of that Chapter, and

b

company C is (whether by virtue of the first condition or this condition) a predecessor of company B.

2

The amendment made by this section has effect in relation to changes in ownership that occur on or after 20 March 2013.

33Change in company ownership: shell companies

Schedule 13—

a

inserts into Part 14 of CTA 2010 (change in company ownership) a new Chapter 5A (shell companies: restrictions on relief), and

b

makes consequential provision.

34Transfer of deductions

Schedule 14—

a

inserts into CTA 2010 a new Part 14A (transfer of deductions), and

b

makes consequential provision.

35R&D expenditure credits

Schedule 15 contains provision about R&D expenditure credits.

36Relief for television production and video games development

1

Schedule 16 contains provision about television production.

2

Schedule 17 contains provision about video games development.

3

Schedule 18 contains consequential amendments.

Exemption from charge

37Health service bodies: exemption

In section 986 of CTA 2010 (exemption from corporation tax: meaning of “health service body”), insert the following entries at the appropriate places in the table—

a clinical commissioning group

section 1I of the National Health Service Act 2006

Health and Social Care Information Centre

section 252 of the Health and Social Care Act 2012

National Health Service Commissioning Board

section 1H of the National Health Service Act 2006

National Institute for Health and Care Excellence

section 232 of the Health and Social Care Act 2012

38Chief constables etc (England and Wales): exemption

1

In Chapter 8 of Part 22 of CTA 2010 (exemptions), after section 987 insert—

Police

987AChief constables etc (England and Wales)

The following are not liable to corporation tax—

a

a chief constable of a police force maintained under section 2 of the Police Act 1996;

b

the Commissioner of Police of the Metropolis.

2

The amendment made by this section is treated as having come into force on 16 January 2012, but, in relation to any time before 22 November 2012, section 987A of CTA 2010 has effect as if paragraph (a) were omitted.

Other provisions

39Real estate investment trusts: UK REITs which invest in other UK REITs

Schedule 19 amends Part 12 of CTA 2010 (real estate investment trusts).

40Corporation tax relief for employee share acquisitions etc

1

Chapter 6 of Part 12 of CTA 2009 (relief for employee share acquisitions: relationship between relief under Part 12 and other reliefs) is amended as follows.

2

For section 1038 substitute—

1038Exclusion of other deductions

1

Subsection (2) applies if relief is or, apart from condition 2 in section 1009(1), would be available under this Part.

For this purpose, it does not matter if the amount of the relief is or would be calculated as nil.

2

Except as provided for by this Part, for the purpose of calculating any company’s profits for corporation tax purposes for any accounting period, no deduction is allowed—

a

in relation to the provision of the shares or to any matter connected with the provision of the shares, or

b

so far as not covered by paragraph (a) in a case in which the shares are acquired pursuant to an option, in relation to the option or to any matter connected with the option.

3

In a case in which section 1022 has applied, in subsection (2)(b) references to the option cover the new option and any relevant earlier qualifying option.

4

For the purposes of subsection (2) it does not matter if the accounting period in question falls wholly before or after the time at which the shares are acquired.

5

In a case in which the shares are acquired under an employee share scheme, the deductions disallowed by subsection (2) include (in particular) deductions for amounts paid or payable by the employing company in relation to the participation of the employee in the scheme.

6

But subsection (2) does not disallow deductions for—

a

expenses incurred in setting up the scheme,

b

expenses incurred in meeting, or contributing to, the costs of administering the scheme,

c

the costs of borrowing for the purposes of the scheme, or

d

fees, commission, stamp duty, stamp duty reserve tax, and similar incidental expenses of acquiring the shares.

7

“Employee share scheme” means a scheme or arrangement for enabling shares to be acquired because of persons’ employment.

8

In a case in which relief is or, apart from condition 2 in section 1009(1), would be available under Chapter 5 by virtue of section 1030(2), subsection (2) does not disallow deductions in relation to the provision of the convertible securities.

3

After section 1038 insert—

1038AExclusion of deductions for share options: shares not acquired

1

Subsection (2) applies if—

a

a person obtains an option to acquire shares and the requirements of section 1015(1)(a) to (c) are met in relation to the obtaining of the option, or

b

so far as not covered by paragraph (a), a person obtains an option to acquire shares and the obtaining of the option is connected with an option previously obtained in a case covered by paragraph (a) or this paragraph.

2

For the purpose of calculating any company’s profits for corporation tax purposes for any accounting period, no deduction is allowed in relation to—

a

the option, or

b

any matter connected with the option,

unless the shares are acquired pursuant to the option.

3

For the purposes of subsection (2) it does not matter if the accounting period in question falls wholly before or after the time at which the option is obtained.

4

In a case in which the shares would be acquired under an employee share scheme, the deductions disallowed by subsection (2) include (in particular) deductions for amounts paid or payable by the employing company in relation to the participation of the employee in the scheme.

5

But subsection (2) does not disallow deductions for—

a

expenses incurred in setting up the scheme,

b

expenses incurred in meeting, or contributing to, the costs of administering the scheme,

c

the costs of borrowing for the purposes of the scheme, or

d

fees, commission, stamp duty, stamp duty reserve tax, and similar incidental expenses of acquiring the shares.

6

“Employee share scheme” means a scheme or arrangement for enabling shares to be acquired because of persons’ employment.

7

Subsection (2) does not disallow deductions for—

a

amounts on which the employee is subject to a charge under ITEPA 2003,

b

amounts on which the employee would have been subject to a charge under ITEPA 2003 had the employee been a UK employee at all material times, or

c

if the employee has died, amounts on which the employee would have been subject to a charge under ITEPA 2003 had the employee been alive.

8

“UK employee” is to be read in accordance with section 1017(4).

4

For the purposes of the following subsections—

“pre-20 March 2013 relevant accounting period” means an accounting period which begins before 20 March 2013 but ends on or after that date, and

“relevant accounting period” means an accounting period which ends on or after 20 March 2013.

5

The amendment made by subsection (2) above has effect for the purpose of disallowing deductions for relevant accounting periods.

For this purpose, it does not matter if the acquisition of shares which gives rise, or would give rise, to the relief under Part 12 of CTA 2009 occurs before a company’s first relevant accounting period.

6

But the amendment made by subsection (2) above has no effect for the purpose of disallowing a deduction for a pre-20 March 2013 relevant accounting period where the acquisition of shares which gives rise, or would give rise, to the relief under Part 12 of CTA 2009 occurs before 20 March 2013.

7

The amendment made by subsection (3) above has effect for the purpose of disallowing deductions for relevant accounting periods.

For this purpose, it does not matter if the option is obtained before a company’s first relevant accounting period.

8

But the amendment made by subsection (3) above has no effect for the purpose of disallowing a deduction for a pre-20 March 2013 relevant accounting period where—

a

the option is obtained before 20 March 2013, and

b

before that date, an event (for example, the lapse or cancellation of the option) occurs in consequence of which the shares cannot be acquired pursuant to the option.

41Derivative contracts: property total return swaps etc

1

Chapter 7 of Part 7 of CTA 2009 (chargeable gains arising in relation to derivative contracts) is amended as follows.

2

In section 643 (contracts relating to land or certain tangible movable property)—

a

in subsection (1), for “and C” substitute “, C and D”, and

b

after subsection (4) insert—

4A

Condition D is that no two or more of the parties to the derivative contract are connected persons.

3

In section 650 (property based total return swaps)—

a

in subsection (1), for “to F” substitute “to H”, and

b

after subsection (7) insert—

8

Condition G is that no two or more of the parties to the derivative contract are connected persons.

9

Condition H is that the securing of a tax advantage is neither the main purpose, nor one of the main purposes, for which the company is a party to the derivative contract.

“Tax advantage” has the meaning given by section 1139 of CTA 2010.

4

In section 659 (meaning of “relevant credits” and “relevant debits”), after subsection (4) insert—

4A

But if the derivative contract has effect such that the return arising from the contract, so far as calculated by reference to that index, is calculated by reference to a percentage (“the capped percentage”) which is closer to zero than the full percentage change in that index over that period (or which is zero even though there has been a change in that index), for the purposes of subsection (4) R% is the capped percentage.

5

The amendments made by this section have effect in relation to accounting periods beginning on or after 5 December 2012.

6

But, for the purposes of subsection (5), an accounting period beginning before, and ending on or after, 5 December 2012 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.

42Corporation tax: tax mismatch schemes

Schedule 20 contains provision about tax mismatch schemes.

43Tier two capital

1

CTA 2010 is amended as follows.

2

In section 162 (meaning of “normal commercial loan”), after subsection (1) insert—

1A

For those purposes, “normal commercial loan” also includes any loan which is not a normal commercial loan by virtue of subsection (1) but is such a loan by virtue of section 164A(1) (loan forming part of tier two capital).

3

After section 164 insert—

164ALoan forming part of tier two capital

1

A loan is a normal commercial loan by virtue of this subsection if it—

a

was made to a bank or a parent undertaking of a bank, and

b

forms part of the tier two capital resources of the bank or parent undertaking.

2

Subsection (1) does not apply in the case of any loan if there are arrangements the main purpose, or one of the main purposes, of which is to obtain a tax advantage for any person as a result of the application of that subsection in respect of that loan.

3

For the purposes of this section—

a

“bank” has the meaning given by section 1120,

b

“tax advantage” has the meaning given by section 1139,

c

“parent undertaking” is to be read in accordance with section 420 of FISMA 2000, and

d

the reference to tier two capital resources is to be read in accordance with the PRA Handbook made by the Prudential Regulation Authority (as that Handbook has effect from time to time).

4

In relation to any time before 1 April 2013, the reference in subsection (3)(d) to the PRA Handbook is to be read as a reference to the Handbook of Rules and Guidance made by the Financial Services Authority (as that Handbook had effect at the time in question).

4

In section 1029(1) (overview), after paragraph (c) insert—

ca

section 1032A (payment in respect of tier two capital),

5

After section 1032 insert—

Tier two capital

1032APayment in respect of tier two capital

1

A payment made in respect of tier two securities is not a distribution for the purposes of the Corporation Tax Acts.

2

Subsection (1) does not apply in the case of any tier two securities if there are arrangements the main purpose, or one of the main purposes, of which is to obtain a tax advantage for any person as a result of the application of that subsection in respect of those securities.

3

For the purposes of this section—

a

“tier two securities” means securities (other than shares) issued by a bank or a parent undertaking of a bank that form part of the tier two capital resources of the bank or parent undertaking,

b

“bank” has the meaning given by section 1120,

c

“tax advantage” has the meaning given by section 1139,

d

“parent undertaking” is to be read in accordance with section 420 of FISMA 2000, and

e

the reference to tier two capital resources is to be read in accordance with the PRA Handbook made by the Prudential Regulation Authority (as that Handbook has effect from time to time).

4

In relation to any time before 1 April 2013, the reference in subsection (3)(e) to the PRA Handbook is to be read as a reference to the Handbook of Rules and Guidance made by the Financial Services Authority (as that Handbook had effect at the time in question).

6

The amendments made by this section are treated as having come into force on 26 October 2012.

44Financing costs and income: group treasury companies

1

In section 316 of TIOPA 2010 (group treasury companies) for subsections (2) to (8) substitute—

2

A company is a group treasury company in the relevant period if—

a

it is a member of the worldwide group,

b

it undertakes treasury activities for the worldwide group in the relevant period (whether or not it also undertakes other activities),

c

at least 90% of the relevant income of the company for the relevant period is group treasury revenue, and

d

it makes an election in respect of the relevant period for the purposes of this section.

3

Subsection (4) applies if throughout the relevant period—

a

all or substantially all of the activities undertaken by a group treasury company consist of treasury activities undertaken by it for the worldwide group, and

b

all or substantially all of the assets and liabilities of the company relate to such activities.

4

Where this subsection applies, the relevant amount, and all other amounts that are relevant amounts in respect of the group treasury company and the relevant period, are treated as not being a financing expense amount or a financing income amount of the group treasury company.

5

If subsection (4) does not apply, those relevant amounts are treated as not being a financing expense amount or a financing income amount of the group treasury company only to the extent that they relate to treasury activities undertaken by the company for the worldwide group.

6

For the purposes of subsection (5) the extent to which amounts relate to the matters mentioned is to be determined on a just and reasonable basis.

7

An election under this section must be made within 3 years after the end of the relevant period.

2

The amendment made by this section has effect in relation to periods of account of the worldwide group beginning on or after 11 December 2012.

45Condition for company to be an “investment trust”

1

In section 1158(2) of CTA 2010 (condition A for a company to be an “investment trust”), for “the business of the company consists of” substitute “all, or substantially all, of the business of the company is”.

2

The amendment made by this section has effect in relation to accounting periods beginning on or after 1 January 2012.

46Community amateur sports clubs

Schedule 21 contains provision about community amateur sports clubs.

CHAPTER 4Pensions

47Lifetime allowance charge: power to amend the transitional provision in Part 2 of Schedule 18 to FA 2011 etc

1

Part 2 of Schedule 18 to FA 2011 (lifetime allowance charge: commencement and transitional provision relating to changes made for the tax year 2012-13 and onwards) is amended as follows.

2

In paragraph 14—

a

omit sub-paragraphs (2) and (15) to (17) (which confer power on the HMRC Commissioners to make provision specifying how notices under paragraph 14 are to be given),

b

in sub-paragraph (7) omit “the annual rate of” where it first appears, and

c

in sub-paragraph (11) after “(5)(a)” insert “and (c)(i)”.

3

After paragraph 14 insert—

15

1

The Commissioners for Her Majesty’s Revenue and Customs may by regulations amend paragraph 14.

2

Regulations under this paragraph may (for example) add to the cases in which paragraph 14 is to apply or is to cease to apply.

3

Regulations under this paragraph may include provision having effect in relation to a time before the regulations are made; but—

a

the time must be no earlier than 6 April 2012, and

b

the provision must not increase any person’s liability to tax.

4

In relation to regulations under this paragraph made during 2013, sub-paragraph (3) has effect with the omission of paragraph (b) so long as the time in question is no earlier than 6 April 2013.

16

1

The Commissioners for Her Majesty’s Revenue and Customs may by regulations make provision specifying how any notice required to be given to an officer of Revenue and Customs under paragraph 14 is to be given.

2

In sub-paragraph (1) the reference to paragraph 14 is to that paragraph as amended from time to time by regulations under paragraph 15.

17

1

Regulations under paragraph 15 or 16 may include supplementary or incidental provision.

2

The powers to make regulations under paragraphs 15 and 16 are exercisable by statutory instrument.

3

A statutory instrument containing regulations under paragraph 15 or 16 is subject to annulment in pursuance of a resolution of the House of Commons.

4

The amendments made by subsection (2)(b) and (c) are treated as having come into force on 6 April 2012.

5

The Registered Pension Schemes (Lifetime Allowance Transitional Protection) Regulations 2011 (S.I. 2011/1752) are to continue to have effect and, so far as they were made under paragraph 14(2) and (15) of Schedule 18 to FA 2011, are to be treated as if they were made under paragraphs 16 and 17(1) of that Schedule (as inserted by subsection (3) above).

48Lifetime allowance charge: new standard lifetime allowance for the tax year 2014-15 and subsequent tax years

1

Section 218 of FA 2004 (standard lifetime allowance etc) is amended as follows.

2

For subsection (2) substitute—

2

The standard lifetime allowance for the tax year 2014-15 and, subject to subsection (3), subsequent tax years is £1,250,000.

3

In subsection (3) for “the tax year 2012-13” substitute “the tax year 2014-15”.

4

The amendments made by subsections (2) and (3) have effect for the tax year 2014-15 and subsequent tax years.

5

Schedule 22 contains transitional provision etc.

49Annual allowance: new annual allowance for the tax year 2014-15 and subsequent tax years

1

Section 228 of FA 2004 (annual allowance) is amended as follows.

2

For subsection (1) substitute—

1

The annual allowance for the tax year 2014-15 and, subject to subsection (2), each subsequent tax year is £40,000.

3

In subsection (2) for “2011-12” substitute “2014-15”.

4

The amendments made by this section have effect for the tax year 2014-15 and subsequent tax years.

50Drawdown pensions and dependants’ drawdown pensions

1

In section 165 of FA 2004 (pension rules), in subsection (1), in pension rule 5, for “100%” substitute “120%”.

2

In section 167 of that Act (pension death benefit rules), in subsection (1), in pension death benefit rule 4, for “100%” substitute “120%”.

3

In Schedule 16 to FA 2011 (benefits under pension schemes)—

a

in paragraph 90(2)(a), after “year” insert “beginning before 26 March 2013 and”,

b

in paragraph 90(3), omit paragraph (b) and the “and” before it,

c

in paragraph 98(2)(a), after “year” insert “beginning before 26 March 2013 and”, and

d

in paragraph 98(3), omit paragraph (b) and the “and” before it.

4

The amendments made by subsections (1) and (2) have effect in relation to drawdown pension years beginning on or after 26 March 2013.

5

The amendments made by subsection (3)(a) and (c) are treated as having come into force on 26 March 2013.

6

The amendments made by subsection (3)(b) and (d) have effect in relation to transfers within paragraph 90(5) or 98(5) of Schedule 16 to FA 2011 occurring during a drawdown pension year ending on or after 25 March 2013.

51Bridging pensions

1

FA 2004 is amended as follows.

2

In paragraph 2 of Schedule 28 (pension rules: meaning of scheme pension)—

a

in sub-paragraph (4)(c)—

i

for the words from “not earlier” to “65” substitute “during the permitted period”, and

ii

after “which” insert “together with any previous reductions of the kind referred to in this paragraph (c)”, and

b

after sub-paragraph (4A) insert—

4B

In sub-paragraph (4)(c) “the permitted period” means the period beginning with the day on which the member reaches the age of 60 and ending with the day on which the member reaches the age of 65 or, if later, reaches pensionable age.

3

In paragraph 1 of Schedule 29 (pension commencement lump sums), in sub-paragraph (4)(a), omit the words from “at a time” to “65”.

4

In consequence of subsection (3), paragraph 21 of Schedule 23 to the FA 2006 is repealed.

5

The amendments made by this section have effect for the tax year 2013-14 and subsequent tax years.

52Abolition of contracting out of state second pension: consequential amendments etc

1

FA 2004 is amended as follows.

2

In section 188 (relief for contributions), in subsection (3) (contributions excluded from relief), omit paragraph (c) and the word “and” immediately preceding that paragraph.

3

In that section, omit subsection (6) (which treats certain amounts recovered by individual’s employer as contributions paid by individual).

4

Omit section 190(5) (certain reliefs not to count towards annual limit for relief).

5

Omit section 196(5) (references to contributions to include references to minimum payments when determining relief for employers).

6

Omit section 202 (minimum contributions under pensions legislation).

7

Omit section 233(2) (references to contributions not to include references to minimum payments when determining pension input amount).

8

In paragraph 5 of Schedule 29 (short service refund lump sum), after sub-paragraph (2) insert—

2A

In sub-paragraph (2) the reference to the member’s contributions includes—

a

any amount paid under section 7 of the Social Security Act 1986 (incentive payments to schemes becoming contracted-out between 1986 and 1993),

b

any amount paid by the Commissioners for Her Majesty’s Revenue and Customs under section 42A(3) of the Pension Schemes Act 1993 or section 38A(3) of the Pension Schemes (Northern Ireland) Act 1993 (rebates), and

c

any amount recovered by the member’s employer under regulations falling within sub-paragraph (2B) in respect of minimum payments made to the scheme in relation to any period before 6 April 2012.

2B

Those regulations are regulations which were made under—

a

section 8(3) of the Pension Schemes Act 1993 (recovery of minimum payments), or

b

section 4(3) of the Pension Schemes (Northern Ireland) Act 1993 (corresponding provision for Northern Ireland).

9

Omit paragraph 14(2) of Schedule 36 (which excludes minimum payments from being relevant contributions for the purposes of enhanced protection from lifetime allowance charge).

10

Subsections (1), (3) to (5) and (7) to (9) come into force on 6 April 2013.

11

Subsection (2) comes into force on 6 April 2015.

12

Subsection (6) comes into force on 6 April 2016, except that the repeal of section 202(5) of FA 2004 comes into force on such day as the Treasury may appoint by order made by statutory instrument.

53Overseas pension schemes: general

1

In section 150(8) of FA 2004 (meaning of “recognised overseas pension scheme”), for the words from “which” to the end substitute “which satisfies any requirements prescribed for the purposes of this subsection by regulations made by the Commissioners for Her Majesty’s Revenue and Customs.”

2

Section 169 of that Act (pension schemes: recognised transfers) is amended as follows.

3

In subsection (2)(c), for “any prescribed information requirements imposed on the scheme manager” substitute “any requirements imposed under subsection (4)”.

4

For subsection (4) substitute—

4

Regulations may require the scheme manager of a QROPS or former QROPS to—

a

give the Commissioners information of a prescribed description,

b

give the Commissioners such evidence as they may require of a prescribed matter, and

c

give a prescribed authority, in prescribed circumstances, information of a prescribed description.

4A

Regulations under subsection (4) may make provision as to—

a

the way and form in which information or evidence is to be given, and

b

the times or intervals at which information or evidence is to be given.

4B

The regulations may apply any provision of Part 7 of Schedule 36 to FA 2008 (penalties), with or without modifications, in relation to requirements imposed under the regulations on a former QROPS.

5

In subsection (5)—

a

for “the Inland Revenue has” substitute “the Commissioners have”,

b

for paragraph (a) (but not the “and” at the end of it) substitute—

a

any of the following conditions is met in relation to the scheme—

i

there has been a failure to comply with a relevant requirement and the failure is significant,

ii

any information given pursuant to a relevant requirement is incorrect in a material respect,

iii

any declaration given pursuant to a relevant requirement is false in a material respect,

iv

there is no scheme manager,

c

in paragraph (b), for “the failure” substitute “that condition being met”.

6

For subsection (6) substitute—

6

A failure to comply with a requirement is significant if—

a

it is a failure to give information or evidence that is (or may be) of significance, or

b

there are reasonable grounds for believing that the failure prejudices (or might prejudice) the assessment or collection of tax by the Commissioners.

7

After subsection (7) insert—

8

In subsections (4) to (6) and this subsection—

“the Commissioners” means the Commissioners for Her Majesty’s Revenue and Customs;

“prescribed” means prescribed by regulations;

“QROPS” means a qualifying recognised overseas pension scheme, and “former QROPS” means a scheme that has at any time been a QROPS;

“regulations” means regulations made by the Commissioners;

“relevant requirement” means—

a

a requirement imposed by regulations under subsection (4), or

b

a requirement imposed by virtue of Part 1 of Schedule 36 to FA 2008 (powers to obtain information and documents).

8

In section 280(1) of that Act (abbreviations), insert at the appropriate place—

“FA 2008” means the Finance Act 2008,

54Overseas pension schemes: information and inspection powers

1

Part 6 of Schedule 36 to FA 2008 (information and inspection powers: special cases) is amended as follows.

2

In paragraph 34B (registered pension schemes etc)—

a

in sub-paragraph (2), omit the “or” at the end of paragraph (b) and, at the end of paragraph (c) insert—

d

a QROPS or former QROPS, or

e

an annuity purchased with sums or assets held for the purposes of a QROPS or former QROPS.

b

after sub-paragraph (4) insert—

4A

In relation to a notice to which this paragraph applies that refers only to information or documents relating to a matter within sub-paragraph (2)(d) or (e), paragraph 20 (old documents) has effect as if the reference to 6 years were to 10 years.

c

after sub-paragraph (7) insert—

7A

Where the notice relates to a matter within sub-paragraph (2)(d) or (e), the officer of Revenue and Customs who gives the notice must give a copy of the notice to the scheme manager in relation to the pension scheme.

d

in sub-paragraph (8), for “and (7)” substitute “to (7A)”.

3

In paragraph 34C (registered pension schemes etc: interpretation), insert at the appropriate places—

“QROPS” and “former QROPS” have the meanings given by section 169(8) of FA 2004;

“scheme manager”, in relation to a pension scheme, has the meaning given by section 169(3) of FA 2004.

4

In paragraphs 34B and 34C of Schedule 36 to FA 2008, references to a former QROPS include a scheme that ceased to be a QROPS before this Act was passed.

CHAPTER 5Other provisions

Employee shareholder shares

55Employee shareholder shares

Schedule 23 contains—

a

provision about employee shareholder shares, and

b

provision for an exemption from income tax in connection with advice relating to proposed employee shareholder agreements.

Seed enterprise investment scheme

56SEIS: income tax relief

1

ITA 2007 is amended as follows.

2

In section 29 (tax reductions: supplementary), in subsection (4B), after the entry for Chapter 1 of Part 5 insert—

Chapter 1 of Part 5A (SEIS relief),

3

In section 32 (liability not dealt with in the calculation), after the entry for section 235 insert—

under section 257G (withdrawal or reduction of SEIS relief),

4

In section 257DG (the control and independence requirement), for subsection (2) substitute—

2

The independence element of the requirement is that—

a

the issuing company must not at any time in period A (ignoring any on-the-shelf period) be within subsection (2A), and

b

no arrangements must be in existence at any time in period A by virtue of which the issuing company could be within that subsection (whether during period A or otherwise).

2A

The issuing company is within this subsection at any time if it is under the control of any other company (or of another company and any other person connected with that other company).

2B

In subsection (2)(a) “on-the-shelf period” means a period during which the issuing company—

a

has not issued any shares other than subscriber shares, and

b

has not begun to carry on, or make preparations for carrying on, any trade or business.

5

The amendments made by subsections (2) and (3) have effect for the tax year 2013-14 and subsequent tax years.

6

The amendment made by subsection (4) has effect in relation to shares issued on or after 6 April 2013.

57SEIS: re-investment relief

1

Schedule 5BB to TCGA 1992 (seed enterprise investment scheme: re-investment) is amended as follows.

2

In paragraph 1 (SEIS re-investment relief)—

a

in sub-paragraph (2)—

i

in paragraph (a), after “the tax year 2012-13” insert “or the tax year 2013-14 (the year in question being referred to in this Schedule as “the relevant year”)”, and

ii

in paragraph (b), for “that year” substitute “the relevant year”,

b

in sub-paragraph (3)(a), for “tax year 2012-13” substitute “relevant year”, and

c

for sub-paragraph (5) substitute—

5

The relevant percentage of the available SEIS expenditure is to be set against a corresponding amount of the original gain.

5A

In sub-paragraph (5)—

“the available SEIS expenditure” means so much of the SEIS expenditure as—

a

is specified in the claim,

b

is unused, and

c

does not exceed so much of the original gain as is unmatched;

“the relevant percentage” means—

a

if the relevant year is the tax year 2012-13, 100%, and

b

if the relevant year is the tax year 2013-14, 50%.

3

In paragraph 2 (restrictions on relief under paragraph 1)—

a

in sub-paragraph (1), for “tax year 2012-13” substitute “relevant year”, and

b

in sub-paragraph (2)—

i

for “tax year 2012-13” substitute “relevant year”, and

ii

for “that tax year” substitute “that year”.

4

In paragraph 5 (removal or reduction of relief) in sub-paragraph (2) for “2012-13” substitute “in which the shares were issued”.

5

Accordingly, in section 150G of TCGA (which introduces Schedule 5BB), for “tax year 2012-13” substitute “tax years 2012-13 and 2013-14”.

Disincorporation

58Disincorporation relief

1

A claim for relief under this section (“disincorporation relief”) may be made where—

a

a company transfers its business to some or all of the shareholders of the company,

b

the transfer of the business is a qualifying business transfer (see section 59), and

c

the business transfer date falls within the period of 5 years beginning with 1 April 2013.

2

As to the consequences of a claim for disincorporation relief being made, see—

sections 162B and 162C of TCGA 1992;

section 849A of CTA 2009.

3

In this section and sections 59 to 61 “the business transfer date”, in relation to the transfer of a business, is the date on which the business is transferred.

For this purpose, where the business is transferred under a contract—

a

the date on which the business is transferred is to be determined in accordance with section 28 of TCGA 1992, and

b

if the business in question is transferred by more than one contract, then for the purposes of that section the contract under which the business is transferred is to be taken to be the contract under which the goodwill of the business is transferred.

4

This section and sections 59 and 60 apply to a transfer of a business with a business transfer date of 1 April 2013 or a later date.

59Qualifying business transfer

1

The transfer of a business from a company to some or all of the shareholders of the company is a qualifying business transfer for the purposes of section 58 if conditions A to E are met.

2

Condition A is that the business is transferred as a going concern.

3

Condition B is that the business is transferred together with all of the assets of the business, or together with all of those assets other than cash.

4

Condition C is that the total market value of the qualifying assets of the business included in the transfer does not exceed £100,000.

5

Condition D is that all of the shareholders to whom the business is transferred are individuals.

6

Condition E is that each of those shareholders held shares in the company throughout the period of 12 months ending with the business transfer date.

7

For the purposes of condition D, the reference to individuals includes an individual acting as a member of a partnership, but does not include an individual acting as a member of a limited liability partnership.

8

Section 60 of TCGA 1992 (nominees and bare trustees) applies for the purposes of this section as it applies for the purposes of that Act.

9

In this section “market value”, in relation to an asset, means the price which the asset might reasonably be expected to fetch on a sale in the open market.

10

In this section a “qualifying asset” means—

a

goodwill, or

b

an interest in land which is not held as trading stock.

60Making a claim

1

A claim for disincorporation relief under section 58—

a

is to be made jointly by the company and all of the shareholders to whom the business is transferred, and

b

is irrevocable.

2

Any claim for disincorporation relief must be made within the period of 2 years beginning with the business transfer date.

61Effect of disincorporation relief

1

In Part 5 of TCGA 1992 (transfer of business assets), in Chapter 1 (general provisions), after section 162A insert—

Transfer of business from company to shareholders

162BDisincorporation relief: assets (including pre-FA 2002 goodwill)

1

This section applies where—

a

a company transfers its business to some or all of the shareholders of the company, and

b

a claim for disincorporation relief in respect of the transfer has been made under section 58 of the Finance Act 2013.

2

The disposal and acquisition of any qualifying asset of the business included in the transfer is to be deemed to be for a consideration equal to the lower of—

a

the sums allowable under section 38 as a deduction in the computation of the gain accruing to the company on the disposal of the asset in question, and

b

the market value of the asset.

3

In subsection (2) a “qualifying asset” means—

a

goodwill, or

b

an interest in land which is not held as trading stock.

4

But subsection (2) does not apply to the goodwill of the business if section 162C applies to it.

162CDisincorporation relief: post-FA 2002 goodwill

1

This section applies where—

a

a company transfers its business to some or all of the shareholders of the company,

b

a claim for disincorporation relief in respect of the transfer has been made under section 58 of the Finance Act 2013, and

c

section 849A of CTA 2009 (disincorporation relief: transfer values for post-FA 2002 goodwill) applies to the transfer of the goodwill of the business.

2

The acquisition of the goodwill of the business is deemed to be for a consideration equal to the value at which the goodwill is treated as transferred by virtue of section 849A of CTA 2009.

2

In Part 8 of CTA 2009 (intangible fixed assets), Chapter 13 (transactions between related parties) is amended as follows.

3

In section 844 (overview of Chapter), in subsection (2) for “849” substitute “849A”.

4

In section 845 (transfer between company and related party treated as at market value), in subsection (4) (exceptions to basic rule)—

a

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

b

after paragraph (d) insert

, and

e

section 849A (disincorporation relief: transfer values for post-FA 2002 goodwill).

5

After section 849 insert—

849ADisincorporation relief: transfer values for post-FA 2002 goodwill

1

This section applies where—

a

a company transfers its business to some or all of the shareholders of the company, and

b

a claim for disincorporation relief in respect of the transfer has been made under section 58 of the Finance Act 2013.

2

If section 735 applies to the transfer of the goodwill of the business, the transfer is treated for the purposes of this Part as being at the lower of—

a

the tax written-down value of the goodwill, and

b

its market value.

3

If section 736 applies to the transfer of the goodwill of the business, the transfer is treated for the purposes of this Part as being at the lower of—

a

the cost of the goodwill, and

b

its market value.

4

If section 738 applies to the transfer of the goodwill of the business, the proceeds of realisation of the goodwill are treated for the purposes of this Part as being nil.

5

In subsection (2)(a) the reference to the tax written-down value of the goodwill is to its tax written-down value immediately before the transfer.

6

In subsection (3)(a) “the cost of the goodwill” means the cost recognised for tax purposes (determined in accordance with section 736(6) and (7)).

7

In this section market value has the meaning given in section 845(5).

6

The amendments made by this section have effect in relation to a transfer of a business with a business transfer date of 1 April 2013 or a later date.

Capital gains

62Attribution of gains to members of non-resident companies

1

TCGA 1992 is amended as follows.

2

In subsection (4) of section 13 (members to whom rule for attributing gains to members of non-resident companies does not apply), for “one tenth” substitute “one quarter”.

3

In subsection (5) of that section (cases where rule for attributing gains to members of non-resident companies does not apply), after the “or” at the end of paragraph (b) insert—

ca

a chargeable gain accruing on the disposal of an asset used, and used only, for the purposes of economically significant activities carried on by the company wholly or mainly outside the United Kingdom, or

cb

a chargeable gain accruing to the company on a disposal of an asset where it is shown that neither—

i

the disposal of the asset by the company, nor

ii

the acquisition or holding of the asset by the company,

formed part of a scheme or arrangements of which the main purpose, or one of the main purposes, was avoidance of liability to capital gains tax or corporation tax, or

4

After section 13 insert—

13ASection 13(5): interpretation

1

For the purposes of section 13(5)(b) a disposal of an asset is to be regarded as a disposal of an asset used for the purposes of a trade carried on wholly outside the United Kingdom by a company if—

a

the asset is accommodation, or an interest or right in accommodation, which is situated outside the United Kingdom, and

b

the accommodation has for each relevant period been furnished holiday accommodation of which a person has made a commercial letting.

2

For the purposes of subsection (1)(b) each of the following is “a relevant period”—

a

the period of 12 months ending with the date of the disposal and each of the two preceding periods of 12 months, or

b

if the company has been the beneficial owner of the accommodation (or interest or right) for a period longer than 36 months, the period of 12 months ending with the date of the disposal and each of the preceding periods of 12 months throughout which the company has been the beneficial owner of the accommodation (or interest or right).

3

The reference in subsection (1)(b) to the commercial letting of furnished holiday accommodation is to be read in accordance with Chapter 6 of Part 4 of CTA 2009, but—

a

as if sections 266, 268 and 268A were omitted, and

b

as if, in section 267(1), the reference to an accounting period were a reference to a relevant period as defined by subsection (2) above.

4

For the purposes of section 13(5)(ca) activities carried on by a company are “economically significant activities” if they are activities which consist of the provision by the company of goods or services to others on a commercial basis and involve—

a

the use of staff in numbers, and with competence and authority,

b

the use of premises and equipment, and

c

the addition of economic value, by the company, to those to whom the goods or services are provided,

commensurate with the size and nature of those activities.

5

In subsection (4) “staff” means employees, agents or contractors of the company.

5

The amendments made by this section have effect in relation to disposals made on or after 6 April 2012.

6

But, in the case of a disposal made on or after that date but before 6 April 2013, a person to whom a part of a chargeable gain or allowable loss would (but for the amendments made by this section) have accrued on the disposal may make an election in writing for section 13 of TCGA 1992 to apply in relation to the disposal without those amendments.

7

An election under subsection (6) in respect of a disposal must be made—

a

in the case of a person within the charge to capital gains tax, within 4 years from the end of the tax year in which the disposal was made, and

b

in the case of a person within the charge to corporation tax, within 4 years from the end of the accounting period in which the disposal was made.

63Heritage maintenance settlements

1

In section 169D of TCGA 1992 (gifts to settlor-interested settlements etc: exceptions to sections 169B and 169C), in subsection (1), after “elected” insert “, or could have elected,”.

2

The amendment made by this section has effect for the tax year 2012-13 and subsequent tax years.

64EMI options and entrepreneurs’ relief etc

Schedule 24 makes provision for capital gains tax purposes in connection with shares acquired under options which are qualifying options under the EMI code.

65Charge on certain high value disposals by companies etc

Schedule 25 contains provision for a new capital gains tax charge on gains accruing to companies etc on certain high value disposals.

66Currency used in tax calculations: chargeable gains and losses

1

Chapter 4 of Part 2 of CTA 2010 (currency) is amended as follows.

2

In section 5 (basic rule: sterling to be used), after subsection (2) insert—

3

See section 9C for provision about the application of subsection (1) so far as it relates to calculating chargeable gains.

3

After section 9B insert—

9CChargeable gains and losses of companies

1

This section applies if—

a

a company disposes of an asset which is a ship, an aircraft, shares or an interest in shares, and

b

at any time beginning with the company’s acquisition of the asset (or, if earlier, the time allowable expenditure was first incurred in respect of the asset) and ending with the disposal, the company’s relevant currency is not sterling.

2

A company’s relevant currency at any time is its functional currency at that time, subject to subsection (3).

3

If, at any time—

a

a company is a UK resident investment company, and

b

the company has a designated currency (see sections 9A and 9B) which is different from its functional currency,

the company’s relevant currency at that time is that designated currency.

4

If the relevant currency of the company at the time of the disposal is not sterling, the chargeable gain or loss accruing to the company on the disposal must be calculated as follows—

Step 1

Calculate the chargeable gain or loss in the relevant currency of the company at the time of the disposal.

Step 2

Translate the amount of the chargeable gain or loss into sterling by reference to the spot rate of exchange on the day of the disposal.

5

In any case, subsections (6) to (10) apply for the purposes of calculating the chargeable gain or loss.

6

Where any allowable expenditure is incurred in a currency which is not the company’s relevant currency at the time it is incurred, that expenditure is to be translated into that relevant currency by reference to the spot rate of exchange for the day on which it is incurred.

7

Where, at any time after any allowable expenditure is incurred but before the asset is disposed of, there is a change in the company’s relevant currency, that expenditure is to be translated (or, if it has previously been translated under this section, further translated) into the relevant currency of the company immediately following the change, by reference to the spot rate of exchange for the day of the change.

8

Any amount of consideration for the disposal which is given in a currency other than the company’s relevant currency is to be translated into that relevant currency by reference to the spot rate of exchange on the day of disposal.

9

For the purposes of subsections (6) and (7)—

a

any translation of expenditure under subsection (6) is to be done before any translation of the expenditure under subsection (7), and

b

if subsection (7) applies as a result of more than one change in the company’s relevant currency, it is to be applied in relation to each change in the order the changes were made (with the earliest first).

10

Where, by virtue of any enactment, the company was at any time treated for the purposes of corporation tax on chargeable gains as acquiring the asset—

a

for a consideration of such amount as would secure that neither a gain nor a loss would accrue to the person disposing of the asset, or

b

for a consideration equal to the market value of the asset,

for the purposes of this section that allowable expenditure is treated as incurred by the company at that time.

11

For the purposes of this section, a reference to a ship or aircraft includes a reference to the benefit of a contract—

a

to which section 67 of CAA 2001 applies, and

b

which relates to plant or machinery which is a ship or aircraft.

12

In this section—

“allowable expenditure” means expenditure which, immediately before the disposal, was attributable to the asset under section 38(1)(a) to (c) of TCGA 1992;

“interest in shares” has the same meaning as in Schedule 7AC to TCGA 1992 (see paragraph 29 of that Schedule);

“shares” includes stock.

4

The amendments made by this section come into force in accordance with provision made by the Treasury by order.

Capital allowances

67Allowances for energy-saving plant and machinery: Northern Ireland

1

Section 45AA of CAA 2001 (section 45A exclusion: payments under Energy Act 2008 schemes) is amended as follows.

2

In subsection (1)—

a

in paragraph (a), after “(feed-in tariffs)” insert “, or under a corresponding scheme having effect in Northern Ireland,”, and

b

in paragraph (b), after “of that Act” insert “or section 113 of the Energy Act 2011”.

3

In subsection (5), for “subsection (6)” substitute “subsections (5A) and (6)”.

4

After that subsection insert—

5A

Except as provided by subsection (6), in the case of expenditure incurred on plant or machinery used or for use in Northern Ireland, the relevant date is—

a

for corporation tax purposes, 1 April 2013, and

b

for income tax purposes, 6 April 2013.

5

In the heading, for “payments under Energy Act 2008 schemes” substitute “feed-in tariffs and renewable heat incentives”.

for a period of hire which begins before the relevant date, and

b

under a contract entered into before that date,

section 49(1A) of ITTOIA 2005 and section 57(1A) of CTA 2009 apply on or after the relevant date as if the amendment made by subsection (3) did not have effect.

8

“The relevant date” means—

a

in the case of income tax, 6 April 2013, and

b

in the case of corporation tax, 1 April 2013.

69Gas refuelling stations: extension of time limit for capital allowance

In section 45E(1)(a) of CAA 2001 (time limit for incurring of expenditure qualifying for first-year allowance), for “2013” substitute “2015”.

70First-year allowance to be available for ships and railway assets

1

In section 46(2) of CAA 2001 (general exclusions from first-year allowance), omit—

a

general exclusion 3 (ships), and

b

general exclusion 4 (railway assets),

and the italicised headings preceding them.

2

The amendments made by this section have effect for expenditure incurred on or after 1 April 2013.

71Restrictions on buying capital allowances

Schedule 26 contains provision amending Chapter 16A of Part 2 of CAA 2001 (restrictions on allowance buying).

72Hire cars for disabled persons

1

In section 268D of CAA 2001 (hire cars for disabled persons), in subsection (2), after paragraph (a) insert—

aa

personal independence payment under the Welfare Reform Act 2012, or the corresponding provision having effect in Northern Ireland, because of entitlement to the mobility component,

ab

armed forces independence payment under a scheme established under section 1 of the Armed Forces (Pensions and Compensation) Act 2004,

2

The amendment made by this section has effect in relation to expenditure incurred on or after 1 April 2013.

73Contribution allowances: plant and machinery

1

Section 538 of CAA 2001 (contribution allowances: plant and machinery) is amended as follows.

2

In subsection (1), omit the “and” at the end of paragraph (a) and after that paragraph insert—

aa

C’s contribution is to expenditure on the provision of plant or machinery, and

3

In subsection (2)—

a

in paragraph (a), for “asset provided by means of C’s contribution” substitute “plant or machinery”,

b

in paragraph (b), for “asset” substitute “plant or machinery”, and

c

in paragraph (c)—

i

for “asset” substitute “plant or machinery”, and

ii

after “times” insert “plant or machinery”.

4

The amendments made by this section have effect in relation to expenditure pooled, and to claims made, on or after 29 May 2013 (“the commencement date”).

5

In relation to such expenditure and claims, when determining for the purposes of section 536(3)(a) of CAA 2001 whether an allowance can be made under Chapter 2 of Part 11 of that Act, the amendments made by this section are to be treated as always having had effect.

6

Nothing in this section applies to a claim by a person for a contribution allowance under Part 2 of CAA 2001 in respect of a contribution made before the commencement date.

7

Subsection (8) applies if—

a

expenditure which a person has been regarded as having incurred (despite section 532(1) of CAA 2001) by virtue of section 536(1) of that Act has been pooled by virtue of section 53 of that Act—

i

on or after 1 January 2013 but before the commencement date, or

ii

before 1 January 2013 in circumstances where no claim was made in respect of the expenditure before that date, and

b

had the amendments made by this section had effect at the time the expenditure was incurred, that person would not have been regarded as having incurred that expenditure (“the relevant expenditure”).

8

Part 2 of CAA 2001 has effect as if an event had occurred as a result of which the person is required to bring into account as a disposal receipt under that Part, for the chargeable period in which the commencement date falls, a disposal value of an amount equal to E-A.

9

For the purposes of subsection (8)—

E is the amount of the relevant expenditure, and

A is the total amount of writing-down allowances made in respect of the relevant expenditure.

10

For the purpose of calculating A, the total amount of writing-down allowances made in respect of expenditure on an item of plant or machinery is to be determined as if that item were the only item of plant or machinery in relation to which Chapter 5 of Part 2 of CAA 2001 had effect.

11

The event mentioned in subsection (8) is not to be regarded as a disposal event for the purposes of section 60(3) of CAA 2001.

Miscellaneous

74Community investment tax relief

Schedule 27 makes provision about community investment tax relief.

75Lease premium relief

Schedule 28 makes provision in relation to relief for lease premiums.

76Manufactured payments: stock lending arrangements

1

Section 596 of ITA 2007 (deemed manufactured payments: stock lending arrangements) is amended in accordance with subsections (2) and (3).

2

For subsection (1) substitute—

1

This section applies if conditions A to C are met.

1A

Condition A is that there is a stock lending arrangement in respect of securities.

1B

Condition B is that a dividend or interest on the securities is paid, as a result of the arrangement, to a person other than the person who is the lender under the arrangement.

1C

Condition C is that—

a

no provision is made for securing that the lender receives payments representative of the dividend or interest, or

b

provision is made for securing that the lender receives—

i

payments representative of the dividend or interest, and

ii

another benefit in respect of the dividend or interest (including the release of the whole or part of any liability to pay an amount).

3

In subsection (2), for paragraph (a) substitute—

a

were required, under the arrangement—

i

in a case falling within paragraph (a) of subsection (1C), to pay the lender an amount representative of the dividend or interest, or

ii

in a case falling within paragraph (b) of that subsection, to pay the lender an amount representative of the dividend or interest but deducting from that amount any payment mentioned in sub-paragraph (i) of that paragraph on which tax has been, or is to be, charged, and

4

Section 812 of CTA 2010 (deemed manufactured payments: stock lending arrangements) is amended in accordance with subsections (5) to (7).

5

For subsection (1) substitute—

1

This section applies if conditions A to C are met.

1A

Condition A is that there is a stock lending arrangement in respect of securities.

1B

Condition B is that a dividend or interest on the securities is paid, as a result of the arrangement, to a person other than the person who is the lender under the arrangement.

1C

Condition C is that—

a

no provision is made for securing that the lender receives payments representative of the dividend or interest, or

b

provision is made for securing that the lender receives—

i

payments representative of the dividend or interest, and

ii

another benefit in respect of the dividend or interest (including the release of the whole or part of any liability to pay an amount).

6

In subsection (2), for paragraph (a) substitute—

a

were required, under the arrangement—

i

in a case falling within paragraph (a) of subsection (1C), to pay the lender an amount representative of the dividend or interest, or

ii

in a case falling within paragraph (b) of that subsection, to pay the lender an amount representative of the dividend or interest but deducting from that amount any payment mentioned in sub-paragraph (i) of that paragraph on which tax has been, or is to be, charged, and

7

After subsection (6) insert—

7

This section has effect regardless of section 358 of CTA 2009 (exclusion of credits on release of connected companies debts) or any other provision of Part 5 of that Act (loan relationships) which prevents a credit from being brought into account.

8

The amendments made by this section have effect in relation to cases in which a dividend or interest is paid, or is treated as paid, on or after 5 December 2012.

77Manufactured payments: general

Schedule 29 contains provision for, and in connection with, the application of the Tax Acts to manufactured payment relationships and payments representative of dividends and interest.

78Relationship between rules prohibiting and allowing deductions

1

In section 31 of ITTOIA 2005 (trade profits: relationship between rules prohibiting and allowing deductions)—

a

after subsection (1) insert—

1A

But, if the relevant permissive rule would allow a deduction in calculating the profits of a trade in respect of an amount which arises directly or indirectly in consequence of, or otherwise in connection with, relevant tax avoidance arrangements, that rule—

a

does not have priority under subsection (1)(a), and

b

is subject to any relevant prohibitive rule in this Part (and to the provisions mentioned in subsection (1)(b)).”, and

b

after subsection (3) insert—

4

In this section “relevant tax avoidance arrangements” means arrangements—

a

to which the person carrying on the trade is a party, and

b

the main purpose, or one of the main purposes, of which is the obtaining of a tax advantage (within the meaning of section 1139 of CTA 2010).

“Arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).

2

In section 274 of ITTOIA 2005 (property businesses: relationship between rules prohibiting and allowing deductions)—

a

after subsection (1) insert—

1A

But, if the relevant permissive rule would allow a deduction in calculating the profits of a property business in respect of an amount which arises directly or indirectly in consequence of, or otherwise in connection with, relevant tax avoidance arrangements, that rule—

a

does not have priority under subsection (1)(a), and

b

is subject to any relevant prohibitive rule in this Part (and to the provisions mentioned in subsection (1)(b)).”, and

b

after subsection (3) insert—

3A

In this section “relevant tax avoidance arrangements” means arrangements—

a

to which the person carrying on the property business is a party, and

b

the main purpose, or one of the main purposes, of which is the obtaining of a tax advantage (within the meaning of section 1139 of CTA 2010).

“Arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).

3

In section 51 of CTA 2009 (trade profits: relationship between rules prohibiting and allowing deductions)—

a

after subsection (1) insert—

1A

But, if the relevant permissive rule would allow a deduction in calculating the profits of a trade in respect of an amount which arises directly or indirectly in consequence of, or otherwise in connection with, relevant tax avoidance arrangements, that rule—

a

does not have priority under subsection (1)(a), and

b

is subject to any relevant prohibitive rule (and to the provisions mentioned in subsection (1)(b)).

b

after subsection (3) insert—

4

In this section “relevant tax avoidance arrangements” means arrangements—

a

to which the company carrying on the trade is a party, and

b

the main purpose, or one of the main purposes, of which is the obtaining of a tax advantage (within the meaning of section 1139 of CTA 2010).

“Arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).

4

In section 214 of CTA 2009 (property businesses: relationship between rules prohibiting and allowing deductions)—

a

after subsection (1) insert—

1A

But, if the relevant permissive rule would allow a deduction in calculating the profits of a property business in respect of an amount which arises directly or indirectly in consequence of, or otherwise in connection with, relevant tax avoidance arrangements, that rule—

a

does not have priority under subsection (1)(a), and

b

is subject to any relevant prohibitive rule (and to the provisions mentioned in subsection (1)(b)).

b

after subsection (3) insert—

3A

In this section “relevant tax avoidance arrangements” means arrangements—

a

to which the company carrying on the property business is a party, and

b

the main purpose, or one of the main purposes, of which is the obtaining of a tax advantage (within the meaning of section 1139 of CTA 2010).

“Arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).

5

The amendments made by this section have effect in relation to deductions in respect of amounts which arise directly or indirectly in consequence of, or otherwise in connection with—

a

arrangements which are entered into on or after 21 December 2012, or

b

any transaction forming part of arrangements which is entered into on or after that date.

6

But those amendments do not have effect where the arrangements are, or any such transaction is, entered into pursuant to an unconditional obligation in a contract made before that date.

7

“An unconditional obligation” means an obligation which may not be varied or extinguished by the exercise of a right (whether under the contract or otherwise).

79Close companies

Schedule 30 (which makes provision about close companies) has effect.

PART 2Oil

7

In this section—

“company” has the meaning given by section 1121 of CTA 2010,

“cross-boundary field” has the meaning given by section 10(9) of the Petroleum Act 1998,

“decommissioning expenditure” has the meaning given by section 81,

“Minister of the Crown” includes the Treasury,

“ring fence trade” has the same meaning as in Part 8 of CTA 2010 (see section 277 of that Act),

“the UK sector of a cross-boundary field” means that part of a cross-boundary field lying within the UK marine area (as defined by section 42 of the Marine and Coastal Access Act 2009), and

“unitisation agreement” has the meaning given by paragraph 1(2) of Schedule 17 to FA 1980.

8

Subsections (8) to (9) of section 30 of the Petroleum Act 1998 (which specifies when one body corporate is associated with another) apply for the purposes of this section as they apply for the purposes of that section.

81Meaning of “decommissioning expenditure”

1

In section 80 “decommissioning expenditure” means expenditure incurred in connection with—

a

demolishing any plant or machinery,

b

preserving any plant or machinery pending its reuse or demolition,

c

preparing any plant or machinery for reuse,

d

arranging for the reuse of any plant or machinery, or

e

the restoration of any land.

2

It is immaterial for the purposes of subsection (1)(b) whether the plant or machinery is reused, is demolished or is partly reused and partly demolished.

3

It is immaterial for the purposes of subsection (1)(c) and (d) whether the plant or machinery is in fact reused.

4

In subsection (1)(e) “restoration” includes landscaping.

5

The Treasury may by order amend this section.

6

An order under subsection (5) may include transitional provision and savings.

7

The power to make an order under subsection (5) is exercisable 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.

82Annual report

1

For each financial year the Treasury must prepare a report containing the information in subsection (2).

2

The information is—

a

the number of decommissioning relief agreements entered into in that year,

b

the total number of decommissioning relief agreements in force at the end of that year,

c

the number of payments made under any decommissioning relief agreements during that year, and the amount of each payment,

d

the total number of payments that have been made under any decommissioning relief agreements as at the end of that year, and the total amount of those payments, and

e

an estimate of the maximum amount liable to be paid under any decommissioning relief agreements.

3

The report for a financial year must be laid before the House of Commons as soon as is reasonably practicable after the end of that year.

4

In this section “decommissioning relief agreement” has the same meaning as in section 80.

5

This section has effect in relation to financial years ending on or after 31 March 2014.

the other company is treated as if it had received the tax relief it would receive if its profit were reduced in that way (so no repayment of tax is to be made by virtue of this subsection).

6

In this section—

“assessable profit” and “chargeable period” have the same meaning as in Part 1 of OTA 1975,

“company” has the meaning given by section 1121 of CTA 2010,

“decommissioning relief agreement” has the same meaning as in section 80, and

“the reference amount” means the reference amount (within the meaning of that section) that relates to the sum mentioned in subsection (1).

84Terminal losses accruing by virtue of another’s default

1

This section applies where—

a

a company defaults on a liability under—

i

a relevant agreement, or

ii

an abandonment programme,

to make a payment towards decommissioning expenditure in respect of an oil field,

b

in consequence of the default, another company (“the other company”) that has rights under a decommissioning relief agreement at the time of the default incurs decommissioning expenditure in respect of that oil field, and

c

but for paragraph 15 of Schedule 17 to FA 1980 (terminal losses), a sum (or a sum of a greater amount) would be payable to the other company under the decommissioning relief agreement.

2

Paragraph 15 of Schedule 17 to FA 1980 does not apply in relation to any allowable loss accruing to the other company from that oil field.

3

Any allowable unrelievable field loss (within the meaning of section 6 of OTA 1975) that—

a

consists of the unrelieved portion of an allowable loss within subsection (2), and

b

would (in the absence of this subsection) arise as a result of subsection (2),

is not to be regarded as arising.

4

Nothing in this section affects the operation of section 83(3) or (5).

5

In this section—

“abandonment programme” means an abandonment programme approved under Part 4 of the Petroleum Act 1998 (including such a programme as revised),

“company” has the meaning given by section 1121 of CTA 2010,

“decommissioning expenditure” has the same meaning as in section 80,

“decommissioning relief agreement” has the same meaning as in that section,

“oil field” has the same meaning as in OTA 1975,

“relevant agreement” has the meaning given by section 104(5)(a) of FA 1991, and

“unrelieved portion”, in relation to an allowable loss, is to be read in accordance with section 6 of OTA 1975.

85Claims under agreement not to affect oil allowance

1

This section applies where—

a

a company defaults on a liability under—

i

a relevant agreement, or

ii

an abandonment programme,

to make a payment towards decommissioning expenditure in respect of an oil field,

b

in consequence of the default, another company that has rights under a decommissioning relief agreement at the time of the default incurs decommissioning expenditure in respect of that oil field, and

c

by virtue of section 83, any expenditure incurred by that company (whether or not that decommissioning expenditure) is treated as having been used by that company or any other company (“the affected company”) to reduce its assessable profit in a chargeable period in a particular way.

2

If, in the absence of section 83, the assessable profit accruing to the affected company from an oil field in that chargeable period would be reduced under section 8(1) of OTA 1975, the amount of the oil allowance for the oil field utilised by the affected company in that chargeable period for the purposes of section 8 of that Act is to be determined as if section 83 did not apply.

3

In this section—

“abandonment programme” means an abandonment programme approved under Part 4 of the Petroleum Act 1998 (including such a programme as revised),

“company” has the meaning given by section 1121 of CTA 2010,

“decommissioning expenditure” has the same meaning as in section 80,

“decommissioning relief agreement” has the same meaning as in that section,

“oil field” has the same meaning as in OTA 1975, and

“relevant agreement” has the meaning given by section 104(5)(a) of FA 1991.

Decommissioning security settlements

86Removal of IHT charges in respect of decommissioning security settlements

1

In Chapter 3 of Part 3 of IHTA 1984 (settled property: settlements without interests in possession etc), section 58 (relevant property) is amended as follows.

2

In subsection (1), omit the “and” at the end of paragraph (ea) and before paragraph (f) insert—

eb

property comprised in a decommissioning security settlement; and

3

At the end insert—

6

For the purposes of subsection (1)(eb) above a settlement is a “decommissioning security settlement” if the sole or main purpose of the settlement is to provide security for the performance of obligations under an abandonment programme.

7

In subsection (6)—

“abandonment programme” means an abandonment programme approved under Part 4 of the Petroleum Act 1998 (including such a programme as revised);

“security” has the same meaning as in section 38A of that Act.

4

This section is treated as having come into force on 20 March 1993.

5

For the purposes of section 58 of IHTA 1984—

a

any reference in that section to Part 4 of the Petroleum Act 1998 has effect, in relation to any period before the coming into force of that Part, as a reference to Part 1 of the Petroleum Act 1987, and

b

section 38A of the Petroleum Act 1998 is to be treated as having come into force at the same time as this section.

6

There is to be no charge to tax under section 65 of IHTA 1984 if the only reason for such a charge would be that property ceases to be relevant property by virtue of the coming into force of this section.

87Loan relationships arising from decommissioning security settlements

1

In Part 8 of CTA 2010 (oil activities), after section 287 insert—

287ARestriction where debits or credits relate to decommissioning security settlement

1

No debits or credits are to be brought into account for the purposes of Part 5 of CTA 2009 (loan relationships) in respect of a company’s loan relationship so far as the loan relationship is in respect of property comprised in a decommissioning security settlement.

2

For the purposes of this section a settlement is a “decommissioning security settlement” if the sole or main purpose of the settlement is to provide security for the performance of obligations under an abandonment programme.

3

In subsection (2)—

“abandonment programme” means an abandonment programme approved under Part 4 of the Petroleum Act 1998 (including such a programme as revised), and

“security” has the same meaning as in section 38A of that Act.

2

In section 464 of CTA 2009 (priority of Part 5 for corporation tax purposes), in subsection (3)(e), for “and 287” substitute “to 287A”.

3

The amendments made by this section have effect in relation to accounting periods beginning on or after the day on which this Act is passed.

Decommissioning expenditure etc

88Decommissioning expenditure taken into account for PRT purposes

1

Section 330B of CTA 2010 (decommissioning expenditure taken into account for PRT purposes) is amended as follows.

2

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

, and

c

an amount equal to the appropriate fraction of the used-up amount of that expenditure is added under section 330A(2) in calculating the participator’s adjusted ring fence profits for an accounting period.

3

For subsection (2) substitute—

2

In calculating for the purposes of section 330(1) the amount of the participator’s adjusted ring fence profits for the accounting period, there is to be deducted the amount given by—

RP×AF×D

where—

RP is the relevant percentage of the decommissioning expenditure,

AF is the appropriate fraction, and

D is the PRT difference.

4

In subsection (3)—

a

before the definition of “the appropriate fraction” insert—

“the relevant percentage of the decommissioning expenditure” is the percentage of that expenditure that is the used-up amount referred to in subsection (1)(c),

b

in the definition of “the appropriate fraction”, omit “relevant”;

c

in the definition of “the PRT difference”, for “subsection (1)” substitute “subsection (1)(a)”.

5

In subsection (4), for “subsection (1)” substitute “subsection (1)(a)”.

6

In subsection (7)—

a

omit the definition of “the relevant accounting period”, and

b

at the end insert—

“the used-up amount”, in relation to any expenditure, has the same meaning as in section 330A (see subsection (3) of that section).

7

The amendments made by this section have effect in relation to expenditure incurred in connection with decommissioning carried out on or after the day on which this Act is passed.

89Miscellaneous amendments relating to decommissioning

1

Part 1 of Schedule 31 contains provision about expenditure on and under abandonment guarantees and abandonment expenditure.

2

Part 2 of Schedule 31 contains provision about calculating the profits of a ring fence trade carried on by a person who incurs expenditure on meeting another person’s decommissioning liabilities.

Capital allowances

90Expenditure on decommissioning onshore installations

1

Section 163 of CAA 2001 (meaning of “general decommissioning expenditure”) is amended as follows.

2

In subsection (1)—

a

the words after “if” become paragraph (a) of that subsection,

b

in that paragraph, for “subsections (3) to (4)” substitute “subsections (3), (3A) and (4)”, and

c

at the end of that paragraph insert

, or

b

the conditions in subsections (3B) and (4) are met.

3

After subsection (3A) insert—

3B

The expenditure must have been incurred on decommissioning plant or machinery—

a

which has been brought into use wholly or partly for the purposes of a ring fence trade, and

b

which—

i

is, or forms part of, a relevant onshore installation, or

ii

when last in use for the purposes of a ring fence trade, was, or formed part of, such an installation.

3C

In subsection (3B) “relevant onshore installation” means any building or structure which—

a

falls within any of sub-paragraphs (ii) to (iv) of section 3(4)(c) of OTA 1975,

b

is not an offshore installation, and

c

is or has been used for purposes connected with the winning of oil from an oil field any part of which lies within—

i

the boundaries of the territorial sea of the United Kingdom, or

ii

an area designated under section 1(7) of the Continental Shelf Act 1964.

4

In subsection (5)(a), for ““oil field” has” substitute ““oil” and “oil field” have”.

5

The amendments made by this section have effect in relation to expenditure incurred on decommissioning carried out on or after the day on which this Act is passed.

91Expenditure on decommissioning certain redundant plant or machinery

1

In section 164 of CAA 2001 (general decommissioning expenditure incurred before cessation of ring fence trade), after subsection (1B) insert—

1C

If the plant or machinery concerned is incidentally-acquired redundant plant or machinery (see subsection (1D)), it is to be regarded for the purposes of this section as having been brought into use for the purposes of the ring fence trade.

1D

Plant or machinery is “incidentally-acquired redundant plant or machinery” if—

a

it has not been brought into use for the purposes of the ring fence trade,

b

it forms part of a relevant installation (see subsection (1E)) which has been brought into use for the purposes of the ring fence trade,

c

at the time R acquired an interest in the relevant installation, the plant or machinery was not being used for any purposes, and

d

the acquisition of the interest in the plant or machinery was merely incidental to the acquisition of the interest in the relevant installation.

1E

For the purposes of subsection (1D)—

“relevant installation” means—

a

an offshore installation,

b

a submarine pipeline, or

c

a relevant onshore installation;

“offshore installation” and “submarine pipeline” have the same meaning as in Part 4 of the Petroleum Act 1998;

“relevant onshore installation” has the meaning given by section 163(3C).

2

The amendment made by this section has effect in relation to expenditure incurred on decommissioning carried out on or after the day on which this Act is passed.

92Expenditure on site restoration

1

Part 5 of CAA 2001 (mineral extraction allowances) is amended as follows.

2

In section 395 (qualifying expenditure), in subsection (1)(d), omit “post-trading”.

3

In section 403 (qualifying expenditure on acquiring a mineral asset), after subsection (2) insert—

2A

For the purposes of this section the reference to expenditure on acquiring a mineral asset does not include expenditure incurred on the restoration of a relevant site (within the meaning of section 416 or 416ZA).

4

In section 416 (expenditure on restoration within 3 years of ceasing to trade)—

a

in subsections (1)(a) and (6)(a), before “mineral extraction trade” insert “relevant”;

b

in subsection (5), at the end insert—

But it does not include decommissioning any plant or machinery (within the meaning of section 163).

c

after subsection (7) insert—

7A

Relevant mineral extraction trade” means a mineral extraction trade that is not a ring fence trade within the meaning of Part 8 of CTA 2010 (see section 277 of that Act).

d

the heading of section 416 becomes “Non-ring fence trades: expenditure on restoration within 3 years of ceasing to trade”.

5

In Chapter 5, after section 416 insert—

416ZARing fence trades: expenditure on site restoration

1

If—

a

a person who is carrying on, or has ceased to carry on, a ring fence trade incurs expenditure on the restoration of a relevant site,

b

that part of the restoration work to which the expenditure relates has been carried out, and

c

the expenditure has not been deducted in calculating for tax purposes the profits of any trade carried on by the person,

the net cost of the restoration is qualifying expenditure for the relevant period in which that part of the work to which the expenditure relates was carried out.

2

“Relevant period” means—

a

in the case of restoration work carried out while the person is carrying on the trade, a chargeable period, and

b

in the case of restoration work carried out after the person has ceased to carry on the trade, a notional accounting period.

For the meaning of “notional accounting period”, see section 416ZB.

3

The qualifying expenditure for a notional accounting period is treated as incurred on the last day of trading.

4

If the amount of expenditure incurred on any part of the restoration work carried out in a relevant period is disproportionate to that part of the restoration work, only so much of the net cost of the restoration as is proportionate to that part of the restoration work (the “allowable expenditure for the period”) is to be treated as qualifying expenditure for that period.

5

But subsection (4) does not prevent that part of the expenditure that is not allowable expenditure for the period from being treated as qualifying expenditure for a subsequent relevant period.

6

If any expenditure incurred by a person is qualifying expenditure under this section—

a

the whole of the expenditure on the restoration (not just the net cost) is not deductible in calculating the person’s income for any tax purposes, and

b

none of the amounts subtracted to produce the net cost is to be treated as the person’s income for any tax purposes.

7

“Restoration” includes—

a

landscaping,

b

in relation to land in the United Kingdom, the carrying out of any works required as a condition of granting planning permission for development relating to the winning of oil from an oil field,

c

in relation to land in the UK marine area, the carrying out of any works required in order to comply with—

i

an approved abandonment programme,

ii

a condition to which the approval of an abandonment programme is subject, or

iii

a requirement imposed by the Secretary of State, or an agreement made with the Secretary of State, in relation to a relevant site, and

d

in relation to land in a foreign sector of the continental shelf, the carrying out of any works required in order to comply with anything corresponding to a matter within paragraph (c)(i), (ii) or (iii) under the law of a territory outside the United Kingdom.

But it does not include decommissioning any plant or machinery (within the meaning of section 163).

8

A “relevant site” means—

a

the site of a source to the working of which the ring fence trade relates (or related), or

b

land used in connection with working such a source.

9

“The net cost of the restoration” means the expenditure incurred on the restoration less any amounts that—

a

are received, or are to be received, by the person, and

b

are attributable to the restoration of the relevant site.

10

All such adjustments are to be made, by way of discharge or repayment of tax or otherwise, as are necessary to give effect to this section.

11

In this section—

“abandonment programme”, “approval” and “approved” (in relation to an abandonment programme) have the same meaning as in Part 4 of the Petroleum Act 1998,

“foreign sector of the continental shelf” means an area within which rights are exercisable with respect to the sea bed and subsoil and their natural resources by a territory outside the United Kingdom,

“oil” and “oil field” have the same meaning as in Part 1 of OTA 1975,

“ring fence trade” has the same meaning as in Part 8 of CTA 2010 (see section 277 of that Act), and

“UK marine area” has the meaning given by section 42 of the Marine and Coastal Access Act 2009.

416ZB“Notional accounting period”

1

For the purposes of section 416ZA “notional accounting period”, in relation to a person (“the former trader”) who has ceased to carry on a ring fence trade, means each of the following periods—

a

the period that—

i

begins with the day following the last day on which the former trader carried on the ring fence trade, and

ii

ends with the day on which the first termination event subsequently occurs, and

b

each period that—

i

begins with the day following the last day of a period determined under paragraph (a) or this paragraph, and

ii

ends with the day on which the first termination event subsequently occurs.

2

But there are to be no notional accounting periods after the end of the post-cessation period (see subsection (4)).

3

“Termination event”, in relation to a notional accounting period, means each of the following—

a

the end of the period of 12 months beginning with the first day of the notional accounting period,

b

the occurrence of an accounting date of the former trader or, if there is a period for which the former trader does not make up accounts, the end of that period (but see subsections (6) and (7)), and

c

the end of the post-cessation period.

4

“The post-cessation period” means the period that—

a

begins with the day following the last day on which the former trader carried on the ring fence trade, and

b

ends with the day on which the appropriate authority is satisfied that the restoration of the relevant site has been completed.

5

In subsection (4) “the appropriate authority” means—

a

in the case of restoration falling within section 416ZA(7)(c), the Secretary of State, and

b

in any other case, such person or body as the Commissioners for Her Majesty’s Revenue and Customs may specify.

6

If the former trader—

a

carries on more than one trade,

b

makes up accounts of any of them to different dates, and

c

does not make up general accounts for the whole of the former trader’s activities,

subsection (3)(b) applies with reference to the accounting date of such one of the trades as the former trader may determine.

7

If the Commissioners for Her Majesty’s Revenue and Customs are of the opinion, on reasonable grounds, that a date determined by the former trader for the purposes of subsection (6) is inappropriate, the Commissioners may by notice direct that the accounting date of such other of the trades referred to in that subsection as appears to the Commissioners to be appropriate is to be used instead.

8

Expressions used in this section and in section 416ZA have the same meaning in this section as they do in that section.

6

In section 416B (first-year qualifying expenditure), in subsection (2), at the end insert “(within the meaning of section 403)”.

7

Part 4 of CTA 2010 (loss relief) is amended as follows.

8

In section 40 (ring fence trades: extension of periods for which relief may be given), in subsection (1)(b), for “403” substitute “by virtue of section 416ZA”.

9

In section 43 (claim period in case of ring fence or mineral extraction trades), in subsection (1)(b)—

a

after “416” insert “or 416ZA”, and

b

for the words from “restoration” to “trade” substitute “site restoration”.

10

The amendments made by this section have effect in relation to expenditure incurred on restoration carried out on or after the day on which this Act is passed.

93Restrictions on allowances for certain oil-related expenditure

Schedule 32 contains provision in connection with restrictions on allowances for certain oil-related expenditure.

PART 3Annual tax on enveloped dwellings

The charge to tax

94Charge to tax

1

A tax (called “annual tax on enveloped dwellings”) is to be charged in accordance with this Part.

2

Tax is charged in respect of a chargeable interest if on one or more days in a chargeable period—

a

the interest is a single-dwelling interest and has a taxable value of more than £2 million, and

b

a company, partnership or collective investment scheme meets the ownership condition with respect to the interest.

3

The tax is charged for the chargeable period concerned.

4

A company meets the ownership condition with respect to a single-dwelling interest on any day on which the company is entitled to the interest (otherwise than as a member of a partnership or for the purposes of a collective investment scheme).

5

A partnership meets the ownership condition with respect to a single-dwelling interest on any day on which a member of the partnership that is a company is entitled to the interest (as a member of the partnership).

6

A collective investment scheme meets the ownership condition with respect to a single-dwelling interest on any day on which the interest is held for the purposes of the scheme.

7

If a company is jointly entitled to a chargeable interest (as a member of a partnership or otherwise), then regardless of whether the company is entitled as a joint tenant or tenant in common (or, in Scotland, as a joint owner or owner in common) the ownership condition is regarded as met in relation to the whole chargeable interest.

8

The chargeable periods are—

entitlement in the capacity of a trustee or personal representative, or

b

entitlement as a beneficiary under a settlement.

3

Subsection (1)(b) does not apply where the contrary is specified.

4

In this section “settlement” has the same meaning as in Part 4 of FA 2003 (see paragraph 1 of Schedule 16 to that Act).

96Person liable

1

The chargeable person is liable to pay tax charged under this Part.

2

“The chargeable person” means—

a

in relation to tax charged by virtue of section 94(4), the company;

b

in relation to tax charged by virtue of section 94(5), the responsible partners.

3

In relation to tax charged by virtue of section 94(6) “the chargeable person” means—

a

if the collective investment scheme is a unit trust scheme, the trustee of the scheme;

b

if the collective investment scheme is an open-ended investment company, the body corporate referred to in section 236(2) of the Financial Services and Markets Act 2000;

c

in relation to an EEA UCITS which is not an open-ended investment company or unit trust scheme, the management company for that UCITS;

d

in any other case, the person who has day-to-day control over the management of the property subject to the scheme.

4

The liability of the responsible partners to pay tax charged on them under this Part is joint and several.

5

References in this section to “the responsible partners” are to all the persons who are members of the partnership concerned on the first day in the chargeable period on which the partnership meets the ownership condition with respect to the single-dwelling interest.

6

Tax charged under this Part is said to be “charged on” the chargeable person (and that person is said to be “chargeable to” the tax).

97Liability of persons jointly entitled

1

Subsection (2) applies if—

a

a company is within the charge for a chargeable period with respect to a single-dwelling interest by virtue of section 96(2)(a), and

b

one or more other persons are jointly entitled to the interest on the first day in that period on which the company is within the charge with respect to it.

2

The company and the other person or persons are jointly and severally liable for the tax charged for that period with respect to the interest (whether or not those other persons are also within the charge with respect to the interest on the day in question).

3

Subsection (4) applies if—

a

a company that is a member of a partnership is entitled (as a member of the partnership) to a single-dwelling interest on a day in a chargeable period, and

b

as a result, the responsible partners are within the charge with respect to the interest for the period.

4

If, on the first day in the chargeable period on which the responsible partners are within the charge a person (“P”) who is not one of the responsible partners is jointly entitled to the chargeable interest, P and the responsible partners are jointly and severally liable for the tax charged for the period with respect to the interest (whether or not P is also within the charge with respect to the interest on the day in question).

98Collective investment schemes: liability for and collection of tax

1

Subsection (2) applies where tax is charged for a chargeable period with respect to a single-dwelling interest by virtue of section 94(6).

2

The persons who are major participants in the scheme on the first day of the chargeable period on which the chargeable person is within the charge with respect to the interest are jointly and severally liable with the chargeable person for the tax charged.

3

Subsection (2) does not permit the recovery from a major participant of an amount exceeding the market value of the participant’s holding in the scheme.

4

The reference in subsection (3) to a participant’s holding in a collective investment scheme is to the interests or rights by virtue of which the participant takes part in the scheme.

5

Tax chargeable by virtue of section 94(6) may be recovered from the depositary (if any) of a collective investment scheme, but only up to the amount or value of any money or other property subject to the scheme that has been entrusted to the depositary for safekeeping.

6

The depositary—

a

may retain out of any money entrusted to it as mentioned in subsection (5) enough money to pay that tax, and

b

is entitled to be fully reimbursed by the participants in the scheme (by that method or another) for amounts recovered under subsection (5).

7

In this section—

a

“depositary”, in relation to a collective investment scheme (other than a unit trust scheme), has the meaning given by section 237(2) of the Financial Services and Markets Act 2000;

b

“major participant”, in relation to a collective investment scheme, is to be read in accordance with section 136(4);

c

“participant”, in relation to a collective investment scheme, is to be read in accordance with section 235 of the Financial Services and Markets Act 2000.

8

For the purposes of this Part “market value” is to be determined as for the purposes of TCGA 1992 (see, particularly, section 272 of that Act).

99Amount of tax chargeable

1

The amount of tax charged for a chargeable period with respect to a single-dwelling interest is stated in subsection (2) or (3).

2

If the chargeable person is within the charge with respect to the single-dwelling interest on the first day of the chargeable period, the amount of tax charged is equal to the annual chargeable amount.

3

Otherwise, the amount of tax charged is equal to the relevant fraction of the annual chargeable amount.

4

The annual chargeable amount for a single-dwelling interest and a chargeable period is determined in accordance with the following table, by reference to the taxable value of the interest on the relevant day.

Annual chargeable amount	Taxable value of the interest on the relevant day
£15,000	More than £2 million but not more than £5 million.
£35,000	More than £5 million but not more than £10 million.
£70,000	More than £10 million but not more than £20 million.
£140,000	More than £20 million.

5

The “relevant day” is—

a

for the purposes of subsection (2), the first day of the chargeable period;

b

for the purposes of subsection (3), the first day in the chargeable period on which the chargeable person is within the charge with respect to the interest.

6

The relevant fraction is—

NY math

where—

“N” is the number of days from (and including) the relevant day to the end of the chargeable period;

“Y” is the number of days in the chargeable period.

7

a

section 100 (interim relief), and

b

section 106 (adjustment of amount chargeable).

the chargeable person is not within the charge with respect to the single-dwelling interest on the day of the claim.

6

Otherwise, amount B is the appropriate fraction of the annual chargeable amount for the single-dwelling interest.

For this purpose the annual chargeable amount is determined (under section 99(4)) on the basis that the day of the claim is the relevant day.

7

In subsection (6) “appropriate fraction” means—

XY math

where—

“X” is the number of days in the period beginning with the day of the claim and ending at the end of the chargeable period, and

“Y” is the number of days in the chargeable period.

8

In this section—

“day of the claim” means the day on which the return mentioned in subsection (2)(a), or notice of the amendment made under subsection (2)(b), is delivered to HMRC;

“pre-claim period” means the period—

beginning with the first day in the chargeable period mentioned in subsection (1) on which the chargeable person is within the charge with respect to the single-dwelling interest, and

ending with the day before the day of the claim.

9

See sections 105 and 106 for provision about the adjustment of the amount of tax charged.

101Indexation of annual chargeable amounts

1

If the consumer prices index for September in 2013 or any later year (“the later year”) is higher than it was for the previous September, section 99(4) applies in relation to chargeable periods beginning on or after 1 April in the year after the later year with the following amendments.

2

For each of the annual chargeable amounts stated in the table in section 99(4) (as it applies in relation to chargeable periods beginning in the previous 12 months) there is substituted the indexed amount.

3

“The indexed amount” is found by—

a

increasing the previous amount by the same percentage increase as the percentage increase in the consumer prices index, and

b

rounding down the result to the nearest multiple of £50.

4

In this section “consumer prices index” means the all items consumer prices index published by the Statistics Board.

5

The Treasury must, before 1 April 2014 and before each subsequent 1 April, make an order stating the amounts that by virtue of this section are to be the annual chargeable amounts for chargeable periods beginning on or after that date.

1

For the purposes of section 102—

a

the acquisition of a chargeable interest in a dwelling is a “substantial acquisition” only if the chargeable consideration for the acquisition is £40,000 or more;

b

the disposal of part (but not the whole) of a single-dwelling interest is a “substantial disposal” only if the chargeable consideration for the acquisition of the chargeable interest by the person acquiring it is £40,000 or more.

2

If the acquisition mentioned in subsection (1)(a) is a transaction between persons who are connected with each other or not acting at arm’s length, subsection (1)(a) applies as if the reference to the chargeable consideration for the acquisition were to the market value of the chargeable interest acquired.

3

If the disposal mentioned in subsection (1)(b) is a transaction between persons who are connected with each other or not acting at arm’s length, subsection (1)(b) applies as if the reference to the chargeable consideration for the acquisition in question were to the market value of the part of the single-dwelling interest disposed of.

4

The chargeable consideration for the acquisition mentioned in subsection (1)(a) is taken to include the chargeable consideration for any linked acquisition of a chargeable interest in or over the same dwelling.

5

The chargeable consideration for the transaction mentioned in subsection (1)(b) is taken to include the chargeable consideration for any linked disposal of part (but not the whole) of the single-dwelling interest concerned.

6

For the purposes of subsection (2) the market value of the chargeable interest acquired is taken to be the sum of the market values of that chargeable interest and any chargeable interest in or over the same dwelling that is acquired in a linked transaction.

7

For the purposes of subsection (3) the market value of the part of the single-dwelling interest disposed of is taken to be the sum of the market values of that chargeable interest and any chargeable interest in or over the same dwelling that is disposed of in a linked transaction.

8

For the purposes of this section two or more transactions are “linked” if they form part of a single scheme, arrangement or series of transactions between the same vendor and purchaser or, in either case, persons connected with them.

9

In this section “chargeable consideration”, “purchaser” and “vendor” have the same meaning as in Part 4 of FA 2003.

10

In this section references to a disposal of part of a single-dwelling interest include the grant of a chargeable interest out of the single-dwelling interest.

104No double charge

Tax in respect of a given single-dwelling interest is charged only once for any chargeable day even if more than one person is “the chargeable person” with respect to the tax charged.

Adjustment of amount charged

105“Adjusted chargeable amount”

1

In relation to a person on whom tax is charged for a chargeable period with respect to a single-dwelling interest, the “adjusted chargeable amount” is the total of the daily amounts for all the days in the period on which the chargeable person is within the charge with respect to the interest.

2

The daily amount for any such day (“the actual day”) is—

1Y×A math

where—

“Y” is the number of days in the chargeable period;

“A” is the annual chargeable amount for the single-dwelling interest, determined (under section 99(4)) on the basis that the actual day is the relevant day.

106Adjustment of amount chargeable

7

The Treasury may by regulations provide that any other description of interest or right in or over a dwelling is an exempt interest.

“non-residential land” means land that is not a dwelling or part of a dwelling;

b

references to a dwelling include a part of a dwelling.

109Different interests held in the same dwelling

1

Subsection (2) applies if on one or more days in a chargeable period—

a

a company is entitled to two or more single-dwelling interests in the same dwelling, or

(if P is a company) in relation to P as if P were on that day entitled to the scheme interest as well as P’s single-dwelling interest.

4

If on any day a single-dwelling interest in a dwelling is held for the purposes of a collective investment scheme (“the first scheme”) and another interest in the same dwelling is held for the purposes of another collective investment scheme (“the second scheme”) that is connected with the first scheme, this Part has effect—

a

in relation to the first scheme, as if both the interests were held on that day for the purposes of that scheme, and

b

in relation to the second scheme, as if both interests were held on that day for the purposes of that scheme.

A building or part of a building used for a purpose specified in section 116(2) or (3) of FA 2003 is not used as a dwelling for the purposes of subsection (1).

5

In this section—

“contract” includes any agreement (including, in the case of Scotland, missives of let not constituting a lease);

“substantially performed” has the same meaning as in section 44 of FA 2003.

114Power to modify meaning of “use as a dwelling”

1

The Treasury may by order amend this Part so as to specify cases where use of a building is to be use of a building as a dwelling for the purposes of section 112(1) or 113(1).

2

The reference in section 116(8)(a) of FA 2003 (power to amend section 116(2) and (3)) to “the purposes of subsection (1)” includes a reference to the purposes of sections 112(1) and 113(1).

4

This Part has effect in relation to the interests mentioned in paragraph (a) or (as the case may be) (b) of subsection (3) as if the main dwelling and the associated dwelling were, on the day in question, suitable for use as a single dwelling.

5

Subsection (4) does not apply if—

a

the day in question is, in relation to the interest in the main dwelling or the interest in the associated dwelling, relievable by virtue of a provision mentioned in subsection (6), or

b

the ownership condition is, by virtue of section 151 (charitable companies), regarded as not being met on that day with respect to one or other of those interests.

6

Those provisions are—

section 133 (property rental businesses);

section 134 (rental property: preparation for sale etc);

section 137 (dwellings opened to the public);

section 138 (property developers);

section 139 (property developers: exchange of dwellings);

section 141 (property traders);

section 143 (financial institutions acquiring dwellings in the course of lending);

section 145 (occupation by certain employees or partners);

section 148 (farmhouses);

section 150 (providers of social housing).

7

The reference in subsection (3)(a) to a person connected with the company does not include a public body (as defined in section 153) or a body listed in section 154(2) (bodies established for national purposes).

8

The reference in subsection (3)(b) to a chargeable interest being held for the purposes of the same collective investment scheme includes a reference to a person connected with the scheme being entitled to the interest.

9

The associated dwelling has “separate access” only if—

a

there is access to the associated dwelling directly from a highway (in Scotland, a road) that the dwelling adjoins, or

b

the person entitled to possession of the associated dwelling has access to that dwelling from a highway (in Scotland, a road), exclusively by passing over land that the person is entitled to pass over by reason of one or more rights of way or other interests in land to which the person is separately entitled.

10

In this section—

in relation to a dwelling or dwellings, references to the “garden or grounds” are to land occupied or enjoyed with the dwelling or dwellings as a garden or grounds;

references to the person entitled to possession of a dwelling are to the person entitled to possession of the dwelling by reason of an estate or interest held by that person;

“separately entitled” means entitled otherwise than by reason of a chargeable interest in or over the main dwelling.

117Dwellings in the same building

1

Two parts of a building are “linked dwellings” if—

a

each of them counts as a dwelling,

b

there is private access between the two dwellings,

c

the two parts of the building are not (together) used or suitable for use as a single dwelling, and

d

the common ownership condition and the use condition are met.

2

The common ownership condition is that—

a

a company is entitled to a chargeable interest in one of the dwellings, and the company or a person connected with the company is entitled to a chargeable interest in the other dwelling, or

b

a chargeable interest in one of the dwellings is held for the purposes of a collective investment scheme, and a chargeable interest in the other dwelling is held for the purposes of the same collective investment scheme.

(It does not matter whether or not the interests are held for the same title.)

3

If on a day in a chargeable period (“the day in question”) two parts of a building constitute linked dwellings, this Part has effect in relation to the interests mentioned in paragraph (a) or (as the case may be) (b) of subsection (2) as if the two parts were, on the day in question, suitable for use as a single dwelling.

4

Subsection (3) does not apply if—

a

the day in question is, in relation to a chargeable interest mentioned in subsection (2)(a) or (as the case may be) (2)(b), relievable by virtue of a provision mentioned in subsection (5), or

b

(in a case where paragraph (a) of subsection (2) applies) the ownership condition is, by virtue of section 151 (charitable companies), regarded as not being met on that day with respect to one or other of the chargeable interests mentioned in that paragraph.

5

Those provisions are—

section 133 (property rental businesses);

section 134 (rental property: preparation for sale etc);

section 137 (dwellings opened to the public);

section 138 (property developers);

section 139 (property developers: exchange of dwellings);

section 141 (property traders);

section 143 (financial institutions acquiring dwellings in the course of lending);

section 145 (occupation by certain employees or partners);

section 148 (farmhouses);

section 150 (providers of social housing).

6

The reference in subsection (2)(a) to a person connected with the company does not include a public body (as defined in section 153) or a body listed in section 154(2) (bodies established for national purposes).

7

If two dwellings in a building (dwelling A and dwelling B) are treated under this section as suitable for use as a single dwelling, and dwelling B and a third dwelling in the building (“dwelling C”) are treated under this section as suitable for use as a single dwelling, all three are treated as suitable for use as a single dwelling (and so on).

118Section 117: supplementary

the date on which the disposal is completed, or

b

any alternative date the Commissioners for Her Majesty’s Revenue and Customs may specify by regulations.

122Contract and conveyance: the purchaser

1

This section applies where a person (“P”) enters into a contract under which—

a

P is to acquire a relevant chargeable interest, and

b

the acquisition is to be completed by a conveyance.

2

P is not regarded as acquiring any chargeable interest by reason of entering into the contract.

3

If the contract is substantially performed without having been completed, this Part has effect as if the substantial performance of the contract were the completion of the acquisition provided for by the contract.

4

Accordingly, where subsection (3) applies and the contract is subsequently completed by a conveyance, that completion is not treated for the purposes of section 102 (taxable value) as effecting the acquisition of a chargeable interest.

5

Where subsection (3) applies and—

a

the contract is afterwards rescinded or annulled, or

b

d

“relevant chargeable interest” means a chargeable interest in or over land that consists of or includes a dwelling;

e

“substantially performed” has the same meaning as in section 44 of FA 2003.

123Contract and conveyance: the vendor

1

This section applies where a person (“V”) enters into a contract under which—

a

V is to dispose of a relevant chargeable interest, and

b

c

the Rates (Northern Ireland) Order 1977 (S.I. 1977/2157 (N.I. 28)) (see Article 25B of that Order).

4

In this section “building” includes a part of a building.

125Dwellings produced from other dwellings

1

This section applies where an existing building that is a dwelling or dwellings (“the old dwelling” or “the old dwellings”) becomes a different dwelling or dwellings (“new” dwellings) as a result of structural alteration.

2

Any question as to whether or not a person has a single-dwelling interest at any time either in the old dwelling or dwellings or in a new dwelling is determined on the assumption that the old dwelling or dwellings cease to exist, and any new dwelling come into existence, only when the conversion is completed.

3

The day after the conversion is completed is a valuation date in the case of any single-dwelling interest in a new dwelling.

4

References to when the conversion is completed are to the end of the day on which the new dwelling is treated as having come into existence (or the first day on which all the new dwellings are treated as having come into existence) for the purposes of—

a

Part 1 of the Local Government Finance Act 1992 (council tax: England and Wales) (see section 17 of that Act), or

b

Part 2 of that Act (council tax: Scotland) (see section 83 of that Act), or

c

the Rates (Northern Ireland) Order 1977 (S.I. 1977/2157 (N.I. 28)) (see Article 25B of that Order).

5

In this section “building” includes a part of a building.

126Demolition of a dwelling

1

This section and sections 127 to 129 apply where a building that is a dwelling (“the old dwelling”) is demolished after 1 April 2013.

2

Except so far as express provision to the contrary is made in sections 127 to 129, any question as to whether a person has a single-dwelling interest in the dwelling, and any question as to the taxable value of such an interest, is determined as if the dwelling had not been demolished.

3

For the purposes of subsection (1) the demolition of a building is treated as having occurred after 1 April 2013 if a day after 1 April 2013 is the first day on which—

a

the demolition has begun, and

b

as a result, the building is no longer suitable for use as a dwelling.

4

In this section “building” includes a part of a building.

the reference to the construction of a dwelling or dwellings on that site is to the construction of a dwelling or dwellings wholly or partly on the site.

Part 2 of that Act (council tax: Scotland) (see section 83 of that Act), or

c

the Rates (Northern Ireland) Order 1977 (S.I. 1977/2157 (N.I. 28)) (see Article 25B of that Order).

the reference to the construction of a dwelling on that site is to the construction of a dwelling wholly or partly on the site.

130Conversion of dwelling for non-residential use

1

This section applies where a building or part of a building—

a

has been suitable for use as a dwelling, and

b

is altered for the purpose of making it suitable for use otherwise than as a dwelling.

2

The question whether or not the alterations make the building or part unsuitable for use as a dwelling is one of fact (but see subsection (3)).

3

The building or part will not be regarded as having become unsuitable for use as a dwelling as a result of the alterations at any time unless by that time any planning permission or development consent required for the alterations has been granted (and the alterations have been made in accordance with any such permission or consent).

4

In this section “planning permission” has the meaning given by the relevant planning enactment.

5

“The relevant planning enactment” means—

a

in relation to land in England and Wales, section 336(1) of the Town and Country Planning Act 1990;

b

in relation to land in Scotland, section 277(1) of the Town and Country Planning (Scotland) Act 1997;

c

in relation to land in Northern Ireland, Article 2(2) of the Planning (Northern Ireland) Order 1991 (S.I. 1991/1220 (N.I. 11)).

6

In this section “development consent” means development consent under the Planning Act 2008.

section 133 (property rental businesses);

section 134 (rental property: preparation for sale etc);

section 137 (dwellings opened to the public);

section 138 (property developers);

section 139 (property developers: exchange of dwellings);

section 141 (property traders);

section 143 (financial institutions acquiring dwellings in the course of lending);

section 145 (occupation by certain employees or partners);

section 148 (farmhouses);

section 150 (providers of social housing).

4

See also section 106 (adjustment of amount chargeable and claim for relief).

133Property rental businesses

1

A day in a chargeable period is relievable in relation to a single-dwelling interest if on that day the interest—

a

is being exploited as a source of rents or other receipts (other than excluded rents) in the course of a qualifying property rental business carried on by a person entitled to the interest, or

b

steps are being taken to secure that the interest will, without undue delay, be so exploited in the course of a qualifying property rental business that is being carried on, or is to be carried on, by a person entitled to the interest.

2

A day is not relievable by virtue of subsection (1) or section 134 in the case of a single-dwelling interest if on that day a non-qualifying individual is permitted to occupy the dwelling.

3

In this Part “qualifying property rental business” means a property rental business that is run on a commercial basis and with a view to profit.

4

A business is a “property rental business” for the purposes of subsection (3) if it is a property business as defined in Chapter 2 of Part 4 of CTA 2009, but—

a

the question whether or not a business is a property rental business for the purposes of subsection (3) is determined without reference to whether or not any profits of the business are chargeable to corporation tax (and section 204(2) of CTA 2009 is therefore disregarded), and

b

for the purposes of this subsection the “rents or other receipts” referred to in section 207(1) of CTA 2009 are taken not to include excluded rents

5

In subsection (1)(b) “without undue delay” means without delay except so far as delay is justified by commercial considerations or cannot be avoided.

6

In this Part “excluded rents” means rents within any of classes 2 to 6 in the table in section 605(2) of CTA 2010.

134Rental property: preparation for sale, demolition etc

1

A day (“day X”) on which a person (“P”) is entitled to a single-dwelling interest is relievable in relation to that interest if—

a

on day X the dwelling is unoccupied and any of the first to fourth conditions is met (see below),

b

day X is preceded by one or more days (“qualifying days”) that are relievable under section 133 in relation to the interest and on which P, or a relevant partner, was entitled to the interest, and

c

the days (if any) between day X and the last of the qualifying days to precede day X are all relievable under this section.

First condition

The first condition is that steps are being taken to secure that the interest will be sold without undue delay.

Second condition

The second condition is that—

steps are being taken to secure that the dwelling will be demolished without undue delay, and

if it is intended that a new dwelling will be constructed on the site of the existing dwelling, the intention is that it will be used in a relievable way.

Third condition

The third condition is that—

steps are being taken to secure that the dwelling will be converted into a different dwelling without undue delay, and

it is intended that the new dwelling will be used in a relievable way.

Fourth condition

The fourth condition is that steps are being taken to secure that the dwelling will be converted into a building other than a dwelling without undue delay.

2

A dwelling is “used in a relievable way” for the purposes of subsection (1) if the single-dwelling interest in question is exploited in such a way, or held in such a way and for such purposes, (or, as the case requires, the dwelling itself is exploited or used in such a way) that a day of such exploitation, ownership or use would be relievable under any of sections 133, 137, 145 and 148.

3

In this section—

“relevant partner”, where P is (on day X) entitled to the interest as a member of a partnership, means a person who was at the time in question carrying on the qualifying rental property business concerned as a member of that partnership;

“without undue delay” means without delay, except so far as delay is justified by commercial considerations or cannot be avoided.

occupation of any part of a dwelling is regarded as occupation of the dwelling.

The reference in subsection (4)(a) to profits or income arising from the scheme is to profits or income arising from the acquisition, holding, management or disposal of the property subject to the scheme.

6

For the purposes of subsection (1), section 1122 of CTA 2010 (as applied by section 172) has effect as if subsections (7) and (8) of that section (application of rules about connected persons to partnerships) were omitted.

7

In this section—

“relative” means brother, sister, ancestor or lineal descendant;

“settlement” and “settlor” have the same meaning as in Chapter 5 of Part 5 of ITTOIA 2005 (see section 620 of that Act).

8

In subsection (1)(d) “trustee” is to be read in accordance with section 1123(3) of CTA 2010 (“connected persons”: supplementary).

137Dwellings opened to the public

1

A day in a chargeable period is relievable in relation to a single-dwelling interest if the first or second condition is met on that day.

2

The first condition is that the dwelling is being exploited as a source of income in the course of a qualifying trade in the normal course of which the public are offered the opportunity to make use of, stay in or otherwise enjoy the dwelling as customers of the trade on least 28 days in any year.

3

The second condition is that steps are being taken to secure—

a

that the dwelling will (in that or a future chargeable period) be exploited as a source of income in the course of a qualifying trade such as is mentioned in subsection (2), and

b

that it will be so exploited without delay, except so far as delay is justified by commercial considerations or cannot otherwise be avoided.

4

In this section “qualifying trade” means a trade carried on on a commercial basis and with a view to profit.

5

For the purposes of this section persons are not taken to have an opportunity to make use of, stay in or otherwise enjoy a dwelling unless the areas that they are permitted to make use of, stay in or otherwise enjoy include a significant part of the interior of the dwelling.

6

The size (relative to the size of the whole dwelling), nature, and function of the area or areas concerned are to be taken into account in determining whether they form a significant part of the interior of the dwelling.

138Property developers

1

A day in a chargeable period is relievable in relation to a single-dwelling interest if on that day—

a

a person carrying on a property development trade (“the property developer”) is entitled to the interest, and

b

the interest is held exclusively for the purpose of developing and reselling the land in the course of the trade.

2

If the property developer holds an interest for the purpose mentioned in subsection (1)(b), any additional purpose the property developer may have of exploiting the interest as a source of rents or other receipts in the course of a qualifying property rental business (after developing the land and before reselling it) is treated as not being a separate purpose in applying the test in subsection (1)(b).

3

A day is not relievable by virtue of subsection (1) if on the day a non-qualifying individual is permitted to occupy the dwelling.

4

In this Part “property development trade” means a trade that—

a

consists of or includes buying and developing for resale residential or non-residential property, and

b

is run on a commercial basis and with a view to profit.

5

In this section references to development include redevelopment.

6

Subsection (7) applies if—

1

A day in a chargeable period is relievable in relation to a single-dwelling interest if on that day—

a

a person carrying on a property trading business is entitled to the interest, and

b

the interest is held as stock of the business and for the sole purpose of resale in the course of the business.

2

A single-dwelling interest in a dwelling is taken not to be held for the sole purpose of resale in the course of a property trading business at any time when a non-qualifying individual is permitted to occupy the dwelling.

3

In this Part “property trading business” means a business that—

a

consists of or includes activities in the nature of a trade of buying and selling dwellings, and

b

is carried on on a commercial basis and with a view to profit.

A day in a chargeable period is relievable in relation to a single-dwelling interest if matters stand as follows on that day—

a

a financial institution carrying on a business that involves the lending of money is entitled to the interest,

b

the financial institution has acquired the interest in the course of that business and in connection with those lending activities, and

c

the interest is held with the intention that it will be sold in the course of that business without delay (except so far as delay is justified by commercial considerations or cannot be avoided).

2

A single-dwelling interest in a dwelling is taken not to be held with the intention mentioned in subsection (1)(c) at any time when a non-qualifying individual is permitted to occupy the dwelling.

3

In this Part (except where otherwise stated) “financial institution” has the meaning given by section 564B of ITA 2007; but for this purpose section 564B(1) is to be read as if paragraph (d) of that subsection were omitted.

if the financial institution carried on the business mentioned in subsection (1)(a) in partnership, another member of the partnership is entitled to the interest.

4

Subsection (5) applies if—

1

A day in a chargeable period is a relievable if matters stand as follows on that day—

a

a person (“P”) is entitled to a single-dwelling interest,

b

P, or a relevant group member, carries on a qualifying trade,

c

the interest is held for the purpose of making the dwelling available to one or more qualifying employees or qualifying partners for use as living accommodation, and

d

the dwelling is, or is to be, made available as mentioned in paragraph (c) for purposes that are solely or mainly purposes of the trade.

2

“Qualifying trade” means a trade that is carried on on a commercial basis and with a view to profit.

3

In this section references to making a dwelling available to a qualifying employee or qualifying partner include making it available to persons who are to share the accommodation with such an individual as their family.

4

Where P is a company, “a relevant group member” means a company which is a member of the same group as P for the purposes mentioned in paragraph 1(2) of Schedule 7 to FA 2003 (stamp duty land tax: group relief).

a dwelling that is linked to the relevant dwelling, as described in section 117(1).

6

In this section references to employment include the holding of an office.

7

For the purposes of subsections (1)(c) and (2)(a)(iii) persons who are entitled to a chargeable interest as beneficial joint tenants (or, in Scotland, as joint owners) are taken to be entitled to the chargeable interest as beneficial tenants in common (or, in Scotland, as owners in common) in equal shares.

147Meaning of “10% or greater share in a company”

1

This section applies for the purposes of section 146.

2

An individual (“P”) is taken to be entitled to a 10% or greater share in a company (“C”) if P possesses (directly or indirectly) or is entitled to acquire—

a

10% or more of the share capital of C,

b

10% or more of the issued share capital of C,

c

10% or more of the voting power in C,

d

so much of the issued share capital of C as would, on the assumption that the whole of the income of C were distributed among the participators, entitle P to receive 10% or more of the amount so distributed, or

e

such rights as would entitle P, in the event of the winding up of C or in any other circumstances, to receive 10% or more of the assets of C which would then be available for distribution among the participators.

3

Any rights that P or any other person has as a loan creditor are to be disregarded for the purposes of the assumption in subsection (2)(d).

4

For the purposes of subsection (2) a person is treated as entitled to acquire anything which the person—

a

is entitled to acquire at a future date, or

b

will at a future date be entitled to acquire.

5

If a person—

a

possesses any rights or powers on behalf of another person (“A”), or

b

may be required to exercise any rights or powers on A’s direction or behalf,

those rights or powers are to be attributed to A.

6

The following are also to be attributed to a person—

a

the rights and powers of any company of which the person has, or the person and associates of the person have, control;

b

the rights and powers of any two or more companies within paragraph (a);

c

the rights and powers of any associate of the person (or of any two or more associates of the person).

7

The rights and powers which are to be attributed under subsection (6)—

a

include those attributed to a company or associate under subsection (5), but

b

do not include those attributed to an associate under subsection (6).

8

A person who does not meet the conditions in subsection (2) is nevertheless treated as having a 10% or greater share in a company if the person exercises, is able to exercise or is entitled to acquire, direct or indirect control over the company’s affairs.

9

In this section—

“associate” has the same meaning as in Part 10 of CTA 2010 (see section 448 of that Act); but for this purpose section 448 is to be read as if the words “or partner” were omitted in subsection (1)(a);

“control” has the same meaning as in that Part (see section 450 of that Act);

“loan creditor” has the same meaning as in that Part (see section 453 of that Act);

“participator” has the same meaning as in that Part (see section 454 of that Act).

with a view to profit.

4

In this section—

“farming” has the same meaning as in the Corporation Tax Acts (see section 1125 of CTA 2010), except that in this section “farming” includes market gardening;

“market gardening” has the same meaning as in the Corporation Tax Acts (see section 1125(5) of CTA 2010).

a person connected with such a person, and

d

a person who is entitled to the single-dwelling interest in the farmhouse on the day mentioned in section 148(1) was entitled to that interest.

4

A person occupying part of a dwelling is regarded as occupying the dwelling for the purposes of this section and section 148.

The first condition is that the activities undertaken for carrying out the primary purposes of the charitable company include, or normally include, opening the dwelling to the public.

The second condition is that the dwelling is being exploited through commercial activities that involve, or normally involve, opening the dwelling to the public.

The third condition is that steps are being taken—

to secure that the first or second condition will be met without undue delay, or

to secure that the single-dwelling interest will be sold without undue delay.

6

In subsection (5)—

a

“opening the dwelling to the public” means offering the public the opportunity to make use of, stay in or otherwise enjoy, on at least 28 days in any year, areas that constitute a significant part of the interior of the dwelling or of the dwelling’s garden or grounds;

b

“without undue delay” means without delay, except so far as delay is justified by commercial considerations or for the sake of a primary purpose of the charitable company.

7

For the purposes of subsection (6)(a), the size (relative to the size of the whole dwelling or of the whole garden or grounds), nature, and function of the areas concerned are to be taken into account in determining whether they form a significant part of the interior of the dwelling or (as the case may be) of the garden or grounds.

8

For the purposes of subsection (3)(a)—

a

“connected” means connected in a matter relating to the structure, administration or control of the charitable company, and

b

section 172 does not apply.

152Section 151: supplementary

1

In section 151 “associate”, in relation to the donor, means any of the following—

a

an individual (“a connected person”) who is connected with the donor,

b

an individual who is the settlor in relation to a settlement of which a trustee is (in the capacity of trustee) connected with the donor,

c

the spouse or civil partner of a connected person or of a relevant settlor,

d

a relative of a connected person or of a relevant settlor, or the spouse or civil partner of a relative of a connected person or of a relevant settlor,

e

a relative of the spouse or civil partner of a connected person or of a relevant settlor, or

f

the spouse or civil partner of a person falling within paragraph (e).

2

In subsection (1)—

“relative” means brother, sister, ancestor or lineal descendant;

“settlement” and “settlor” have the same meaning as in Chapter 5 of Part 5 of ITTOIA 2005 (see section 620 of that Act).

3

In subsection (1)(b) “trustee” is to be read in accordance with section 1123(3) of CTA 2010 (“connected persons”: supplementary).

4

For the purposes of section 151 occupation of any part of a dwelling is regarded as occupation of the dwelling.

5

For the purposes of section 151(3)—

a

the making of a gift is disregarded if it is made before the day on which this Act is passed, and

b

an agreement to make a gift is disregarded if the agreement is made before that day.

6

Arrangements entered into before the day on which this Act is passed are disregarded for the purposes of section 151(3) unless a material alteration has been made to them on or after that date.

“Material alteration” means an alteration affecting anything in the arrangements that relates to the individual’s having (at any time), or potentially having, permission to occupy the dwelling.

7

References in section 151 and this section to a gift include the disposal of an asset for consideration of an amount or value which is less than the market value of the asset.

8

In section 151 and this section “arrangements” includes any scheme, arrangement or understanding of any kind, whether or not legally enforceable, involving a single transaction or two or more transactions.

153Public bodies

1

A public body is not regarded as a company for the purposes of this Part.

2

In this section—

a

“public body” means any body corporate that is a public body for the purposes of section 66 of FA 2003, and

b

references to a public body accordingly include a company such as is mentioned in subsection (5) of that section (companies wholly owned by the listed bodies).

3

The power of the Treasury to prescribe persons by an order under section 66(4) of FA 2003 may be exercised so as to make different provision for purposes relating to annual tax on enveloped dwellings and stamp duty land tax.

4

In paragraph (b) of subsection (2) “company” means a company as defined by section 1 of the Companies Act 2006 (and subsection (1) is to be ignored in interpreting that paragraph).

154Bodies established for national purposes

1

A body listed in subsection (2) is not regarded as a company for the purposes of this Part.

2

The bodies are—

the Historic Buildings and Monuments Commission for England;

the Trustees of the British Museum;

the Trustees of the National Heritage Memorial Fund;

the Trustees of the Natural History Museum.

155Dwelling conditionally exempt from inheritance tax

1

Subsection (2) applies to a single-dwelling interest if—

a

the whole or part of the dwelling has been designated under section 31 of IHTA 1984 (buildings of outstanding historic or architectural interest etc),

b

an undertaking has been made with respect to the dwelling under section 30 of that Act (conditionally exempt transfers), and

c

a transfer of value is exempt from inheritance tax by virtue of that designation and that undertaking.

2

The taxable value of the single-dwelling interest on any day is taken to be zero if no chargeable event has occurred with respect to the dwelling in the time between the transfer of value and the beginning of that day.

3

Subsection (4) applies to a single-dwelling interest if—

a

the whole or part of the dwelling has been designated under section 31 of IHTA 1984,

b

an undertaking has been made with respect to the dwelling under section 78 of that Act (settled property: conditionally exempt occasions), and

c

a transfer of property or other event is a conditionally exempt occasion by virtue of that designation and that undertaking.

4

The taxable value of the single-dwelling interest on any day is taken to be zero if no chargeable event has occurred with respect to the dwelling in the time between the conditionally exempt occasion and the beginning of that day.

5

In this section—

“chargeable event” means an event which is a chargeable event under section 32 of IHTA 1984;

“conditionally exempt occasion” is to be read in accordance with section 78(2) of that Act;

“financial institution” has the meaning given by section 73BA of FA 2003;

“the first transaction” has the same meaning as in section 71A or (as the case requires) 72 of FA 2003;

“further transaction” has the same meaning as in section 71A of FA 2003;

“the leasehold interest” means the interest granted to the lessee under the second transaction;

“the second transaction” has the same meaning as in section 71A or (as the case requires) 72 of FA 2003.

8

The reference in subsection (1) to a major interest in land is to be read in accordance with section 117 of FA 2003.

9

Where the lessee is an individual, references in subsections (5) and (6) to the lessee are to be read, in relation to times after the death of the lessee, as references to the lessee’s personal representatives.

10

In relation to transactions in relation to which section 29 of the Scotland Act 2012 (disapplication of UK stamp duty land tax) has effect, this section has effect as if—

a

in subsection (1) the words “or section 72 of that Act (land in Scotland sold to financial institution and leased to person)” were omitted, and

b

in subsection (7) the words, “or (as the case requires) section 72” were omitted (in each place).

Administration and payment of tax

158Responsibility for collection and management

The Commissioners for Her Majesty’s Revenue and Customs are responsible for the collection and management of annual tax on enveloped dwellings.

159Annual tax on enveloped dwellings return

1

Where tax is charged on a person for a chargeable period with respect to a single-dwelling interest the person must deliver a return for the period with respect to the interest.

2

A return under subsection (1) must be delivered by the end of the period of 30 days beginning with first day in the period on which the person is within the charge with respect to the interest.

3

If the first day in the chargeable period on which the person is within the charge with respect to the interest (“day 1”) is a valuation date only because of section 124 (new dwellings) or section 125 (dwellings produced from other dwellings)—

a

subsection (2) does not apply, and

b

the return must be delivered by the end of the period of 90 days beginning with day 1.

4

A return under this section must be delivered to an officer of Revenue and Customs, and is called an “annual tax on enveloped dwellings return”.

160Return of adjusted chargeable amount

1

A person on whom tax is charged for a chargeable period with respect to a single-dwelling interest must deliver a further return for the period with respect to the interest if the first or second condition is met.

2

The return must be delivered by the end of the period of 30 days beginning with the first day of the period following the period for which the tax is charged (but see subsection (3)).

3

If the return is required because the second condition is met and the adjusted chargeable amount is affected by an event that has occurred after the end of the chargeable period mentioned in subsection (1), the return must be delivered by the end of the period of 30 days beginning with the day on which that event occurred.

4

The first condition is that—

a

the person has not made a claim under section 100 (interim relief) with respect to the interest for the chargeable period, and

b

the adjusted chargeable amount is greater than the amount charged under section 99 with respect to the single-dwelling interest for the period.

5

The second condition is that—

a

the person has made one or more claims under section 100 with respect to the interest for the chargeable period, and

b

the sum of amounts A and B, as calculated under that section, in connection with the last of those claims is less than the adjusted chargeable amount.

6

A return under this section must be delivered to an officer of Revenue and Customs, and is called a “return of the adjusted chargeable amount”.

1

Schedule 33 contains provision about returns, enquiries and related matters.

2

The Treasury may by regulations—

a

make any amendments of Schedule 33 that they may at any time think appropriate;

b

make any amendment of any other provision of this Part that may be necessary in consequence of provision under paragraph (a).

Part 2 contains provision about penalties.

165Collection and recovery of tax etc

b

if no notice is given under paragraph (a), whichever of those persons is designated by an officer of Revenue and Customs as the proper officer for those purposes.

10

See also section 153 (public bodies) and section 154 (bodies established for national purposes).

Any such nomination, or the revocation of such a nomination, has effect only after notice of the nomination, or revocation, has been given to an officer of Revenue and Customs.

Supplementary provisions

168Miscellaneous amendments and transitory provision

Schedule 35 contains—

a

miscellaneous amendments, and

b

provision about the chargeable period beginning on 1 April 2013.

169Orders and regulations

1

Orders and regulations under this Part are to be made by statutory instrument.

2

A statutory instrument containing an order or regulations made under this Part is subject to annulment in pursuance of a resolution of the House of Commons.

3

Subsection (2) does not apply to—

a

an instrument containing only an order under section 101(5), or

b

an instrument to which subsection (4) applies.

4

A statutory instrument containing (whether alone or with other provision) provision made under section 156(1) or 162(2) may not be made unless a draft of the instrument has been laid before and approved by a resolution of the House of Commons.

5

An order or regulations under this Part—

a

may make different provision for different purposes,

b

may include consequential or transitional provisions or savings.

Interpretation

170Meaning of “chargeable day” and “within the charge”

1

Any day on which the conditions in section 94(2) are met with respect to a single-dwelling interest is a “chargeable day” for that interest.

2

Where a day is a chargeable day as a result of subsection (1), the chargeable person is “within the charge” with respect to a single-dwelling interest on that day.

171References to the state of affairs “on” a day

In determining for the purposes of any provision of this Part whether or not a state of affairs obtains on a particular day, it is to be assumed that the state of affairs obtaining at the end of the day persisted throughout the day.

172Connected persons

1

Section 1122 of the Corporation Tax Act 2010 (connected persons) has effect for the purposes of this Part (except where otherwise stated).

2

For the purposes of this Part a person is taken to be connected with a collective investment scheme if the person is a participant in the scheme who—

a

is entitled to a share of at least 50% either of all the profits or income arising from the scheme or of any profits or income arising from the scheme that may be distributed to participants, or

b

would in the event of the winding up of the scheme be entitled to 50% or more of the assets of the scheme that would then be available for distribution among the participants.

3

The reference in subsection (2) to a collective investment scheme does not include a unit trust scheme; but see section 1123(2) of CTA 2010 (provision about the application of rules about connected persons to unit trust schemes).

4

The reference in subsection (2)(a) to profits or income arising from the scheme is to profits or income arising from the acquisition, holding, management or disposal of the property subject to the scheme.

5

For the purposes of subsection (2) a person is taken to have any rights and powers that the person—

a

is entitled to acquire at a future date, or

b

will at a future date be entitled to acquire.

6

For the purposes of subsection (2) the rights and powers of any associate of a person (or of any two or more associates of a person) are to be attributed to the person.

7

In this section “associate” has the same meaning as in Part 10 of CTA 2010 (see section 448 of that Act); but for this purpose section 448 is to be read as if the words “or partner” were omitted in subsection (1)(a).

173Connected persons: cell companies

In this Part—

“chargeable day” (in relation to a single-dwelling interest) is to be read in accordance with section 170;

“chargeable interest” has the meaning given by section 107;

“the chargeable person” has the meaning given by section 96(2) or (3);

“closure notice” has the meaning given by paragraph 16 of Schedule 33;

“collective investment scheme” has the same meaning as in Part 17 of the Financial Services and Markets Act 2000 (see section 235 of that Act);

“company” has the meaning given by section 166(1);

“completion”, in Scotland, means—

in relation to a lease, when it is executed by the parties (that is to say, by signing) or constituted by any means,

in relation to any other transaction, the settlement of the transaction;

“discovery assessment” has the meaning given by paragraph 21 of Schedule 33;

“EEA UCITS” has the same meaning as in Part 17 of the Financial Services and Markets Act 2000 (see section 237 of that Act);

“excluded rents” has the meaning given by section 133(6);

“farming” has the meaning given by section 148(4);

“filing date”, in relation to an annual tax on enveloped dwellings return or a return of the adjusted chargeable amount, has the meaning given by paragraph 58 of Schedule 33;

“financial institution” has the meaning given by section 143 (except where otherwise stated);

“HMRC” means Her Majesty’s Revenue and Customs;

“HMRC determination” has the meaning given by paragraph 18 of Schedule 33;

“jointly entitled” means—

in England and Wales, beneficially entitled as joint tenants or tenants in common,

in Scotland, entitled as joint owners or owners in common,

in Northern Ireland, beneficially entitled as joint tenants, tenants in common or coparceners;

“land” includes—

buildings and structures, and

land covered by water;

“market value” has the meaning given by section 98(8);

“notice of enquiry” has the meaning given by paragraph 8 of Schedule 33;

“open-ended investment company” has the same meaning as in Part 17 of the Financial Services and Markets Act 2000 (see section 236(1) of that Act);

“participant”, in relation to a collective investment scheme, has the meaning given by section 98(7);

“partnership” has the meaning given by section 167;

“property development trade” has the meaning given by section 138(4);

“property rental business” has the meaning given by section 133(4);

“property trading business” has the meaning given by section 141(3);

“qualifying property rental business” has the meaning given by section 133(3);

“self assessment” has the meaning given by section 161(3);

“tax” means tax under this Part;

“trade” has the same meaning as in section 35 of CTA 2009 (and cognate expressions are to be read accordingly);

“unit trust scheme” has the same meaning as in Part 17 of the Financial Services and Markets Act 2000 (see section 237(1) of that Act).

2

In this Part—

references to the “adjusted chargeable amount”, in relation to a person on whom tax is charged for a chargeable period with respect to a single-dwelling interest, are to be read in accordance with section 105;

references to an “annual tax on enveloped dwellings return” are to be read in accordance with section 159(4);

references to the “daily amount” for a day are to be read in accordance with section 105(2);

references to “delivery”, in relation to an annual tax on enveloped dwellings return, are to be read in accordance with paragraph 2 of Schedule 33;

references to the “effective date” of an acquisition are to be read in accordance with section 121(4);

references to the “effective date” of a disposal are to be read in accordance with section 121(5);

references to a “major interest” in land are to be read in accordance with section 117 of FA 2003;

references to a “return of the adjusted chargeable amount” are to be read in accordance with section 160(6);

references to meeting the “ownership condition” are to be read in accordance with section 94(4) to (6);

references to being “within the charge” with respect to a single-dwelling interest are to be read in accordance with section 170.

PART 4Excise duties and other taxes

Inheritance tax

175Open- ended investment companies and authorised unit trusts

1

In section 65 of IHTA 1984 (settlements without interests in possession etc: charge when property ceases to be relevant property etc), after subsection (7) insert—

7A

Tax shall not be charged under this section by reason only that property comprised in a settlement becomes excluded property by virtue of section 48(3A)(a) (holding in an authorised unit trust or a share in an open-ended investment company is excluded property unless settlor domiciled in UK when settlement made).

2

The amendment made by this section is treated as having come into force on 16 October 2002.

176Treatment of liabilities for inheritance tax purposes

Schedule 36 makes provision in relation to the treatment of liabilities for the purposes of inheritance tax.

177Election to be treated as domiciled in United Kingdom

1

IHTA 1984 is amended as follows.

2

In section 267 (persons treated as domiciled in United Kingdom), at the end insert—

5

In determining for the purposes of this section whether a person is, or at any time was, domiciled in the United Kingdom, sections 267ZA and 267ZB are to be ignored.

3

After that section insert—

267ZAElection to be treated as domiciled in United Kingdom

1

A person may, if condition A or B is met, elect to be treated for the purposes of this Act as domiciled in the United Kingdom (and not elsewhere).

2

A person’s personal representatives may, if condition B is met, elect for the person to be treated for the purposes of this Act as domiciled in the United Kingdom (and not elsewhere).

3

Condition A is that, at any time on or after 6 April 2013 and during the period of 7 years ending with the date on which the election is made, the person had a spouse or civil partner who was domiciled in the United Kingdom.

4

Condition B is that a person (“the deceased”) dies and, at any time on or after 6 April 2013 and within the period of 7 years ending with the date of death, the deceased was—

a

domiciled in the United Kingdom, and

b

the spouse or civil partner of the person who would, by virtue of the election, be treated as domiciled in the United Kingdom.

5

An election under this section does not affect a person’s domicile for the purposes of section 6(2) or (3) or 48(4).

6

An election under this section is to be ignored—

a

in interpreting any such provision as is mentioned in section 158(6), and

b

in determining the effect of any qualifying double taxation relief arrangements in relation to a transfer of value by the person making the election.

7

For the purposes of subsection (6)(b) a qualifying double taxation relief arrangement is an arrangement which is specified in an Order in Council made under section 158 before the coming into force of this section (other than by way of amendment by an Order made on or after the coming into force of this section).

8

In determining for the purposes of this section whether a person making an election under this section is or was domiciled in the United Kingdom, section 267 is to be ignored.

267ZBSection 267ZA: further provision about election

1

For the purposes of this section—

a

references to a lifetime election are to an election made by virtue of section 267ZA(3), and

b

references to a death election are to an election made by virtue of section 267ZA(4).

2

A lifetime or death election is to be made by notice in writing to HMRC.

3

A lifetime or death election is treated as having taken effect on a date specified, in accordance with subsection (4), in the notice.

4

The date specified in a notice under subsection (3) must—

a

be 6 April 2013 or a later date,

b

be within the period of 7 years ending with—

i

in the case of a lifetime election, the date on which the election is made, or

ii

in the case of a death election, the date of the deceased’s death, and

c

meet the condition in subsection (5).

5

The condition in this subsection is met by a date if, on the date—

a

in the case of a lifetime election—

i

the person making the election was married to, or in a civil partnership with, the spouse or civil partner, and

ii

the spouse or civil partner was domiciled in the United Kingdom, or

b

in the case of a death election—

i

the person who is, by virtue of the election, to be treated as domiciled in the United Kingdom was married to, or in a civil partnership with, the deceased, and

ii

the deceased was domiciled in the United Kingdom.

6

A death election may only be made within 2 years of the death of the deceased or such longer period as an officer of Revenue and Customs may in the particular case allow.

7

Subsection (8) applies if—

a

a lifetime or death election is made,

b

a disposition is made, or another event occurs, during the period beginning with the time when the election is treated by virtue of subsection (3) as having taken effect and ending at the time when the election is made, and

c

the effect of the election being treated as having taken effect at that time is that the disposition or event gives rise to a transfer of value.

8

This Act applies with the following modifications in relation to the transfer of value—

a

subsections (1) and (6)(c) of section 216 have effect as if the period specified in subsection (6)(c) of that section were the period of 12 months from the end of the month in which the election is made, and

b

sections 226 and 233 have effect as if the transfer were made at the time when the election is made.

9

A lifetime or death election cannot be revoked.

10

If a person who made an election under section 267ZA(1) is not resident in the United Kingdom for the purposes of income tax for a period of four successive tax years beginning at any time after the election is made, the election ceases to have effect at the end of that period.

178Transfer to spouse or civil partner not domiciled in United Kingdom

1

Section 18 of IHTA 1984 (transfers between spouses or civil partners) is amended as follows.

2

In subsection (2) (transfer to spouse or civil partner not domiciled in United Kingdom), for “£55,000” substitute “the exemption limit at the time of the transfer,”.

3

After subsection (2) insert—

2A

For the purposes of subsection (2), the exemption limit is the amount shown in the second column of the first row of the Table in Schedule 1 (upper limit of portion of value charged at rate of nil per cent).

Table of rates of duty on wine and made-wine

PART 1Wine 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

82.18

Wine or made-wine of a strength exceeding 4 per cent but not exceeding 5.5 per cent

113.01

Wine or made-wine of a strength exceeding 5.5 per cent but not exceeding 15 per cent and not being sparkling

266.72

Sparkling wine or sparkling made-wine of a strength exceeding 5.5 per cent but less than 8.5 per cent

258.23

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

341.63

Wine or made-wine of a strength exceeding 15 per cent but not exceeding 22 per cent

355.59

PART 2Wine 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

28.22

Description of wine or made-wine	Rates of duty per hectolitre £
Wine or made-wine of a strength not exceeding 4 per cent	82.18
Wine or made-wine of a strength exceeding 4 per cent but not exceeding 5.5 per cent	113.01
Wine or made-wine of a strength exceeding 5.5 per cent but not exceeding 15 per cent and not being sparkling	266.72
Sparkling wine or sparkling made-wine of a strength exceeding 5.5 per cent but less than 8.5 per cent	258.23
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	341.63
Wine or made-wine of a strength exceeding 15 per cent but not exceeding 22 per cent	355.59

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	28.22

7

The amendments made by this section are treated as having come into force on 25 March 2013.

Tobacco

181Rates of tobacco products duty

1

For the table in Schedule 1 to TPDA 1979 substitute—

TABLE

1. Cigarettes

An amount equal to 16.5 per cent of the retail price plus £176.22 per thousand cigarettes

2. Cigars

£219.82 per kilogram

3. Hand-rolling tobacco

£172.74 per kilogram

4. Other smoking tobacco and chewing tobacco

£96.64 per kilogram

2

The amendment made by this section is treated as having come into force at 6 pm on 20 March 2013.

182Meaning of “tobacco products”

1

Section 1 of TPDA 1979 (tobacco products) is amended as follows.

2

In subsection (1), omit “, but does not include herbal smoking products”.

3

After that subsection insert—

1A

But a product is not a tobacco product for the purposes of this Act if—

a

the product does not contain any tobacco, and

b

the Commissioners are satisfied that—

i

the product is of a description that is used for medical purposes, and

ii

the product is intended to be used exclusively for such purposes.

4

In subsection (3), omit “but not including herbal smoking products”.

5

Omit subsection (6).

6

The amendments made by this section come into force on 1 January 2014.

Gambling

183Rates of gaming duty

1

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

TABLE

Part of gross gaming yield

Rate

The first £2,242,500

15 per cent

The next £1,546,000

20 per cent

The next £2,707,500

30 per cent

The next £5,714,500

40 per cent

The remainder

50 per cent

Part of gross gaming yield	Rate
The first £2,242,500	15 per cent
The next £1,546,000	20 per cent
The next £2,707,500	30 per cent
The next £5,714,500	40 per cent
The remainder	50 per cent

2

The amendment made by this section has effect in relation to accounting periods beginning on or after 1 April 2013.

in paragraph (b) for “£184” substitute “£188”.

5

The amendments made by this section have effect in relation to the carriage of passengers beginning on or after 1 April 2013.

186Air passenger duty: miscellaneous provision

1

In section 38 of FA 1994 (accounting for and payment of duty) after subsection (2) insert—

2A

Regulations may require a prescribed person to make, at prescribed times during a prescribed period, payments based on an estimate of what the person’s liability will be for duty charged in the period.

2B

The estimate and the amounts of the payments are to be determined in accordance with provision made by the regulations.

2C

The payments are to be treated as being payments on account of the person’s liability for duty charged in the period.

2D

The regulations must make provision for dealing with cases where this results in an overpayment of duty by providing for amounts—

a

to be repaid by the Commissioners, or

b

to be treated as having been paid on account of the person’s liability for duty charged in other periods,

or both.

2

In Part 2 of Schedule 5A to FA 1994 (territories etc) at the appropriate place insert “South Sudan”.

3

The amendment made by subsection (2) has effect in relation to the carriage of passengers beginning on or after 9 July 2011.

Vehicle excise duty

187VED rates for light passenger vehicles, light goods vehicles, motorcycles etc

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 “£220” substitute “£225”, and

b

in sub-paragraph (2A) (vehicle not covered elsewhere in Schedule with engine cylinder capacity not exceeding 1,549cc), for “£135” substitute “£140”.

3

In paragraph 1B (graduated rates of duty for light passenger vehicles)—

a

for the tables substitute—

TABLE 1Rates 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

115

125

140

150

130

140

150

165

165

175

165

175

275

285

175

185

325

335

185

200

465

475

200

225

610

620

225

255

830

840

255

—

1055

1065

TABLE 2Rates 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

95

105

130

140

115

125

140

150

130

140

150

165

165

175

165

175

190

200

175

185

210

220

185

200

250

260

200

225

270

280

225

255

465

475

255

—

480

490

CO2 emissions figure	Rate
(1)	(2)	(3)	(4)
Exceeding	Not exceeding	Reduced rate	Standard rate
g/km	g/km	£	£
130	140	115	125
140	150	130	140
150	165	165	175
165	175	275	285
175	185	325	335
185	200	465	475
200	225	610	620
225	255	830	840
255	—	1055	1065

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	95	105
130	140	115	125
140	150	130	140
150	165	165	175
165	175	190	200
175	185	210	220
185	200	250	260
200	225	270	280
225	255	465	475
255	—	480	490

b

in the sentence immediately following the tables, for paragraphs (a) and (b) substitute—

a

in column (3), in the last two rows, “270” were substituted for “465” and “480”, and

b

in column (4), in the last two rows, “280” were substituted for “475” and “490”.

4

In paragraph 1J (VED rates for light goods vehicles)—

a

in paragraph (a), for “£215” substitute “£220”, and

b

in paragraph (b), for “£135” substitute “£140”.

5

In paragraph 2(1) (VED rates for motorcycles)—

a

in paragraph (a), for “£16” substitute “£17”,

b

in paragraph (b), for “£36” substitute “£37”,

c

in paragraph (c), for “£55” substitute “£57”, and

d

in paragraph (d), for “£76” substitute “£78”.

6

The amendments made by this section have effect in relation to licences taken out on or after 1 April 2013.

188Not exhibiting licence: period of grace

1

In section 33 of VERA 1994 (not exhibiting licence), omit subsections (1B) to (1D).

2

After that section insert—

33ANot exhibiting licence: period of grace

1

A person is not guilty of an offence under subsection (1) or (1A) of section 33 by using or keeping a vehicle on a public road during any of the following periods.

First registration

The period of 14 days beginning with the day on which the vehicle is first registered under this Act.

Change of keeper

The period of 14 days beginning with the day on which a new licence or nil licence is issued for the vehicle because of a change in the person by whom the vehicle is being kept.

Renewal etc.

The period of 14 days following the time when a licence or nil licence for or in respect of the vehicle, or a relevant declaration applying to the vehicle, ceases to be in force, but only if an application for a licence or nil licence for or in respect of the vehicle to run from that time has been received before that time.

Replacement

The period beginning with the time when a licence or nil licence that is in force for or in respect of the vehicle is delivered to the Secretary of State with an application for a replacement licence, and ending with the time when the replacement licence is obtained.

2

For the purposes of this section—

a

there is a relevant declaration applying to a vehicle if the particulars and declaration required to be furnished and made by regulations under section 22(1D) have been furnished and made in relation to the vehicle in accordance with the regulations, and

b

the relevant declaration ceases to be in force if, after the particulars and declaration have been furnished and made the vehicle is used or kept on a public road (otherwise than under a trade licence).

3

In consequence of the provision made by subsections (1) and (2) omit—

a

section 147 of FA 2008, and

b

in regulation 6 of the Road Vehicles (Registration and Licensing) Regulations 2002 (S.I. 2002/2742), paragraph (1) and, in paragraph (2), the words “Except where paragraph (1) applies,”.

189Vehicles not kept or used on public road

Group 2 (installation of energy-saving materials) of Part 2 of Schedule 7A to VATA 1994 (reduced rate supplies of goods and services) is amended as follows.

2

For items 1 and 2 substitute—

1

Supplies of services of installing energy-saving materials in residential accommodation.

2

Supplies of energy-saving materials by a person who installs those materials in residential accommodation.

3

Omit Note 3 (meaning of “use for a relevant charitable purpose”).

4

The amendments made by this section have effect in relation to supplies made on or after 1 August 2013.

Stamp duty land tax

194Pre-completion transactions: existing cases

1

Section 45 of FA 2003 (contract and conveyance: effect of transfer of rights)—

a

has effect subject to the amendment in subsection (2) below in relation to agreements for the grant or assignment of an option that are entered into during the period beginning with 21 March 2012 and ending immediately before the day on which this Act is passed, and

b

has effect subject to the amendments in subsections (3) to (7) below in relation to transfers of rights (see subsection (1) of that section) entered into during that period.

2

At the end of subsection (1A) insert “or an agreement for the future grant or assignment of an option”.

3

In subsection (3), in the second sentence, after “except” insert “in a case excluded by subsection (3A) or”.

4

After subsection (3) insert—

3A

A case is excluded by this subsection from the second sentence of subsection (3) if—

a

the secondary contract is substantially performed at the same time as, and in connection with, the substantial performance or completion of the original contract but is not completed at that time (“the relevant time”),

b

the original purchaser or a person connected with the original purchaser is in possession of the whole, or substantially the whole, of the subject-matter of the transfer of rights at any time after the relevant time, and

c

having regard to all the circumstances, it would be reasonable to conclude that the obtaining of a tax advantage for the original purchaser was the main purpose, or one of the main purposes, of the original purchaser in entering into the transfer of rights.

3B

In subsection (3A)—

“possession” has the same meaning as in section 44(5)(a);

“tax advantage” means—

a

a relief from tax or increased relief from tax,

b

a repayment of tax or increased repayment of tax, or

c

the avoidance or reduction of a charge to tax.

3C

Nothing in subsection (3A) or (3B) affects the breadth of the application of sections 75A to 75C.

5

In subsection (4), at the end insert “except in a case excluded by subsection (4A)”.

6

After subsection (4) insert—

4A

Subsection (3A) applies for the purposes of subsection (4) as if—

a

the reference to subsection (3) were a reference to subsection (4),

b

a reference to the original contract were a reference to the secondary contract arising from the earlier transfer of rights,

c

a reference to the original purchaser were a reference to the transferee under the earlier transfer of rights, and

d

a reference to the transfer of rights were a reference to the subsequent transfer of rights.

4

The amendments made by this section have effect in relation to disposals made (or treated as made) on or after 1 April 2014.

Climate change levy

199Climate change levy: main rates

1

In paragraph 42(1) of Schedule 6 to FA 2000 (climate change levy: amount payable by way of levy) for the table substitute—

TABLE

Taxable commodity supplied

Rate at which levy payable if supply is not a reduced-rate supply or a supply for use in scrap metal recycling

Electricity

£0.00541 per kilowatt hour

Gas supplied by a gas utility or any gas supplied in a gaseous state that is of a kind supplied by a gas utility

£0.00188 per kilowatt hour

Any petroleum gas, or other gaseous hydrocarbon, supplied in a liquid state

£0.01210 per kilogram

Any other taxable commodity

£0.01476 per kilogram

Taxable commodity supplied	Rate at which levy payable if supply is not a reduced-rate supply or a supply for use in scrap metal recycling
Electricity	£0.00541 per kilowatt hour
Gas supplied by a gas utility or any gas supplied in a gaseous state that is of a kind supplied by a gas utility	£0.00188 per kilowatt hour
Any petroleum gas, or other gaseous hydrocarbon, supplied in a liquid state	£0.01210 per kilogram
Any other taxable commodity	£0.01476 per kilogram

2

The amendment made by subsection (1) has effect in relation to supplies treated as taking place on or after 1 April 2014.

200Climate change levy: supplies subject to carbon price support rates etc

Schedule 42 amends Schedule 6 to FA 2000 (climate change levy).

Insurance premium tax

201Contracts that are not taxable

1

In Schedule 7A to FA 1994 (IPT: contracts that are not taxable), paragraph 3 (contracts relating to motor vehicles for use by handicapped persons) is amended as follows.

2

In sub-paragraph (2)(a)—

a

after “disability living allowance” insert “, or personal independence payment,” and

b

after “component” insert “, or of an armed forces independence payment”.

3

In sub-paragraph (3), after “disability living allowance” insert “, personal independence payment, armed forces independence payment”.

4

After sub-paragraph (4)(b) insert—

ba

personal independence payment” means a personal independence payment under Part 4 of the Welfare Reform Act 2012 or the corresponding provision having effect in Northern Ireland;

bb

“armed forces independence payment” means an armed forces independence payment under a scheme established under section 1 of the Armed Forces (Pensions and Contributions) Act 2004;

“the chargeable period” is to be construed in accordance with paragraph 4 or (as the case may be) 5 of Schedule 19 to FA 2011;

“the commencement date” means the day on which this Act is passed;

“the Instalment Payment Regulations” means the Corporation Tax (Instalment Payments) Regulations 1998 (S.I. 1998/3175);

and references to the total liability of E for an accounting period are to be construed in accordance with regulation 2(3) of the Instalment Payment Regulations.

203Bank levy: rates from 1 January 2014

1

Schedule 19 to FA 2011 (bank levy) is amended as follows.

2

In paragraph 6 (steps for determining the amount of the bank levy), in sub-paragraph (2)—

a

for “0.065%” substitute “0.071%”, and

b

for “0.130%” substitute “0.142%”.

3

In paragraph 7 (special provision for chargeable periods falling wholly or partly before 1 January 2013).

4

In sub-paragraph (1) for “2013” substitute “2014”.

5

In sub-paragraph (2) (as substituted by paragraph 6 of Schedule 34 to FA 2012), in the table in the substituted Step 7—

a

for the final entry in the first column substitute—

1 January 2013 to 31 December 2013

b

at the end add—

Any time on or after 1 January 2014

0.071%

0.142%

6

In the italic heading immediately before that paragraph for “2013” substitute “2014”.

7

Accordingly, in Schedule 34 to FA 2012 (bank levy), omit paragraph 6(2).

8

The amendments made by this section come into force on 1 January 2014.

204No deductions for UK or foreign bank levies

1

Schedule 19 to FA 2011 (the bank levy) is amended as follows.

2

In paragraph 46 (bank levy to be ignored for purposes of corporation tax and income tax), in paragraph (b), after “paid” insert “(directly or indirectly)”.

3

In Part 7 (double taxation relief), after paragraph 69 insert—

69AForeign levies to be ignored for purposes of income tax or corporation tax

1

In calculating profits or losses for the purposes of income tax or corporation tax—

a

no deduction is allowed in respect of any tax which is imposed by the law of a territory outside the United Kingdom and corresponds to the bank levy, and

b

no account is to be taken of any amount which is paid (directly or indirectly) by a member of a group to another member for the purposes of meeting or reimbursing the cost of such a tax charged in relation to the group.

2

Paragraph 66(3) applies for the purposes of sub-paragraph (1) as it applies for the purposes of paragraph 66(2).

4

Accordingly—

a

in paragraph 3, after “double taxation relief” insert “and with the deduction of foreign levies for the purposes of corporation tax and income tax”, and

b

in the heading for Part 7, after “RELIEF” insert “ETC”

5

The amendments made by this section have effect in relation to any period of account beginning on or after 1 January 2013.

6

The amendments made by subsections (3) and (4) also have effect in relation to any period of account beginning before that date, but only if, and to the extent that, the tax is the subject of a claim for relief under paragraph 66 or 67 of Schedule 19 to FA 2011 (bank levy: double taxation relief) made on or after 5 December 2012.

7

For the purposes of subsections (5) and (6), a period of account beginning before, and ending on or after 1 January 2013 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.

205High quality liquid assets

1

In paragraph 70 of Schedule 19 to FA 2011 (bank levy: definitions), in sub-paragraph (1), in the definition of “high quality liquid asset” for “section 12.7.2(1) to (4)” substitute “section 12.7 (assets that are eligible for inclusion in a firm’s regulatory liquid assets buffer)’.

2

The amendment made by this section has effect in relation to chargeable periods ending on or after 1 January 2011, and in relation to those chargeable periods the amendment is to be treated as always having had effect.

PART 5General anti-abuse rule

206General anti-abuse rule

1

This Part has effect for the purpose of counteracting tax advantages arising from tax arrangements that are abusive.

2

The rules of this Part are collectively to be known as “the general anti-abuse rule”.

3

The general anti-abuse rule applies to the following taxes—

a

income tax,

b

corporation tax, including any amount chargeable as if it were corporation tax or treated as if it were corporation tax,

c

capital gains tax,

d

petroleum revenue tax,

e

inheritance tax,

f

stamp duty land tax, and

g

annual tax on enveloped dwellings.

207Meaning of “tax arrangements” and “abusive”

1

Arrangements are “tax arrangements” if, having regard to all the circumstances, it would be reasonable to conclude that the obtaining of a tax advantage was the main purpose, or one of the main purposes, of the arrangements.

2

Tax arrangements are “abusive” if they are arrangements the entering into or carrying out of which cannot reasonably be regarded as a reasonable course of action in relation to the relevant tax provisions, having regard to all the circumstances including—

a

whether the substantive results of the arrangements are consistent with any principles on which those provisions are based (whether express or implied) and the policy objectives of those provisions,

b

whether the means of achieving those results involves one or more contrived or abnormal steps, and

c

whether the arrangements are intended to exploit any shortcomings in those provisions.

3

Where the tax arrangements form part of any other arrangements regard must also be had to those other arrangements.

4

Each of the following is an example of something which might indicate that tax arrangements are abusive—

a

the arrangements result in an amount of income, profits or gains for tax purposes that is significantly less than the amount for economic purposes,

b

the arrangements result in deductions or losses of an amount for tax purposes that is significantly greater than the amount for economic purposes, and

c

the arrangements result in a claim for the repayment or crediting of tax (including foreign tax) that has not been, and is unlikely to be, paid,

but in each case only if it is reasonable to assume that such a result was not the anticipated result when the relevant tax provisions were enacted.

5

The fact that tax arrangements accord with established practice, and HMRC had, at the time the arrangements were entered into, indicated its acceptance of that practice, is an example of something which might indicate that the arrangements are not abusive.

6

The examples given in subsections (4) and (5) are not exhaustive.

208Meaning of “tax advantage”

A “tax advantage” includes—

a

relief or increased relief from tax,

b

repayment or increased repayment of tax,

c

avoidance or reduction of a charge to tax or an assessment to tax,

d

avoidance of a possible assessment to tax,

e

deferral of a payment of tax or advancement of a repayment of tax, and

f

avoidance of an obligation to deduct or account for tax.

209Counteracting the tax advantages

1

If there are tax arrangements that are abusive, the tax advantages that would (ignoring this Part) arise from the arrangements are to be counteracted by the making of adjustments.

2

The adjustments required to be made to counteract the tax advantages are such as are just and reasonable.

3

The adjustments may be made in respect of the tax in question or any other tax to which the general anti-abuse rule applies.

4

The adjustments that may be made include those that impose or increase a liability to tax in any case where (ignoring this Part) there would be no liability or a smaller liability, and tax is to be charged in accordance with any such adjustment.

5

Any adjustments required to be made under this section (whether by an officer of Revenue and Customs or the person to whom the tax advantage would arise) may be made by way of an assessment, the modification of an assessment, amendment or disallowance of a claim, or otherwise.

6

But—

a

no steps may be taken by an officer of Revenue and Customs by virtue of this section unless the procedural requirements of Schedule 43 have been complied with, and

b

the power to make adjustments by virtue of this section is subject to any time limit imposed by or under any enactment other than this Part.

7

Any adjustments made under this section have effect for all purposes.

despite any time limit imposed by or under any enactment other than this Part.

10

In this section “the taxpayer”, in relation to a counteraction of a tax advantage under section 209, means the person to whom the tax advantage would have arisen.

evidence of established practice at that time.

212Relationship between the GAAR and priority rules

1

Any priority rule has effect subject to the general anti-abuse rule (despite the terms of the priority rule).

2

A “priority rule” means a rule (however expressed) to the effect that particular provisions have effect to the exclusion of, or otherwise in priority to, anything else.

3

Examples of priority rules are—

a

the rule in section 464, 699 or 906 of CTA 2009 (priority of loan relationships rules, derivative contracts rules and intangible fixed assets rules for corporation tax purposes), and

b

the rule in section 6(1) of TIOPA 2010 (effect to be given to double taxation arrangements despite anything in any enactment).

213Consequential amendment

1

Section 42 of TMA 1970 (procedure for making claims etc) is amended as follows.

2

In subsection (2), for “(3ZB)” substitute “(3ZC)”.

3

After subsection (3ZB) insert—

3ZC

Subsection (2) also does not apply in relation to any claim under section 210 of the Finance Act 2013 (claims for consequential relieving adjustments after counteraction of tax advantage under the general anti-abuse rule).

214Interpretation of Part 5

In this Part—

“abusive”, in relation to tax arrangements, has the meaning given by section 207(2) to (6);

“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);

“the Commissioners” means the Commissioners for Her Majesty’s Revenue and Customs;

“the GAAR Advisory Panel” has the meaning given by paragraph 1 of Schedule 43;

“the general anti-abuse rule” has the meaning given by section 206;

“HMRC” means Her Majesty’s Revenue and Customs;

“tax advantage” has the meaning given by section 208;

“tax arrangements” has the meaning given by section 207(1).

215Commencement and transitional provision

1

The general anti-abuse rule has effect in relation to any tax arrangements entered into on or after the day on which this Act is passed.

2

Where the tax arrangements form part of any other arrangements entered into before that day those other arrangements are to be ignored for the purposes of section 207(3), subject to subsection (3).

3

Account is to be taken of those other arrangements for the purposes of section 207(3) if, as a result, the tax arrangements would not be abusive.

PART 6Other provisions

Trusts

216Trusts with vulnerable beneficiary

Schedule 44 contains provision about trusts which have a vulnerable beneficiary.

Unit trusts

217Unauthorised unit trusts

1

The Treasury may by regulations make provision about the treatment of the trustees or unit holders of unauthorised unit trusts for the purposes of income tax, corporation tax, capital gains tax or stamp duty land tax.

2

Regulations under this section may—

a

confer or impose powers or duties on officers of Revenue and Customs or other persons;

b

modify any enactment or instrument (whenever passed or made);

c

specify descriptions of unauthorised unit trust in relation to which the regulations are to apply or are not to apply;

d

make different provision for different cases or different purposes;

e

make incidental, consequential, supplementary and transitional provision and savings.

make provision amending, repealing or revoking any provision made by or under an Act (whenever passed or made).

4

An order under subsection (2) is to be made by statutory instrument.

5

A statutory instrument containing an order under subsection (2) is subject to annulment in pursuance of a resolution of the House of Commons.

219Ordinary residence

1

Schedule 46 contains provision removing or replacing rules relating to ordinary residence.

2

The Treasury may by order make further provision removing or replacing rules relating to ordinary residence with respect to—

a

income tax,

b

capital gains tax, and

c

(so far as the ordinary residence status of individuals is relevant to them) inheritance tax and corporation tax.

3

An order under subsection (2) may take effect from the start of the tax year in which the order is made.

4

The Treasury may by order make any incidental, supplemental, consequential, transitional or saving provision in consequence of Schedule 46 or in consequence of any further provision made under subsection (2).

5

An order under this section may—

a

make different provision for different purposes, and

b

make provision amending, repealing or revoking any provision made by or under an Act (whenever passed or made).

6

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

7

A statutory instrument containing an order under subsection (2) (whether alone or with other provisions) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.

8

Subject to subsection (7), a statutory instrument containing an order under this section is subject to annulment in pursuance of a resolution of the House of Commons.

International matters

220Controlled foreign companies etc

Schedule 47 makes provision in relation to CFCs etc.

221Agreement between UK and Switzerland

1

In Schedule 36 to FA 2012 (agreement between UK and Switzerland), after paragraph 26 insert—

Transfers to HMRC under Agreement

26A

1

Income or chargeable gains of a person are to be treated as not remitted to the United Kingdom if conditions A to D are met.

2

Condition A is that (but for sub-paragraph (1)) the income or gains would be regarded as remitted to the United Kingdom by virtue of the bringing of money to the United Kingdom.

3

Condition B is that the money is brought to the United Kingdom pursuant to a transfer made to HMRC in accordance with the Agreement.

4

Condition C (which applies only if the money brought to the United Kingdom is a sum levied under Article 19(2)(b)) is that the sum was levied within the period of 45 days beginning with the day on which the amount derived from the income or gain in question was remitted as mentioned in Article 19(2)(b).

5

Condition D is that the transfer is made in relation to a tax year in which section 809B, 809D or 809E of ITA 2007 (application of remittance basis) applies to the person.

6

Sub-paragraph (1) does not apply in relation to money brought to the United Kingdom if or to the extent that—

a

paragraph 18(2), or section 138(4)(a) or 140(5)(a) of TIOPA 2010, is applied in relation to it (set-off against other tax liabilities), or

b

it is repaid or refunded by HMRC.

26B

1

This paragraph applies if—

a

but for paragraph 26A(1), income or chargeable gains would have been regarded as remitted to the United Kingdom by virtue of the bringing of money to the United Kingdom, and

b

section 809Q of ITA 2007 (transfers from mixed funds) would have applied in determining the amount that would have been so remitted.

2

The bringing of the money to the United Kingdom counts as an offshore transfer for the purposes of section 809R(4) of ITA 2007 (composition of mixed fund).

2

The amendment made by this section is to be treated as having come into force on 1 January 2013.

make different provision for different cases or circumstances;

d

contain incidental, supplemental, transitional, transitory or saving provision (including provision amending any enactment).

4

In this section—

“FATCA” means the provisions commonly known as the Foreign Account Tax Compliance Act in the enactment of the United States of America called the Hiring Incentives to Restore Employment Act;

“HMRC” means Her Majesty’s Revenue and Customs;

“specified” means specified in regulations under this section.

5

The power conferred by this section is without prejudice to any other powers conferred by or under any enactment.

6

The power of the Treasury to make regulations under this section is exercisable by statutory instrument.

7

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

Disclosure

223Disclosure of tax avoidance schemes

1

Part 7 of FA 2004 (disclosure of tax avoidance schemes) is amended in accordance with subsections (2) and (3).

2

After section 312A insert—

312BDuty of client to provide information to promoter

1

This section applies where a person who is a promoter in relation to notifiable arrangements has provided a person (“the client”) with the information prescribed under section 312(2) (duty of promoter to notify client of reference number).

2

The client must, within the prescribed period, provide the promoter with prescribed information relating to the client.

3

The duty under subsection (2) is subject to any exceptions that may be prescribed.

3

After section 313ZA insert—

313ZBEnquiry following disclosure of client details

1

This section applies where—

a

a person who is a promoter in relation to notifiable arrangements has provided HMRC with information in relation to a person (“the client”) under section 313ZA(3) (duty to provide client details), and

b

HMRC suspect that a person other than the client is or is likely to be a party to the arrangements.

2

HMRC may by written notice require the promoter to provide prescribed information in relation to any person other than the client who the promoter might reasonably be expected to know is or is likely to be a party to the arrangements.

3

The promoter must comply with a requirement under or by virtue of subsection (2) within—

a

the prescribed period, or

b

such longer period as HMRC may direct.

4

In section 98C(2) of TMA 1970 (notification under Part 7 of FA 2004)—

a

after paragraph (da) insert—

daa

section 312B (duty of client to provide information to promoter),

b

after paragraph (db) insert—

dc

section 313ZB (enquiry following disclosure of client details),

Powers

224Powers under Proceeds of Crime Act 2002

Schedule 48 makes provision for, and in connection with, conferring powers under Chapter 3 of Part 5 and Chapters 2 and 3 of Part 8 of the Proceeds of Crime Act 2002 on officers of Revenue and Customs.

225Definition of “goods” for certain customs purposes

In section 1(1) of CEMA 1979 (interpretation), in the definition of “goods”, for “baggage” substitute “containers”.

226Power to detain goods

1

Section 139 of CEMA 1979 (provisions as to detention, seizure and condemnation of goods etc) is amended as follows.

2

After subsection (1) insert—

1A

A person mentioned in subsection (1) who reasonably suspects that any thing may be liable to forfeiture under the customs and excise Acts may detain that thing.

1B

References in this section and Schedule 2A to a thing detained as liable to forfeiture under the customs and excise Acts include a thing detained under subsection (1A).

3

In subsection (2), for the words from “either” to the end substitute “deliver that thing to an officer”.

4

In subsection (4), for “the Commissioners at the nearest office of customs and excise” substitute “an officer”.

5

In subsection (5), for “Schedule 3” substitute “Schedules 2A and 3”.

6

After that subsection insert—

5A

Schedule 2A contains supplementary provisions relating to the detention of things as liable to forfeiture under the customs and excise Acts.

7

After Schedule 2 to that Act (composite goods: supplementary provisions as to excise duties and drawbacks) insert—

SCHEDULE 2ASupplementary provisions relating to the detention of things as liable to forfeiture

Section 139(5A)

1Interpretation

In this Schedule, references (however expressed) to a thing being detained are references to a thing being detained as liable to forfeiture under the customs and excise Acts.

2Period of detention

1

This paragraph applies where a thing is detained.

2

The thing may be detained for 30 days beginning with the day on which the thing is first detained.

3

The thing is deemed to be seized as liable to forfeiture under the customs and excise Acts if its detention ceases to be authorised under this paragraph.

3Notice of detention

1

The Commissioners must take reasonable steps to give written notice of the detention of any thing, and of the grounds for the detention, to any person who to their knowledge was, at the time of the detention, the owner or one of the owners of the thing.

2

But notice need not be given under sub-paragraph (1) if the detention occurred in the presence of—

a

the person whose offence or suspected offence occasioned the detention,

b

the owner or any of the owners of the thing detained or any servant or agent of such an owner, or

c

in the case of any thing detained on a ship or aircraft, the master or commander.

Unauthorised removal or disposal: penalties etc

4

1

This paragraph applies where a thing is detained and, with the agreement of a person within sub-paragraph (2) (“the responsible person”), the thing remains at the place where it is first detained (rather than being removed and detained elsewhere).

2

A person is within this sub-paragraph if the person is—

a

the owner or any of the owners of the thing at the time it was detained or any servant or agent of such an owner, or

b

a person whom the person who detains the thing reasonably believes to be a person within paragraph (a).

3

If the responsible person fails to prevent the unauthorised removal or disposal of the thing from the place where it is detained, that failure attracts a penalty under section 9 of the Finance Act 1994 (civil penalties).

4

The removal or disposal of the thing is unauthorised unless it is done with the permission of a proper officer of Revenue and Customs.

5

Where any duty of excise is payable in respect of the thing—

a

the penalty is to be calculated by reference to the amount of that duty (whether it has been paid or not), and

b

section 9 of the Finance Act 1994 has effect as if in subsection (2)(a) the words “5 per cent of” were omitted.

6

If no duty of excise is payable in respect of the thing, that section has effect as if the penalty provided for by subsection (2)(b) of that section were whichever is the greater of—

a

the value of the thing at the time it was first detained, or

b

£250.

5

1

This paragraph applies where—

a

a thing is detained at a revenue trader’s premises,

b

the thing is liable to forfeiture under the customs and excise Acts, and

c

without the permission of a proper officer of Revenue and Customs, the thing is removed from the trader’s premises, or otherwise disposed of, by any person.

2

The Commissioners may seize, as liable to forfeiture under the customs and excise Acts, goods of equivalent value to the thing, from the revenue trader’s stock.

3

For the purposes of this paragraph, a revenue trader’s premises include any premises used to hold or store anything for the purposes of the revenue trader’s trade, regardless of who owns or occupies the premises.

8

The amendments made by this section have effect in relation to things detained on or after the day on which this Act is passed.

227Penalty instead of forfeiture of larger ships

1

Section 143 of CEMA 1979 (penalty in lieu of forfeiture of larger ship where responsible officer is implicated in offence) is amended as follows.

2

For subsection (1) (Commissioners’ power to impose fine up to £50) substitute—

1

This section applies where—

a

any ship of 250 or more tons register would, but for section 142, be liable to forfeiture for, or in connection with, any offence under the customs and excise Acts, and

b

in the opinion of the Commissioners, a responsible officer of the ship is implicated either by the officer’s own act, or by neglect, in that offence.

7

If the Treasury consider that there has been a change in the value of money since the Finance Act 2013 was passed or, as the case may be, since the last occasion when the power conferred by this subsection was exercised, they may by order substitute for the sum for the time being specified in subsections (3) and (4) such other sum as appears to them to be justified by the change.

8

An order under subsection (7) may not vary the penalty for any conduct occurring before the coming into force of the order.

9

An order under subsection (7) must be made by statutory instrument.

10

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

228Data-gathering from merchant acquirers etc

1

In Part 2 of Schedule 23 to FA 2011 (data-gathering powers: relevant data-holders), after paragraph 13 insert—

13AMerchant acquirers etc

1

A person who has a contractual obligation to make payments to retailers in settlement of payment card transactions is a relevant data-holder.

2

In this paragraph—

“payment card” includes a credit card, a charge card and a debit card;

“payment card transaction” means any transaction in which a payment card is accepted as payment;

“retailer” means a person who accepts a payment card as payment for any transaction.

3

In this paragraph any reference to a payment card being accepted as payment includes a reference to any account number or other indicators associated with a payment card being accepted as payment.

2

This section applies in relation to relevant data with a bearing on any period (whether before, on or after the day on which this Act is passed).

Payment

229Corporation tax: deferral of payment of exit charge

Schedule 49 contains provision for, and in connection with, deferring the payment by a company of certain corporation tax in circumstances where income, profits or gains arise by virtue of section 25, 185 or 187(4) of TCGA 1992 or section 162, 333, 334, 609, 610, 859 or 862 of CTA 2009.

230Penalties: late filing, late payment and errors

Schedule 50 contains provision for, and in connection with, penalties for late filing, late payment and errors.

231Overpayment relief: generally prevailing practice exclusion and EU law

1

In Schedule 1AB to TMA 1970 (recovery of overpaid tax etc), in paragraph 2 (cases in which Commissioners not liable to give effect to claim), after sub-paragraph (9) insert—

9A

Cases G and H do not apply where the amount paid, or liable to be paid, is tax which has been charged contrary to EU law.

9B

For the purposes of sub-paragraph (9A), an amount of tax is charged contrary to EU law if, in the circumstances in question, the charge to tax is contrary to—

a

the provisions relating to the free movement of goods, persons, services and capital in Titles II and IV of Part 3 of the Treaty on the Functioning of the European Union, or

b

the provisions of any subsequent treaty replacing the provisions mentioned in paragraph (a).

2

In Schedule 2 to OTA 1975 (management and collection of petroleum revenue tax), in paragraph 13B (claim for relief for overpaid tax etc: cases in which HMRC not liable to give effect to a claim), after sub-paragraph (8) insert—

9

Case G does not apply where the amount paid, or liable to be paid, is tax which has been charged contrary to EU law.

10

For the purposes of sub-paragraph (9), an amount of tax is charged contrary to EU law if, in the circumstances in question, the charge to tax is contrary to—

a

the provisions relating to the free movement of goods, persons, services and capital in Titles II and IV of Part 3 of the Treaty on the Functioning of the European Union, or

b

the provisions of any subsequent treaty replacing the provisions mentioned in paragraph (a).

3

In Part 6 of Schedule 18 to FA 1998 (overpaid tax, excessive assessments or repayments etc), in paragraph 51A (cases in which Commissioners not liable to give effect to a claim), after sub-paragraph (8) insert—

9

Case G does not apply where the amount paid, or liable to be paid, is tax which has been charged contrary to EU law.

10

For the purposes of sub-paragraph (9), an amount of tax is charged contrary to EU law if, in the circumstances in question, the charge to tax is contrary to—

a

the provisions relating to the free movement of goods, persons, services and capital in Titles II and IV of Part 3 of the Treaty on the Functioning of the European Union, or

b

the provisions of any subsequent treaty replacing the provisions mentioned in paragraph (a).

4

In Part 6 of Schedule 10 to FA 2003 (relief in case of overpaid tax or excessive assessment), in paragraph 34A (cases in which Commissioners not liable to give effect to a claim), after sub-paragraph (8) insert—

9

Case G does not apply where the amount paid, or liable to be paid, is tax which has been charged contrary to EU law.

10

For the purposes of sub-paragraph (9), an amount of tax is charged contrary to EU law if, in the circumstances in question, the charge to tax is contrary to—

a

the provisions relating to the free movement of goods, persons, services and capital in Titles II and IV of Part 3 of the Treaty on the Functioning of the European Union, or

b

the provisions of any subsequent treaty replacing the provisions mentioned in paragraph (a).

5

The amendments made by this section have effect in relation to any claim (in respect of overpaid tax, excessive assessment etc) made after the end of the six month period beginning with the day on which this Act is passed.

232Overpayment relief: time limit for claims

1

In Schedule 1AB to TMA 1970 (recovery of overpaid tax etc), in paragraph 3 (making a claim), in sub-paragraph (3) after “the relevant tax year is” insert

—

a

where the amount liable to be paid is excessive by reason of a mistake in a return or returns under section 8, 8A or 12AA, the tax year to which the return (or, if more than one, the first return) relates, and

b

otherwise,

2

In Schedule 2 to OTA 1975, in paragraph 13C (claim for relief for overpaid tax etc: making a claim), in sub-paragraph (3) after “the relevant chargeable period is” insert

—

a

where the amount liable to be paid is excessive by reason of a mistake in a return or returns under paragraph 2 or 5, the chargeable period to which the return (or, if more than one, the first return) relates, and

b

otherwise,

3

In Part 6 of Schedule 18 to FA 1998 (overpaid tax, excessive assessments or repayments, etc), in paragraph 51B (making a claim), in sub-paragraph (3), after “the relevant accounting period is” insert

—

a

where the amount liable to be paid is excessive by reason of a mistake in a company tax return or returns, the accounting period to which the return (or, if more than one, the first return) relates, and

b

otherwise,

4 Administration

b

if the Commissioners have, or an officer of Revenue and Customs has, paid any sum as originally required by the interim remedy, order the repayment of the sum or any part of the sum as appropriate (with interest from the date of payment).

9

For the purposes of this section, proceedings on appeal are to be treated as part of the original proceedings from which the appeal lies.

10

In this section “taxation matter” means anything, other than national insurance contributions, the collection and management of which is the responsibility of the Commissioners for Her Majesty’s Revenue and Customs (or was the responsibility of the Commissioners of Inland Revenue or Commissioners of Customs and Excise).

PART 7Final provisions

235Interpretation

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,

“CEMA 1979” means the Customs and Excise Management Act 1979,

“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,

“F(No.3)A 2010” means the Finance (No. 3) Act 2010,

“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,

“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;

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

236Short title

This Act may be cited as the Finance Act 2013.

SCHEDULES

SCHEDULE 1Annual investment allowance: periods straddling 1 January 2013 or 1 January 2015

Section 7

1Chargeable periods which straddle 1 January 2013

1

This paragraph applies in relation to a chargeable period which begins before 1 January 2013 and ends on or after that date (“the first straddling period”).

2

The maximum allowance under section 51A of CAA 2001 for the first straddling period is the sum of each maximum allowance that would be found if—

a

so much (if any) of the first straddling period as falls before the relevant date,

b

so much of the first straddling period as falls on or after the relevant date but before 1 January 2013, and

c

so much of the first straddling period as falls on or after 1 January 2013,

were each treated as separate chargeable periods.

3

But this is subject to paragraphs 2 and 3.

4

In this Schedule “the relevant date” means—

a

for the purposes of corporation tax, 1 April 2012;

b

for the purposes of income tax, 6 April 2012.

2Straddling period beginning before the relevant date

1

This paragraph applies where the first straddling period begins before the relevant date.

2

So far as concerns expenditure incurred before the relevant date, the maximum allowance under section 51A of CAA 2001 for the first straddling period is what would have been the maximum allowance for that period if the amendment made by section 7(1) had not been made.

3

So far as concerns expenditure incurred on or after the relevant date but before 1 January 2013, the maximum allowance under section 51A of CAA 2001 for the first straddling period is—

A−B math

4

In sub-paragraph (3)—

a

“A” means the amount that would have been the maximum allowance for the period beginning on the relevant date and ending at the end of the first straddling period if—

i

that period had been a separate chargeable period, and

ii

the amendment made by section 7(1) had not been made;

b

“B” means the amount (if any) by which—

i

the AIA expenditure incurred in the period mentioned in paragraph 1(2)(a) in respect of which a claim for an annual investment allowance is made, exceeds

ii

the maximum allowance under section 51A of CAA 2001 for that period if it were treated as a separate chargeable period.

5

So far as concerns expenditure incurred on or after 1 January 2013, the maximum allowance under section 51A of CAA 2001 for the first straddling period is the sum of each maximum allowance that would be found if the period mentioned in paragraph 1(2)(b) and the period mentioned in paragraph 1(2)(c) were each treated as separate chargeable periods.

3First straddling period beginning on or after the relevant date

1

This paragraph applies where no part of the first straddling period falls within paragraph 1(2)(a).

2

So far as concerns expenditure incurred before 1 January 2013, the maximum allowance under section 51A of CAA 2001 for the first straddling period is to be calculated as if the amendment made by section 7(1) had not been made.

4Chargeable periods which straddle 1 January 2015

1

This paragraph applies in relation to a chargeable period (“the second straddling period”) which begins before 1 January 2015 and ends on or after that date.

2

The maximum allowance under section 51A of CAA 2001 for the second straddling period is the sum of each maximum allowance that would be found if—

a

the period beginning with the first day of the chargeable period and ending with the day before 1 January 2015, and

b

the period beginning with 1 January 2015 and ending with the last day of the chargeable period,

were treated as separate chargeable periods.

3

But, so far as concerns expenditure incurred on or after 1 January 2015, the maximum allowance under section 51A of CAA 2001 for the second straddling period is the maximum allowance, calculated in accordance with sub-paragraph (2), for the period mentioned in paragraph (b) of that sub-paragraph.

5Operation of annual investment allowance where restrictions apply

1

Paragraphs 1 to 4 also apply for the purpose of determining the maximum allowance under section 51K of CAA 2001 (operation of annual investment allowance where restrictions apply) in a case where one or more chargeable periods in which the relevant AIA qualifying expenditure is incurred are chargeable periods within paragraph 1(1) or 4(1).

2

There is to be taken into account for those purposes only chargeable periods of one year or less (whether or not they are chargeable periods within paragraph 1(1) or 4(1)), and, if there is more than one such period, only that period which gives rise to the greatest maximum allowance.

3

For the purposes of sub-paragraph (2) any chargeable period which—

a

is longer than a year, and

b

ends in the tax year 2012-13, 2013-14, 2014-15, 2015-16 or 2016-17,

is to be treated as being a chargeable period of one year ending at the same time as it actually ends.

4

Section 11(11) of FA 2011 is repealed.

5

That repeal has effect in relation to cases where one or more chargeable periods in which the relevant AIA qualifying expenditure is incurred are chargeable periods within paragraph 1(1).

6

Nothing in this paragraph affects the operation of sections 51M and 51N of CAA 2001.

SCHEDULE 2Tax advantaged employee share schemes

Section 14

PART 1Retirement of participants

1Introduction

Part 7 of ITEPA 2003 (employment income: income and exemptions relating to securities) is amended as follows.

Share incentive plans

2

In section 498 (no charge on shares ceasing to be subject to plan in certain circumstances) in subsection (2)(e) omit the words from “on” to “2)”.

3

In Part 4 of Schedule 2 (types of shares that may be awarded) in paragraph 32 (provision for forfeiture) in sub-paragraph (2)(e) omit the words from “on” to “98)”.

4

Part 11 of Schedule 2 (supplementary provisions) is amended as follows.

5

Omit paragraph 98 (meaning of “specified retirement age”).

6

In paragraph 100 (index of defined expressions) omit the entry for “the specified retirement age”.

SAYE option schemes

7

Part 6 of Schedule 3 (requirements etc relating to share options) is amended as follows.

8

In paragraph 27 (introduction) in sub-paragraph (1)—

a

omit the entry for paragraph 31,

b

after the entry for paragraph 32 insert “and”, and

c

omit the entry for paragraph 33 and the “and” after it.

9

In paragraph 30 (time for exercising options) in sub-paragraph (2)(a)—

a

for “32 to” substitute “32,”, and

b

omit “reaching the specified age without retiring,”.

10

Omit paragraph 31 (requirement to have a “specified age”).

11

Omit paragraph 33 (exercise of options: reaching specified age without retiring).

12

In paragraph 34 (exercise of options: scheme-related employment ends) in sub-paragraph (2)(b) omit the words from “on” to “employment”.

13

In Part 9 of Schedule 3 (supplementary provisions) in paragraph 49 (index of defined expressions) omit the entry for “specified age”.

CSOP schemes

14

In section 524 (no charge in respect of exercise of option) in subsection (2C) omit the definition of “retirement” and the “and” before it.

15

In Part 8 of Schedule 4 (supplementary provisions) omit paragraph 35A (retirement age).

Transitional provision

16

The amendment made by paragraph 11 above has no effect in relation to options granted before the day on which this Act is passed; and the effect of the amendments made by paragraphs 8 to 10 and 13 above is limited accordingly.

17

1

A SIP, SAYE option scheme or CSOP scheme approved before the day on which this Act is passed has effect with any modifications needed to reflect the amendments made by this Part of this Schedule.

2

In relation to any shares awarded under a SIP before that day which are subject to provision for forfeiture, that provision has effect with any modifications needed to reflect the amendment made by paragraph 3 above.

3

Because of paragraphs 48 and 58 below, that amendment is not relevant to shares awarded under a SIP on or after that day.

PART 2“Good leavers” (other than retirees)

18Introduction

Part 7 of ITEPA 2003 (employment income: income and exemptions relating to securities) is amended as follows.

Share incentive plans

19

In section 498 (no charge on shares ceasing to be subject to plan in certain circumstances) after subsection (2) insert—

3

A participant is not liable to income tax on shares (“the relevant shares”) in a company (“the relevant company”) being withdrawn from the plan if—

a

the withdrawal of the relevant shares from the plan relates to—

i

a transaction resulting from a compromise, arrangement or scheme falling within subsection (9),

ii

an offer forming part of a general offer falling within subsection (10), or

iii

the application of sections 979 to 982 or 983 to 985 of the Companies Act 2006 in the case of a takeover offer (as defined in section 974 of that Act) falling within subsection (13), and

b

as a result of, as the case may be—

i

the transaction,

ii

the offer, or

iii

the application of sections 979 to 982 or 983 to 985 of the Companies Act 2006,

the participant receives cash (and no other assets) in exchange for the relevant shares.

4

For the purposes of subsection (3)(b) it does not matter if the participant receives other assets in exchange for shares other than the relevant shares.

5

Subsection (3) does not apply to the relevant shares (or to a proportion of them) if in connection with, as the case may be—

a

the compromise, arrangement or scheme,

b

the general offer, or

c

the takeover offer,

a course of action was open to the participant which, had it been followed, would have resulted in other assets being received in exchange for the relevant shares (or the proportion of them) instead of cash.

6

Subsection (3) does not apply to the relevant shares (or to a proportion of them) if it is reasonable to suppose that the relevant shares (or the proportion of them) would not have been awarded to the participant—

a

had, as the case may be—

i

the compromise, arrangement or scheme,

ii

the general offer, or

iii

the takeover offer,

not been made, or

b

had any arrangements for the making of—

i

a compromise, arrangement or scheme which would fall within subsection (9),

ii

a general offer which would fall within subsection (10), or

iii

a takeover offer (as defined in section 974 of the Companies Act 2006) which would fall within subsection (13),

which were in place or under consideration at any time not been in place or under consideration.

7

In subsection (6) the reference to shares being awarded to the participant is to be read, in the case of dividend shares, as a reference to the shares being acquired by the trustees on the participant’s behalf.

8

In subsection (6)(b) “arrangements” includes any plan, scheme, agreement or understanding, whether or not legally enforceable.

9

A compromise, arrangement or scheme falls within this subsection if it is applicable to or affects—

a

all the ordinary share capital of the relevant company or all the shares of the same class as the relevant shares, or

b

all the shares, or all the shares of that same class, which are held by a class of shareholders identified otherwise than by reference to their employment or their participation in an approved SIP.

10

A general offer falls within this subsection if—

a

it is made to holders of shares of the same class as the relevant shares or to holders of shares in the relevant company, and

b

it is made in the first instance on a condition such that if it is satisfied the person making the offer will have control of the relevant company.

11

For the purposes of subsection (10) it does not matter if the general offer is made to different shareholders by different means.

12

In subsection (10)(b) “control” has the meaning given by sections 450 and 451 of CTA 2010.

13

A takeover offer falls within this subsection if—

a

it relates to the relevant company, and

b

where there is more than one class of share in the relevant company, the class or classes to which it relates is or include the class of the relevant shares.

20

1

In Part 5 of Schedule 2 (free shares) in paragraph 37 (holding period: power of participant to direct trustees to accept general offers etc) after sub-paragraph (6) insert—

7

For the purposes of sub-paragraph (5) it does not matter if the general offer is made to different shareholders by different means.

8

If in the case of a takeover offer (as defined in section 974 of the Companies Act 2006) there arises a right under section 983 of that Act to require the offeror to acquire the participant’s free shares, or such of them as are of a particular class, the participant may direct the trustees to exercise that right.

2

A SIP approved before the day on which this Act is passed has effect with any modifications needed to reflect the amendment made by this paragraph.

SAYE option schemes

21

In section 519 (no charge in respect of exercise of option) after subsection (3) insert—

3A

In relation to any shares acquired by the exercise of the share option, no liability to income tax arises in respect of its exercise if—

a

the individual exercises the option before the third anniversary of the date on which the option was granted at a time when the SAYE option scheme is approved,

b

the option is exercised by virtue of a provision included in the scheme—

i

under paragraph 37(1) of Schedule 3 where the relevant date is the relevant date for the purposes of paragraph 37(2) or (4), or

ii

under paragraph 37(6) of Schedule 3,

c

as a result of, as the case may be—

i

the general offer,

ii

the compromise or arrangement, or

iii

the takeover offer,

the individual receives cash (and no other assets) in exchange for the shares,

d

when the decision to grant the option was taken—

i

the general offer,

ii

the compromise or arrangement, or

iii

the takeover offer,

as the case may be, had not been made,

e

when that decision was taken, no arrangements were in place or under consideration for—

i

the making of a general offer which would fall within subsection (3D),

ii

the making of any compromise or arrangement which would fall within subsection (3H), or

iii

the making of a takeover offer (as defined in section 974 of the Companies Act 2006) which would fall within subsection (3I),

f

if the scheme includes a provision under paragraph 38 of Schedule 3 (“the paragraph 38 provision”), in connection with—

i

the general offer,

ii

the compromise or arrangement, or

iii

the takeover offer,

as the case may be, no course of action was open to the individual which, had it been followed, would have resulted in the individual making an agreement under the paragraph 38 provision which would have prevented the individual from acquiring the shares by the exercise of the option, and

g

the avoidance of tax or national insurance contributions is not the main purpose (or one of the main purposes) of any arrangements under which the option was granted or is exercised.

3B

In subsection (3A)(c)(iii), (d)(iii) and (f)(iii) “the takeover offer” means the takeover offer (as defined in section 974 of the Companies Act 2006) giving rise to the application of sections 979 to 982 or 983 to 985 of that Act.

3C

In subsection (3A)(e) “arrangements” includes any plan, scheme, agreement or understanding, whether or not legally enforceable.

3D

A general offer falls within this subsection if it is—

a

a general offer to acquire the whole of the issued ordinary share capital of the relevant company which is made on a condition such that, if it is met, the person making the offer will have control of the relevant company, or

b

a general offer to acquire all the shares in the relevant company which are of the same class as those acquired by the exercise of the option.

3E

In subsection (3D)(a) the reference to the issued ordinary share capital of the relevant company does not include any capital already held by the person making the offer or a person connected with that person and in subsection (3D)(b) the reference to the shares in the relevant company does not include any shares already held by the person making the offer or a person connected with that person.

3F

For the purposes of subsection (3D)(a) and (b) it does not matter if the general offer is made to different shareholders by different means.

3G

For the purposes of subsection (3D)(a) a person is to be treated as obtaining control of a company if that person and others acting in concert together obtain control of it.

3H

A compromise or arrangement falls within this subsection if it is applicable to or affects—

a

all the ordinary share capital of the relevant company or all the shares of the same class as those acquired by the exercise of the option, or

b

all the shares, or all the shares of that same class, which are held by a class of shareholders identified otherwise than by reference to their employment or directorships or their participation in an approved SAYE option scheme.

3I

A takeover offer falls within this subsection if—

a

it relates to the relevant company, and

b

where there is more than one class of share in the relevant company, the class or classes to which it relates is or include the class of the shares acquired by the exercise of the option.

3J

In subsections (3D), (3H) and (3I) “the relevant company” means the company whose shares are acquired by the exercise of the option.

22

Part 6 of Schedule 3 (requirements etc relating to share options) is amended as follows.

23

1

Paragraph 34 (exercise of options: scheme-related employment ends) is amended as follows.

2

In sub-paragraph (2)—

a

omit the “or” after paragraph (a), and

b

after paragraph (b) insert—

c

a relevant transfer within the meaning of the Transfer of Undertakings (Protection of Employment) Regulations 2006, or

d

if P holds office or is employed in a company which is an associated company (as defined in paragraph 35(4)) of the scheme organiser, that company ceasing to be an associated company of the scheme organiser by reason of a change of control (as determined in accordance with sections 450 and 451 of CTA 2010),

3

In sub-paragraphs (4) and (5A)(b) for “or (b)” substitute “to (d)”.

4

A SAYE option scheme approved before the day on which this Act is passed has effect with any modifications needed to reflect the amendments made by this paragraph.

24

1

Paragraph 37 (exercise of options: company events) is amended as follows.

2

After sub-paragraph (3) insert—

3A

In sub-paragraph (3)(a) the reference to the issued ordinary share capital of the company does not include any capital already held by the person making the offer or a person connected with that person and in sub-paragraph (3)(b) the reference to the shares in the company does not include any shares already held by the person making the offer or a person connected with that person.

3B

For the purposes of sub-paragraph (3)(a) and (b) it does not matter if the general offer is made to different shareholders by different means.

3

A SAYE option scheme approved before the day on which this Act is passed which contains provision under paragraph 37(1) of Schedule 3 to ITEPA 2003 by reference to paragraph 37(2) has effect with any modifications needed to reflect the amendment made by sub-paragraph (2).

4

In sub-paragraph (4) for the words from “proposed” to the end substitute

applicable to or affecting—

a

all the ordinary share capital of the company or all the shares of the same class as the shares to which the option relates, or

b

all the shares, or all the shares of that same class, which are held by a class of shareholders identified otherwise than by reference to their employment or directorships or their participation in an approved SAYE option scheme.

5

A SAYE option scheme approved before the day on which this Act is passed which contains provision under paragraph 37(1) of Schedule 3 to ITEPA 2003 by reference to paragraph 37(4) has effect with any modifications needed to reflect the amendment made by sub-paragraph (4).

6

In sub-paragraph (6)—

a

after “982” insert “or 983 to 985”, and

b

after “shareholder” insert “etc”.

7

A SAYE option scheme approved before the day on which this Act is passed which contains provision under paragraph 37(6) of Schedule 3 to ITEPA 2003 has effect with any modifications needed to reflect the amendments made by sub-paragraph (6).

25

1

In Part 7 of Schedule 3 (exercise of share options) paragraph 38 (exchange of options on company reorganisation) is amended as follows.

2

In sub-paragraph (2)(c)—

a

after “982” insert “or 983 to 985”, and

b

after “shareholder” insert “etc”.

3

After sub-paragraph (2) insert—

2A

In sub-paragraph (2)(a)(i) the reference to the issued ordinary share capital of the scheme company does not include any capital already held by the person making the offer or a person connected with that person and in sub-paragraph (2)(a)(ii) the reference to the shares in the scheme company does not include any shares already held by the person making the offer or a person connected with that person.

2B

For the purposes of sub-paragraph (2)(a)(i) and (ii) it does not matter if the general offer is made to different shareholders by different means.

4

A SAYE option scheme approved before the day on which this Act is passed which contains provision under paragraph 38 of Schedule 3 to ITEPA 2003 has effect with any modifications needed to reflect the amendments made by this paragraph.

CSOP schemes

26

1

Section 524 (no charge in respect of exercise of option) is amended as follows.

2

In subsection (2B) for paragraph (a) substitute—

a

has ceased to be in qualifying employment because of—

i

injury, disability, redundancy or retirement,

ii

a relevant transfer within the meaning of the Transfer of Undertakings (Protection of Employment) Regulations 2006, or

iii

in the case of a group scheme where the qualifying employment is as a director or employee of a constituent company, that company ceasing to be controlled by the scheme organiser, and

3

After subsection (2B) insert—

2BA

For the purposes of subsection (2B) an individual is in “qualifying employment” if the individual is a full-time director or qualifying employee (as defined in paragraph 8(2) of Schedule 4) of—

a

the scheme organiser, or

b

in the case of a group scheme, a constituent company.

4

In subsection (2C) for “(2B)” substitute “(2B)(a)(i)”.

5

After subsection (2C) insert—

2D

Subsection (2B)(a)(iii) does not cover a case where the constituent company was controlled by the scheme organiser by virtue of paragraph 34 of Schedule 4 (jointly owned companies).

2E

In relation to any shares acquired by the exercise of the share option, no liability to income tax arises in respect of its exercise if—

a

the individual exercises the option before the third anniversary of the date on which the option was granted at a time when the CSOP scheme is approved,

b

the option is exercised by virtue of a provision included in the scheme under paragraph 25A of Schedule 4,

c

as a result of, as the case may be—

i

the general offer,

ii

the compromise or arrangement, or

iii

the takeover offer,

the individual receives cash (and no other assets) in exchange for the shares,

d

when the decision to grant the option was taken—

i

the general offer,

ii

the compromise or arrangement, or

iii

the takeover offer,

as the case may be, had not been made,

e

when that decision was taken, no arrangements were in place or under consideration for—

i

the making of a general offer which would fall within subsection (2H),

ii

the making of any compromise or arrangement which would fall within subsection (2L), or

iii

the making of a takeover offer (as defined in section 974 of the Companies Act 2006) which would fall within subsection (2M),

f

if the scheme includes a provision under paragraph 26 of Schedule 4 (“the paragraph 26 provision”), in connection with—

i

the general offer,

ii

the compromise or arrangement, or

iii

the takeover offer,

as the case may be, no course of action was open to the individual which, had it been followed, would have resulted in the individual making an agreement under the paragraph 26 provision which would have prevented the individual from acquiring the shares by the exercise of the option, and

g

the avoidance of tax or national insurance contributions is not the main purpose (or one of the main purposes) of any arrangements under which the option was granted or is exercised.

2F

In subsection (2E)(c)(iii), (d)(iii) and (f)(iii) “the takeover offer” means the takeover offer (as defined in section 974 of the Companies Act 2006) giving rise to the application of sections 979 to 982 or 983 to 985 of that Act.

2G

In subsection (2E)(e) “arrangements” includes any plan, scheme, agreement or understanding, whether or not legally enforceable.

2H

A general offer falls within this subsection if it is—

a

a general offer to acquire the whole of the issued ordinary share capital of the relevant company which is made on a condition such that, if it is met, the person making the offer will have control of the relevant company, or

b

a general offer to acquire all the shares in the relevant company which are of the same class as those acquired by the exercise of the option.

2I

In subsection (2H)(a) the reference to the issued ordinary share capital of the relevant company does not include any capital already held by the person making the offer or a person connected with that person and in subsection (2H)(b) the reference to the shares in the relevant company does not include any shares already held by the person making the offer or a person connected with that person.

2J

For the purposes of subsection (2H)(a) and (b) it does not matter if the general offer is made to different shareholders by different means.

2K

For the purposes of subsection (2H)(a) a person is to be treated as obtaining control of a company if that person and others acting in concert together obtain control of it.

2L

A compromise or arrangement falls within this subsection if it is applicable to or affects—

a

all the ordinary share capital of the relevant company or all the shares of the same class as those acquired by the exercise of the option, or

b

all the shares, or all the shares of that same class, which are held by a class of shareholders identified otherwise than by reference to their employment or directorships or their participation in an approved CSOP scheme.

2M

A takeover offer falls within this subsection if—

a

it relates to the relevant company, and

b

where there is more than one class of share in the relevant company, the class or classes to which it relates is or include the class of the shares acquired by the exercise of the option.

2N

In subsections (2H), (2L) and (2M) “the relevant company” means the company whose shares are acquired by the exercise of the option.

27

Part 5 of Schedule 4 (requirements etc relating to share options) is amended as follows.

28

In paragraph 21 (introduction) in sub-paragraph (2)—

a

after the entry for paragraph 24 omit “or”, and

b

after the entry for paragraph 25 insert

, or

paragraph 25A (exercise of options: company events)

29

After paragraph 25 insert—

25AExercise of options: company events

1

The scheme may provide that share options relating to shares in a company may be exercised within 6 months after the relevant date for the purposes of sub-paragraph (2) or (6).

2

The relevant date for the purposes of this sub-paragraph is the date when—

a

a person has obtained control of the company as a result of making an offer falling within sub-paragraph (3), and

b

any condition subject to which the offer is made has been satisfied.

3

An offer falls within this sub-paragraph if it is—

a

a general offer to acquire the whole of the issued ordinary share capital of the company which is made on a condition such that, if it is met, the person making the offer will have control of the company, or

b

a general offer to acquire all the shares in the company which are of the same class as the shares to which the option relates.

4

In sub-paragraph (3)(a) the reference to the issued ordinary share capital of the company does not include any capital already held by the person making the offer or a person connected with that person and in sub-paragraph (3)(b) the reference to the shares in the company does not include any shares already held by the person making the offer or a person connected with that person.

5

For the purposes of sub-paragraph (3)(a) and (b) it does not matter if the general offer is made to different shareholders by different means.

6

The relevant date for the purposes of this sub-paragraph is the date when the court sanctions under section 899 of the Companies Act 2006 (court sanction for compromise or arrangement) a compromise or arrangement applicable to or affecting—

a

all the ordinary share capital of the company or all the shares of the same class as the shares to which the option relates, or

b

all the shares, or all the shares of that same class, which are held by a class of shareholders identified otherwise than by reference to their employment or directorships or their participation in an approved CSOP scheme.

7

The scheme may provide that share options relating to shares in a company may be exercised at any time when any person is bound or entitled to acquire shares in the company under sections 979 to 982 or 983 to 985 of the Companies Act 2006 (takeover offers: right of offeror to buy out minority shareholder etc).

8

For the purposes of this paragraph a person is to be treated as obtaining control of a company if that person and others acting in concert together obtain control of it.

30

1

In Part 6 of Schedule 4 (exercise of share options) paragraph 26 (exchange of options on company reorganisation) is amended as follows.

2

In sub-paragraph (2)(c)—

a

after “982” insert “or 983 to 985”, and

b

after “shareholder” insert “etc”.

3

After sub-paragraph (2) insert—

2A

In sub-paragraph (2)(a)(i) the reference to the issued ordinary share capital of the scheme company does not include any capital already held by the person making the offer or a person connected with that person and in sub-paragraph (2)(a)(ii) the reference to the shares in the scheme company does not include any shares already held by the person making the offer or a person connected with that person.

2B

For the purposes of sub-paragraph (2)(a)(i) and (ii) it does not matter if the general offer is made to different shareholders by different means.

4

A CSOP scheme approved before the day on which this Act is passed which contains provision under paragraph 26 of Schedule 4 to ITEPA 2003 has effect with any modifications needed to reflect the amendments made by this paragraph.

31Enterprise management incentives

1

In Part 6 of Schedule 5 (company reorganisations) in paragraph 39 (introduction) after sub-paragraph (3) insert—

4

In sub-paragraph (2)(a)(i) the reference to the issued share capital of the company does not include any capital already held by the person making the offer or a person connected with that person and in sub-paragraph (2)(a)(ii) the reference to the shares in the company does not include any shares already held by the person making the offer or a person connected with that person.

5

For the purposes of sub-paragraph (2)(a)(i) and (ii) it does not matter if the general offer is made to different shareholders by different means.

2

The amendment made by this paragraph comes into force on such day as the Treasury may by order appoint.

PART 3Material interest rules

32Introduction

Part 7 of ITEPA 2003 (employment income: income and exemptions relating to securities) is amended as follows.

Share incentive plans

33

Part 3 of Schedule 2 (eligibility of individuals) is amended as follows.

34

In paragraph 13 (introduction)—

a

after the entry for paragraph 18 insert “and”, and

b

omit the entry for paragraph 19 and the “and” before it.

35

In paragraph 14 (time of eligibility to participate) in sub-paragraph (7)—

a

after paragraph (b) insert “and”, and

b

omit paragraph (c) and the “and” before it.

36

Omit paragraphs 19 to 24 (the “no material interest” requirement).

37

In Part 11 of Schedule 2 (supplementary provisions) in paragraph 100 (index of defined expressions), in the entry for “close company”, omit “(and see paragraph 20(4))”.

38

1

The amendments made by paragraphs 33 to 37 above have effect for the purpose of determining whether an individual is eligible to participate in an award of shares on the day on which this Act is passed or any later day.

2

A SIP approved before the day on which this Act is passed has effect accordingly with the omission of any provision falling within a provision of Schedule 2 to ITEPA 2003 omitted by those paragraphs.

SAYE option schemes

39

Part 3 of Schedule 3 (eligibility of individuals) is amended as follows.

40

In paragraph 9 (introduction) omit the entry for paragraph 11 and the “and” before it.

41

Omit paragraphs 11 to 16 (the “no material interest” requirement).

42

In Part 9 of Schedule 3 (supplementary provisions) in paragraph 49 (index of defined expressions), in the entry for “close company”, omit “(and see paragraph 11(4))”.

43

1

The amendments made by paragraphs 39 to 42 above have effect for the purpose of determining whether an individual is eligible to participate in a scheme on the day on which this Act is passed or any later day.

2

A SAYE option scheme approved before the day on which this Act is passed has effect accordingly with the omission of any provision falling within a provision of Schedule 3 to ITEPA 2003 omitted by those paragraphs.

44CSOP schemes

1

In Part 3 of Schedule 4 (eligibility of individuals) in paragraphs 10(2) and (3), 11(3) and (4) and 13(2) (which relate to the “no material interest” requirement) for “25%” substitute “30%”.

2

The amendments made by this paragraph have effect for the purpose of determining whether a person is eligible to participate in a scheme on the day on which this Act is passed or any later day (by altering what constitutes a material interest on that day and within the 12 months preceding that day).

3

A CSOP scheme approved before the day on which this Act is passed has effect with any modifications needed to reflect the amendments made by this paragraph.

PART 4Restricted shares

45Introduction

Part 7 of ITEPA 2003 (employment income: income and exemptions relating to securities) is amended as follows.

Share incentive plans

46

Part 4 of Schedule 2 (types of shares that may be awarded) is amended as follows.

47

In paragraph 25 (introduction) in sub-paragraph (1)—

a

after the entry for paragraph 28 insert “and”, and

b

omit the entry for paragraph 30 and the “and” before it.

48

Omit paragraphs 30 to 33 (only certain kinds of restrictions allowed).

49

In Part 5 of Schedule 2 (free shares) in paragraph 35 (maximum annual award) omit sub-paragraphs (3) and (4).

50

In Part 6 of Schedule 2 (partnership shares) in paragraph 43 (introduction) after sub-paragraph (2) insert—

2A

The plan must provide that partnership shares are not to be subject to any provision for forfeiture.

51

In Part 7 of Schedule 2 (matching shares) in paragraph 59 (general requirement for matching shares) omit sub-paragraph (2).

52

In Part 9 of Schedule 2 (trustees) in paragraph 75 (duty to give notice of award of shares etc) in sub-paragraphs (2) and (3) after paragraph (a) insert—

aa

if the shares are subject to any restriction, giving details of the restriction,

53

1

In Part 10 of Schedule 2 (approval of plans) paragraph 84 (disqualifying events) is amended as follows.

2

In sub-paragraph (3)—

a

after paragraph (b) insert “or”, and

b

omit paragraph (c) and the “or” after it.

3

In sub-paragraph (4)(b) for “provision for forfeiture” substitute “restriction”.

54

Part 11 of Schedule 2 (supplementary provision) is amended as follows.

55

In paragraph 92 (determination of market value) for sub-paragraph (2) substitute—

2

For the purposes of this Schedule the market value of shares subject to a restriction is to be determined as if they were not subject to the restriction.

56

In paragraph 99 (minor definitions) after sub-paragraph (3) insert—

4

For the purposes of the SIP code—

a

shares are subject to a “restriction” if there is any contract, agreement, arrangement or condition which makes provision to which any of subsections (2) to (4) of section 423 (restricted securities) would apply if the references in those subsections to the employment-related securities were to the shares, and

b

the “restriction” is that provision.

57

In paragraph 100 (index of defined expressions) at the appropriate place insert—

restriction (in relation to shares)

paragraph 99(4)

58

1

The amendments made by paragraphs 46 to 48 and 50 to 52 above have effect in relation to awards of shares made on or after the day on which this Act is passed.

2

A SIP approved, or a trust instrument made, before that day has effect with any modifications needed to reflect the amendments made by paragraphs 46 to 57 above.

3

In particular, in relation to awards of shares on or after that day, such a SIP has effect with the omission of any provision falling within a provision of Schedule 2 to ITEPA 2003 omitted by paragraph 48 above.

SAYE option schemes

59

Part 4 of Schedule 3 (shares to which schemes can apply) is amended as follows.

60

In paragraph 17 (introduction) in sub-paragraph (1)—

a

after the entry for paragraph 20 insert “and”, and

b

omit the entry for paragraph 21 and the “and” after it.

61

Omit paragraph 21 (only certain kinds of restrictions allowed).

62

In Part 6 of Schedule 3 (requirements etc relating to share options) in paragraph 28 (requirements as to price of acquisition of shares) after sub-paragraph (4) insert—

5

At the time a share option is granted—

a

it must be stated whether or not the shares which may be acquired by the exercise of the option may be subject to any restriction, and

b

if so, the details of the restriction must also be stated.

6

For the purposes of this paragraph the market value of shares subject to a restriction is to be determined as if they were not subject to the restriction.

63

In Part 7 of Schedule 3 (exchange of share options) in paragraph 39 (requirements about share options granted in exchange) after sub-paragraph (6) insert—

7

For the purposes of this paragraph the market value of shares subject to a restriction is to be determined as if they were not subject to the restriction.

64

Part 9 of Schedule 3 (supplementary provisions) is amended as follows.

65

In paragraph 48 (minor definitions) after sub-paragraph (2) insert—

3

For the purposes of the SAYE code—

a

shares are subject to a “restriction” if there is any contract, agreement, arrangement or condition which makes provision to which any of subsections (2) to (4) of section 423 (restricted securities) would apply if the references in those subsections to the employment-related securities were to the shares, and

b

the “restriction” is that provision.

66

In paragraph 49 (index of defined expressions) at the appropriate place insert—

restriction (in relation to shares)

paragraph 48(3)

67

1

The amendments made by paragraphs 59 to 62 above have effect in relation to options granted on or after the day on which this Act is passed.

2

The amendment made by paragraph 63 above has effect for cases where the old options are granted on or after that day.

3

A SAYE option scheme approved before that day has effect with any modifications needed to reflect the amendments made by paragraphs 59 to 66 above.

4

In particular, in relation to options granted on or after that day, such a SAYE option scheme has effect with the omission of any provision falling within a provision of Schedule 3 to ITEPA 2003 omitted by paragraph 61 above.

CSOP schemes

68

In Part 2 of Schedule 4 (general requirements for approval) in paragraph 6 (limit on value of shares subject to options) after sub-paragraph (3) insert—

4

For the purposes of this paragraph the market value of shares subject to a restriction is to be determined as if they were not subject to the restriction.

69

Part 4 of Schedule 4 (shares to which schemes can apply) is amended as follows.

70

In paragraph 15 (introduction)—

a

after the entry for paragraph 18 insert “and”, and

b

omit the entry relating to paragraph 19 and the “and” after it.

71

Omit paragraph 19 (only certain kinds of restrictions allowed).

72

In Part 5 of Schedule 4 (requirements etc relating to share options) in paragraph 22 after sub-paragraph (4) insert—

5

At the time a share option is granted—

a

it must be stated whether or not the shares which may be acquired by the exercise of the option may be subject to any restriction, and

b

if so, the details of the restriction must also be stated.

6

For the purposes of this paragraph the market value of shares subject to a restriction is to be determined as if they were not subject to the restriction.

73

In Part 6 of Schedule 4 (exchange of share options) in paragraph 27 (requirements about share options granted in exchange) after sub-paragraph (6) insert—

7

For the purposes of this paragraph the market value of shares subject to a restriction is to be determined as if they were not subject to the restriction.

74

Part 8 of Schedule 4 (supplementary provisions) is amended as follows.

75

In paragraph 36 (minor definitions) after sub-paragraph (2) insert—

3

For the purposes of the CSOP code—

a

shares are subject to a “restriction” if there is any contract, agreement, arrangement or condition which makes provision to which any of subsections (2) to (4) of section 423 (restricted securities) would apply if the references in those subsections to the employment-related securities were to the shares, and

b

the “restriction” is that provision.

76

In paragraph 37 (index of defined expressions) at the appropriate place insert—

restriction (in relation to shares)

paragraph 36(3)

77

1

The amendment made by paragraph 68 above has effect for the purpose of determining whether options may be granted to an individual on or after the day on which this Act is passed; but the amendment is to be ignored in determining the market value of any shares to which an option granted before that day relates.

2

The amendments made by paragraphs 69 to 72 above have effect in relation to options granted on or after that day.

3

The amendment made by paragraph 73 above has effect for cases where the old options are granted on or after that day.

4

A CSOP scheme approved before that day has effect with any modifications needed to reflect the amendments made by paragraphs 68 to 76 above.

5

In particular, in relation to options granted on or after that day, such a CSOP scheme has effect with the omission of any provision falling within a provision of Schedule 4 to ITEPA 2003 omitted by paragraph 71 above.

PART 5Share incentive plans: partnership shares

78

Schedule 2 to ITEPA 2003 is amended as follows.

79

1

In Part 6 (partnership shares) paragraph 52 (application of money deducted in accumulation period) is amended as follows.

2

After sub-paragraph (2) insert—

2A

The number of shares awarded to the employee must be determined in accordance with one of sub-paragraphs (3), (3A) and (3B) and the partnership share agreement must specify which one of those sub-paragraphs is to apply for the purposes of the agreement.

3

In sub-paragraph (3) for “The number of shares awarded to each” substitute “If the agreement specifies that this sub-paragraph is to apply, the number of shares awarded to the”.

4

After sub-paragraph (3) insert—

3A

If the agreement specifies that this sub-paragraph is to apply, the number of shares awarded to the employee must be determined in accordance with the market value of the shares at the beginning of the accumulation period.

3B

If the agreement specifies that this sub-paragraph is to apply, the number of shares awarded to the employee must be determined in accordance with the market value of the shares on the acquisition date.

5

In sub-paragraphs (4) and (5) for “and (3)” substitute “to (3B)”.

80

In Part 9 (trustees) in paragraph 75 (duty to give notice of award of shares etc) in sub-paragraph (3) for paragraph (c) substitute—

c

stating the market value in accordance with which the number of shares awarded to the employee was determined.

81

1

The amendments made by paragraphs 79 and 80 above have effect in relation to partnership share agreements made on or after the day on which this Act is passed.

2

A trust instrument made before that day has effect with any modifications needed to reflect the amendment made by paragraph 80 above.

PART 6Share incentive plans: dividend shares

82Introduction

Part 8 of Schedule 2 to ITEPA 2003 (cash dividends and dividend shares) is amended as follows.

Company’s power to direct reinvestment of cash dividends

83

1

Paragraph 62 (reinvestment of dividends) is amended as follows.

2

In sub-paragraph (1) for the first “all” substitute “some or all of the”.

3

After sub-paragraph (1) insert—

1A

The company’s direction must set out—

a

the amount of the cash dividends to be applied as mentioned in sub-paragraph (1), or

b

how that amount is to be determined.

4

In sub-paragraph (4) after “may” insert “modify or”.

84

In paragraph 68 (reinvestment: amounts to be carried forward) for sub-paragraph (1) substitute—

1

This paragraph applies where an amount is not reinvested because it is not sufficient to acquire a share.

85

In paragraph 69 (cash dividends with no requirement to reinvest) in sub-paragraph (2) for “which” substitute “so far as they”.

86

1

A SIP approved before the day on which this Act is passed which contains provision under paragraph 62(1) of Schedule 2 to ITEPA 2003 has effect with any modifications needed to reflect the amendments made by paragraphs 83 to 85 above.

2

Sub-paragraph (3) applies to a direction requiring the reinvestment of cash dividends which is given before that day.

3

For the purposes of paragraph 62(1A) of Schedule 2 to ITEPA 2003 the direction is to be treated as requiring the reinvestment of all the cash dividends, subject to any modification of the direction which is made on or after that day under paragraph 62(4) of that Schedule.

Removal of limit on amount reinvested

87

In paragraph 63 (requirements to be met as regards cash dividends) in sub-paragraph (1) omit the entry for paragraph 64.

88

Omit paragraph 64 (limit on amount reinvested).

89

1

The amendments made by paragraphs 87 and 88 above have effect in relation to the tax year 2013-14 and subsequent tax years.

2

A SIP approved before 6 April 2013 has effect accordingly with the omission of any provision falling within a provision of Schedule 2 to ITEPA 2003 omitted by paragraph 88 above.

90Amounts to be carried forward

1

Paragraph 68 (reinvestment: amounts to be carried forward) is amended as follows.

2

In sub-paragraph (4)—

a

omit paragraph (a) and the “or” after it, and

b

in paragraphs (b) and (c) omit “during that period”.

3

Omit sub-paragraph (6).

4

The amendments made by this paragraph have effect in relation to amounts held by trustees on or after 6 April 2013 (including amounts originally retained before that date in relation to which an event falling within paragraph 68(4)(a) to (c) of Schedule 2 to ITEPA 2003 did not occur before that date).

5

A SIP approved before 6 April 2013 has effect accordingly with the omission of any provision falling within a provision of Schedule 2 to ITEPA 2003 omitted by this paragraph.

PART 7Share incentive plans: employee share ownership trusts

91

Part 9 of Schedule 2 to ITEPA 2003 (trustees) is amended as follows.

92

In paragraph 70 (introduction) in sub-paragraph (2)—

a

after the entry for paragraph 77 insert “and”, and

b

omit the entry for paragraph 78.

93

e

section 133(1).

4

In section 148 (share loss relief: disposal of shares forming part of mixed holding) in subsection (3)(b) before sub-paragraph (i) insert—

ai

shares to which SEIS relief is attributable (as determined in accordance with Part 5A),

Commencement and transitional provision

3

The amendments made by paragraphs 1 and 2 above have effect for the tax year 2013-14 and subsequent tax years.

4

1

Sub-paragraph (2) applies to a claim which relates to the tax year 2013-14 or a subsequent tax year by virtue of paragraph 2 of Schedule 1B to TMA 1970 where the earlier year is a tax year before the tax year 2013-14.

2

The amount of the claim is to be determined as if the amendments made by paragraphs 1 and 2 above also have effect for tax years before the tax year 2013-14.

3

For this purpose, section 24A(6) of ITA 2007 (as inserted by paragraph 1 above) is treated as having effect for tax years before the tax year 2013-14 as if—

a

in paragraphs (a), (b), (f) and (g) the references to relief were limited to relief in respect of a loss made in the tax year 2013-14 or a subsequent tax year, and

b

all the other paragraphs were omitted.

5

In section 24A(6)(d) of ITA 2007 (as inserted by paragraph 1 above) the reference to relief does not include relief in respect of a loss made in the tax year 2012-13.

SCHEDULE 4Cash basis for small businesses

Section 17

PART 1Main provisions

1Introductory

Part 2 of ITTOIA 2005 (trading income) is amended as follows.

Eligibility to calculate profits on cash basis

2

Chapter 3 (trade profits: basic rules) is amended as follows.

3

In section 25(3) (exception to requirement to use generally accepted accounting practice), for “section 160 (barristers and advocates in early years of practice)” substitute “section 25A (cash basis for small businesses)”.

4

After section 25 insert—

25ACash basis for small businesses

1

A person who is or has been carrying on a trade may elect for the profits of the trade to be calculated on the cash basis (instead of in accordance with generally accepted accounting practice).

2

References in this Part to calculating the profits of a trade on the cash basis are references to doing so in accordance with this section.

3

Chapter 3A contains provision about—

a

when a person may make an election under this section, and

b

the effect of such an election.

4

Where an election under this section has effect in relation to a trade, sections 27, 28 and 30 do not apply in relation to the calculation of the profits of the trade.

5

After Chapter 3 insert—

CHAPTER 3ATrade profits: cash basis

Eligibility

31AConditions to be met for profits to be calculated on cash basis

1

A person may make an election under section 25A for a tax year if conditions A to C are met.

2

Condition A is that the aggregate of the cash basis receipts of each trade, profession or vocation carried on by the person during that tax year does not exceed any relevant maximum applicable for that tax year (see section 31B).

3

Condition B is that, in a case where the person is either an individual who controls a firm or a firm controlled by an individual—

a

the aggregate of the cash basis receipts of each trade, profession or vocation carried on by the individual or the firm during that tax year does not exceed any relevant maximum applicable for that tax year, and

b

the firm or the individual (as the case may be) has also made an election under section 25A for that tax year.

4

Condition C is that the person is not an excluded person in relation to the tax year (see section 31C).

5

For the purposes of this section, the “cash basis receipts” of a trade, profession or vocation, in relation to a tax year, are any receipts that—

a

are received during the basis period for the tax year, and

b

would be brought into account in calculating the profits of the trade, profession or vocation for that tax year on the cash basis.

31BRelevant maximum

1

For the purposes of section 31A there is a “relevant maximum” applicable for a tax year in relation to a trade, profession or vocation carried on by a person if any of conditions A to C is met.

2

Condition A is that an election under section 25A did not have effect in relation to the trade, profession or vocation for the previous tax year.

3

Condition B is that the aggregate of the cash basis receipts of each trade, profession or vocation carried on by the person during the previous tax year is greater than an amount equal to twice the VAT threshold for that previous tax year.

4

Condition C is that, in a case where the person is either an individual who controls a firm or a firm controlled by an individual, the aggregate of the cash basis receipts of each trade, profession or vocation carried on by the individual or the firm during the previous tax year is greater than an amount equal to twice the VAT threshold for that previous tax year.

5

If there is a relevant maximum applicable for a tax year, the amount of the relevant maximum is—

a

the VAT threshold, or

b

in the case where the person is an individual who is a universal credit claimant in the tax year, an amount equal to twice the VAT threshold.

6

For the purposes of this section, where the basis period for a tax year is less than 12 months, the VAT threshold is proportionately reduced.

7

In this section—

“universal credit claimant”, in relation to a tax year, means a person who is entitled to universal credit under the relevant legislation for an assessment period (within the meaning of the relevant legislation) that falls within the basis period for the tax year,

“the relevant legislation” means—

a

Part 1 of the Welfare Reform Act 2012, or

b

any provision made for Northern Ireland which corresponds to that Part of that Act, and

“the VAT threshold”, in relation to a tax year, means the amount specified at the end of that tax year in paragraph 1(1)(a) of Schedule 1 to VATA 1994.

8

The Treasury may by order amend this section.

9

A statutory instrument containing an order under subsection (8) that restricts the circumstances in which an election may be made under section 25A may not be made unless a draft of the instrument containing the order has been laid before, and approved by a resolution of, the House of Commons.

31CExcluded persons

1

A person is an excluded person in relation to a tax year if the person meets any of conditions A to H.

2

Condition A is that—

a

the person is a firm, and

b

one or more of the persons who have been partners in the firm at any time during the basis period for the tax year was not an individual at that time.

3

Condition B is that the person was a limited liability partnership at any time during the basis period for the tax year.

4

Condition C is that the person is an individual who has been a Lloyd’s underwriter at any time during the basis period for the tax year.

5

Condition D is that the person has made an election under Chapter 8 (trade profits: herd basis rules) that has effect in relation to the tax year.

6

Condition E is that the person has made a claim under section 221 (claim for averaging of fluctuating profits) in relation to the tax year.

7

Condition F is that, at any time within the period of 7 years ending immediately before the basis period for the tax year, the person obtained an allowance under Part 3A of CAA 2001 (business premises renovation allowances).

8

Condition G is that the person has carried on a mineral extraction trade at any time during the basis period for the tax year.

In this subsection “mineral extraction trade” has the same meaning as in Part 5 of CAA 2001 (see section 394(2) of that Act).

9

Condition H is that—

a

at any time before the beginning of the basis period for the tax year the person obtained an allowance under Part 6 of CAA 2001 (research and development allowances) in respect of qualifying expenditure incurred by the person, and

b

the person owns an asset representing the expenditure.

In this subsection “qualifying expenditure” has the same meaning as in Part 6 of CAA 2001.

10

The Treasury may by order amend this section.

11

A statutory instrument containing an order under subsection (10) that restricts the circumstances in which an election may be made under section 25A may not be made unless a draft of the instrument containing the order has been laid before, and approved by a resolution of, the House of Commons.

Elections under section 25A

31DEffect of election under section 25A

1

An election made by a person under section 25A has effect—

a

for the tax year for which it is made, and

b

for every subsequent tax year.

This is subject to subsections (2) and (3).

2

An election made by a person under section 25A ceases to have effect if any of conditions A to C in section 31A is not met for a subsequent tax year.

3

An election made by a person under section 25A ceases to have effect if—

a

there is a change of circumstances relating to any trade, profession or vocation carried on by the person which makes it more appropriate for its profits for a subsequent tax year to be calculated in accordance with generally accepted accounting practice, and

b

the person elects to calculate those profits in that way.

4

Neither subsection (2) nor subsection (3) prevents the person making an election under section 25A for any subsequent tax year.

5

An election that—

a

is made by a person under section 25A, and

b

has effect for a tax year,

has effect in relation to every trade, profession or vocation carried on by the person during the tax year.

6

For provision prohibiting a person who has made an election under section 25A from claiming any capital allowances (other than in respect of expenditure incurred on the provision of a car), see section 1(4) of CAA 2001.

Calculation of profits on cash basis

31ECalculation of profits on cash basis

1

This section applies to professions and vocations as it applies to trades.

2

To determine the profits of a trade for a tax year on the cash basis—

Step 1

Calculate the total amount of receipts of the trade received during the basis period for the tax year.

Step 2

Deduct from that amount the total amount of expenses of the trade paid during the basis period for the tax year.

3

Subsection (2) is subject to any adjustment required or authorised by law in calculating profits for income tax purposes.

Overview of rest of Part 2

31FOverview of rest of Part 2 as it applies to cash basis

1

For provision about the application of Chapters 4 to 6 (rules about deductions and receipts) in relation to the cash basis, see sections 32A, 56A and 95A.

2

For provision about the application of Chapter 11 (trade profits: other specific trades) in relation to the cash basis, see section 148K.

3

The following Chapters apply only where profits are calculated on the cash basis—

Chapter 6A (trade profits: amounts not reflecting commercial transactions),

Chapter 17A (cash basis: adjustments for capital allowances).

4

The following Chapters do not apply in relation to the cash basis—

Chapter 8 (trade profits: herd basis rules),

Chapter 9 (trade profits: sound recordings),

Chapter 10 (trade profits: certain telecommunication rights),

Chapter 10A (leases of plant or machinery: special rules for long funding leases),

Chapter 11A (trade profits: changes in trading stock),

Chapter 13 (deductions from profits: unremittable amounts),

Chapter 14 (disposal and acquisition of know-how),

Chapter 16 (averaging profits of farmers and creative artists),

Chapter 16ZA (compensation for compulsory slaughter of animal),

Chapter 16A (oil activities).

Rules restricting deductions

6

Chapter 4 (trade profits: rules restricting deductions) is amended as follows.

7

After section 32 insert—

Cash basis accounting

32AApplication of Chapter to the cash basis

1

The following sections do not apply in calculating the profits of a trade on the cash basis—

section 33 (capital expenditure),

section 35 (bad and doubtful debts),

sections 36 and 37 (unpaid remuneration),

section 43 (employee benefit contributions: profits calculated before end of 9 month period),

sections 48 to 50B (car hire).

2

For rules restricting deductions that apply only where profits are calculated on the cash basis, see the following—

section 33A (cash basis: capital expenditure),

section 51A (cash basis: interest payments on loans).

8

After section 33 insert—

33ACash basis: capital expenditure

1

In calculating the profits of a trade on the cash basis, no deduction is allowed for items of a capital nature, other than expenditure that—

a

if it were not allowable as a deduction in calculating the profits of the trade, would be qualifying expenditure within the meaning of Part 2 of CAA 2001 (plant and machinery allowances), and

b

is not expenditure incurred on the provision of a car.

2

In this section “car” has the same meaning as in Part 2 of CAA 2001 (see section 268A of that Act).

9

In section 38 (restriction of deductions in respect of employee benefit contributions), after subsection (2) insert—

2A

In calculating for income tax purposes the profits of a trade on the cash basis, this section has effect as if—

a

in subsection (1), the words “or to be made” were omitted, and

b

in subsection (2), the words “or within 9 months from the end of it” were omitted (in both places).

10

Before section 52 (and after the heading “Interest payments”) insert—

51ACash basis: interest payments on loans

1

In calculating the profits of a trade on the cash basis, no deduction is allowed for the interest paid on a loan.

2

This is subject to section 57B.

11

1

Section 55A (expenditure on integral features) is amended as follows.

2

The existing provision becomes subsection (1).

3

After that subsection insert—

2

But section 33A(3) of CAA 2001 does not apply in calculating the profits of a trade on the cash basis.

Rules allowing deductions

12

Chapter 5 (trade profits: rules allowing deductions) is amended as follows.

13

After section 56 insert—

Cash basis accounting

56AApplication of Chapter to the cash basis

1

The following sections do not apply in calculating the profits of a trade on the cash basis—

sections 60 to 67 (tenants under taxed leases),

section 68 (replacement and alteration of trade tools).

2

For rules allowing deductions that apply only where profits are calculated on the cash basis, see the following—

section 57B (cash basis: interest payments on loans).

3

In calculating the profits of a trade on the cash basis, any reference in this Chapter to the incurring of expenses is to be read as a reference to the paying of expenses.

14

After section 57A insert—

Cash basis: interest payments

57BCash basis: interest payments on loans

1

This section applies if a person carrying on a trade in a period pays any interest on a loan during the period and—

a

a deduction for the interest would not otherwise be allowable in calculating the profits of the trade because of section 51A, or

b

in the absence of section 51A, a deduction for the interest would not otherwise be allowable in calculating the profits of the trade because (and only because) it was not an expense incurred wholly and exclusively for the purposes of the trade.

2

In calculating the profits of the trade on the cash basis, a deduction is allowed for the interest.

3

But the maximum amount that may be deducted by virtue of this section or section 58 (incidental costs of obtaining finance) in calculating the profits of a trade for any period is £500.

4

The Treasury may by order amend the figure for the time being specified in subsection (3).

5

A statutory instrument containing an order under this section that amends that figure so as to substitute a lower figure may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.

15

In section 58 (incidental costs of obtaining finance), in subsection (5), after “with” insert

—

a

section 57B(3) (which imposes a limit on the total amount that may be deducted by virtue of this section or section 57B), and

b

16

In section 72 (payroll deduction schemes: contributions to agents’ expenses), after subsection (2) insert—

2A

In calculating the profits of the employer’s trade on the cash basis, subsection (2) has effect as if paragraph (b) were omitted.

17

In section 94A (costs of setting up SAYE option scheme or CSOP scheme), after subsection (4) insert—

5

But subsection (4) does not apply in calculating the profits of a trade on the cash basis.

Receipts

18

Chapter 6 (trade profits: receipts) is amended as follows.

19

After section 95 insert—

Cash basis accounting

95AApplication of Chapter to the cash basis

For rules about receipts that apply only for the purpose of calculating profits on the cash basis, see the following—

section 96A (cash basis: capital receipts),

section 97A (cash basis: value of trading stock on cessation of trade),

section 97B (cash basis: value of work in progress on cessation of profession or vocation).

20

After section 96 insert—

96ACash basis: capital receipts

1

This section applies if—

a

the whole or part of any expenditure incurred in acquiring, creating or improving an asset has been brought into account in calculating the profits of a trade of a person on the cash basis, or

b

the whole or part of any such expenditure would have been so brought into account if an election under section 25A had had effect in relation to the trade at the time the expenditure was paid.

2

The following amounts are to be brought into account as a receipt in calculating the profits of the trade on the cash basis—

a

any proceeds arising from the disposal of the asset or any part of it;

b

any proceeds arising from the grant of any right in respect of, or any interest in, the asset;

c

any amount of damages, proceeds of insurance or other compensation received in respect of the asset.

3

In a case where only part of the expenditure incurred in acquiring, creating or improving an asset has been, or would have been, brought into account as mentioned in subsection (1), the amount brought into account under subsection (2) is proportionately reduced.

4

If—

a

at any time the person ceases to use the asset or any part of it for the purposes of the trade, but

b

the person does not dispose of the asset (or that part) at that time,

the person is to be regarded for the purposes of this section as disposing of the asset (or that part) at that time for an amount equal to the market value amount.

5

If at any time there is a material increase in the person’s non-business use of the asset or any part of it, the person is to be regarded for the purposes of this section as disposing of the asset (or that part) at that time for an amount equal to the relevant proportion of the market value amount.

6

For the purposes of subsection (5)—

a

there is an increase in a person’s non-business use of an asset (or part of an asset) if—

i

the proportion of the person’s use of the asset (or that part) that is for the purposes of the trade decreases, and

ii

the proportion of the person’s use of the asset (or that part) that is for other purposes (the “non-business use”) increases;

b

“the relevant proportion” is the difference between—

i

the proportion of the person’s use of the asset (or part of the asset) that is non-business use, and

ii

the proportion of the person’s use of the asset (or that part) that was non-business use before the increase mentioned in subsection (5).

7

In this section “the market value amount” means the amount that would be regarded as normal and reasonable—

a

in the market conditions then prevailing, and

b

between persons dealing with each other at arm’s length in the open market.

21

After section 97 insert—

Cash basis: value of stock and work in progress on cessation

97ACash basis: value of trading stock on cessation of trade

1

This section applies if—

a

a person permanently ceases to carry on a trade in a tax year, and

b

an election under section 25A (cash basis for small businesses) has effect in relation to the trade for the tax year.

2

The value of any trading stock belonging to the trade at the time of the cessation is brought into account as a receipt in calculating the profits of the trade for the tax year.

3

The value is to be determined on a basis that is just and reasonable in all the circumstances.

4

If there is a change in the persons carrying on a trade, subsection (2) does not apply in relation to the trade so long as a person carrying on the trade immediately before the change continues to carry it on after the change.

5

In this section “trading stock” has the same meaning as in Chapter 12 (see section 174).

6

This section does not apply to professions or vocations.

97BCash basis: value of work in progress on cessation of profession or vocation

1

This section applies if—

a

a person permanently ceases to carry on a profession or vocation in a tax year, and

b

an election under section 25A (cash basis for small businesses) has effect in relation to the profession or vocation for the tax year.

2

The value of any work in progress at the time of the cessation is brought into account as a receipt in calculating the profits of the profession or vocation for the tax year.

3

The value is to be determined on a basis that is just and reasonable in all the circumstances.

4

If there is a change in the persons carrying on a profession, subsection (2) does not apply in relation to the profession so long as a person carrying on the profession immediately before the change continues to carry it on after the change.

5

In this section “work in progress” has the same meaning as in Chapter 12 (see section 183).

22

1

Section 105 (industrial development grants) is amended as follows.

2

In subsection (2), at the end of paragraph (a) insert “(but see subsection (2A))”.

3

After that subsection insert—

2A

Subsection (2)(a) is to be disregarded in calculating the profits of a trade on the cash basis.

23Amounts not reflecting commercial transactions

After Chapter 6 insert—

CHAPTER 6ATrade profits: amounts not reflecting commercial transactions

106AProfessions and vocations

The provisions of this Chapter apply to professions and vocations as they apply to trades.

106BApplication of Chapter

This Chapter applies in calculating the profits of a person’s trade for a period on the cash basis.

106CAmounts not reflecting commercial transactions

1

This section applies if—

a

the person does anything in relation to the trade (“the relevant act”),

b

there is a difference between—

i

the amount (if any) that, as a result of the relevant act, would (apart from this section) be brought into account in calculating the profits of the trade for the period, and

ii

the amount (if any) that would have been so brought into account had the relevant act consisted of a transaction between the person and another person dealing with each other at arm’s length in the open market (“the arm’s length amount”), and

c

the profits of the trade for the period are less than they would have been if the arm’s length amount had been so brought into account.

2

The amount to be brought into account in calculating the profits of the trade for the period is an amount that is just and reasonable in all the circumstances.

106DCapital receipts

Section 106C does not apply in relation to the relevant act if subsection (4) or (5) of section 96A (cash basis: capital receipts) applies in relation to that act.

106EGifts to charities etc

Section 106C does not apply in relation to the relevant act if any of the provisions of Chapter 7 (trade profits: gifts to charities etc) applies in relation to that act.

24Herd basis rules

In Chapter 8 (trade profits: herd basis rules), after section 111 insert—

111AHerd basis rules not to apply where cash basis used

Nothing in this Chapter applies in calculating the profits of a trade on the cash basis.

25Sound recordings

In Chapter 9 (trade profits: sound recordings), after section 130 insert—

130AChapter not to apply where cash basis used

Nothing in this Chapter applies in calculating the profits of a trade on the cash basis.

26Telecommunication rights

In Chapter 10 (trade profits: certain telecommunication rights), before section 145 insert—

144AChapter not to apply where cash basis used

Nothing in this Chapter applies in calculating the profits of a trade on the cash basis.

27Long funding leases

In Chapter 10A (leases of plant or machinery: special rules for long funding leases), before section 148A (and the italic heading preceding it) insert—

Application of Chapter

148ZAChapter not to apply where cash basis used

Nothing in this Chapter applies in calculating the profits of a trade on the cash basis.

28Specific trades

In Chapter 11 (trade profits: other specific trades), before section 149 (and the italic heading preceding it) insert—

Cash basis accounting

148KApplication of Chapter to the cash basis

The following sections do not apply in calculating the profits of a trade, profession or vocation on the cash basis—

sections 149 to 154A (dealers in securities etc),

section 157 (relief in respect of mineral royalties),

section 158 (lease premiums etc: reduction of receipts),

section 159 (ministers of religion),

section 161 (mineral exploration and access),

section 162 (payments by persons liable to pool betting duty),

sections 163 and 164 (intermediaries treated as making employment payments),

section 164A (managed service companies),

sections 165 to 168 (waste disposal),

sections 169 to 172ZE (cemeteries and crematoria).

29Changes in trading stock

In Chapter 11A (trade profits: changes in trading stock), after section 172A insert—

172AAChapter not to apply where cash basis used

Nothing in this Chapter applies in calculating the profits of a trade on the cash basis.

30Unremittable amounts

In Chapter 13 (deductions from profits: unremittable amounts), after section 188 insert—

188AChapter not to apply where cash basis used

Nothing in this Chapter applies in calculating the profits of a trade on the cash basis.

31Disposal and acquisition of know-how

In Chapter 14 (disposal and acquisition of know-how), before section 192 insert—

191AChapter not to apply where cash basis used

Nothing in this Chapter applies in calculating the profits of a trade on the cash basis.

32Averaging profits of farmers and creative artists

In Chapter 16 (averaging profits of farmers and creative artists), after section 221 insert—

221AClaim not available where cash basis used

Nothing in this Chapter applies in calculating the profits of a trade on the cash basis.

33Compensation for compulsory slaughter of animal

In Chapter 16ZA (compensation for compulsory slaughter of animal), after section 225ZA insert—

225ZAAChapter not to apply where cash basis used

Nothing in this Chapter applies in calculating the profits of a trade on the cash basis.

34Oil activities

In Chapter 16A (oil activities), before section 225A (and the italic heading preceding it) insert—

Application of Chapter

225ZHChapter not to apply where cash basis used

Nothing in this Chapter applies in calculating the profits of a trade on the cash basis.

Adjustment income

35

Chapter 17 (adjustment income) is amended as follows.

36

After section 227 insert—

227AApplication of Chapter where cash basis used

1

This Chapter applies if—

a

an election under section 25A (cash basis for small businesses) has effect in relation to a trade for a tax year but no such election has effect in relation to the trade for the following tax year, or

b

no such election has effect in relation to a trade for a tax year but such an election has effect in relation to the trade for the following tax year.

2

But this Chapter does not apply to income which is charged in accordance with section 832.

37

After section 239 insert—

Spreading of adjustment income on leaving cash basis

239ASpreading on leaving cash basis

1

This section applies if—

a

an election under section 25A (cash basis for small businesses) has effect in relation to a trade for a tax year, and

b

no such election has effect in relation to the trade for the following tax year.

2

Any adjustment income is spread over 6 tax years as follows.

3

In each of the 6 tax years beginning with that in which the whole amount of the adjustment income would otherwise be chargeable to tax, an amount equal to one-sixth of the amount of the adjustment income is treated as arising and is charged to tax.

4

This section is subject to any election under section 239B (election to accelerate charge).

239BElection to accelerate charge under section 239A

1

A person who under section 239A is liable to tax for a tax year on an amount of adjustment income may elect for an additional amount to be treated as arising in the tax year.

2

The election must be made on or before the first anniversary of the normal self-assessment filing date for the tax year.

3

The election must specify the amount to be treated as income arising in the tax year (which may be any amount of the adjustment income not previously charged to tax).

4

If an election is made, section 239A applies in relation to any subsequent tax year as if the amount of adjustment income (as reduced by any previous application of this section) were reduced by the amount given by the following formula—

A×6T

where—

A is the additional amount treated as arising in the tax year for which the election is made, and

T is the number of tax years remaining after that tax year in the period of 6 tax years referred to in section 239A.

38Adjustments for capital allowances

After Chapter 17 insert—

CHAPTER 17ACash basis: adjustments for capital allowances

Introduction

240AProfessions and vocations

The provisions of this Chapter apply to professions and vocations as they apply to trades.

Adjustments on entering cash basis

240B“Entering the cash basis”

For the purposes of this Chapter a person carrying on a trade enters the cash basis for a tax year if—

a

an election under section 25A has effect in relation to the trade for the tax year, and

b

immediately before the beginning of the basis period for the tax year, such an election does not have effect in relation to the trade.

240CUnrelieved qualifying expenditure

1

This section applies if—

a

a person carrying on a trade enters the cash basis for a tax year (“the current tax year”), and

b

at the end of the basis period for the previous tax year, the person has unrelieved qualifying expenditure to carry forward from the chargeable period ending with that basis period.

2

But this section does not apply if section 240D (assets not fully paid for) applies.

3

In calculating the profits of the trade for the current tax year, a deduction is allowed for the relevant portion of the expenditure.

4

The “relevant portion” of the expenditure means the amount of the expenditure for which a deduction would be allowed in calculating the profits of the trade on the cash basis for a period if the expenditure was paid during that period.

5

The relevant portion of the expenditure is to be determined on such basis as is just and reasonable in all the circumstances.

6

Section 59(1) and (2) of CAA 2001 (unrelieved qualifying expenditure) has effect for the purposes of this section.

240DAssets not fully paid for

1

This section applies if—

a

a person carrying on a trade enters the cash basis for a tax year,

b

at any time before the beginning of the basis period for that tax year the person has obtained capital allowances in respect of expenditure on the provision of plant or machinery (“the relevant expenditure”), and

c

not all of the relevant expenditure has actually been paid by the person.

2

If the amount of the relevant expenditure that the person has actually paid exceeds the amount of capital allowances given in respect of the relevant expenditure, the difference is to be deducted in calculating the profits of the trade for the tax year.

3

If the amount of the relevant expenditure that the person has actually paid is less than the amount of capital allowances given in respect of the relevant expenditure, the difference is to be treated as a receipt in calculating the profits of the trade for the tax year.

4

The amount of any capital allowance obtained in respect of expenditure on the provision of any plant or machinery is to be determined on such basis as is just and reasonable in all the circumstances.

5

If the amount of capital allowances given in respect of the relevant expenditure has been reduced under section 205 or 207 of CAA 2001 (reduction where asset provided or used only partly for qualifying activity), the amount of the relevant expenditure that the person has actually paid is to be proportionately reduced for the purposes of this section.

6

This section does not apply where the relevant expenditure was incurred on the provision of a car.

In this subsection “car” has the same meaning as in Part 2 of CAA 2001 (see section 268A of that Act).

Successions where predecessor and successor are connected persons

240EEffect of election where predecessor and successor are connected persons

1

This section applies if—

a

a person carrying on a trade enters the cash basis for a tax year,

b

the person is the successor for the purposes of section 266 of CAA 2001, and

c

as a result of an election under section 267 of that Act, relevant plant or machinery is treated as sold by the predecessor to the successor at any time during the basis period for the tax year.

2

The provisions of this Chapter have effect in relation to the successor as if everything done to or by the predecessor had been done to or by the successor.

3

Any expenditure actually incurred by the successor on acquiring the relevant plant or machinery is to be ignored for the purposes of calculating the profits of the trade for the tax year.

4

In this section “the predecessor” and “relevant plant or machinery” have the same meaning as in section 267 of CAA 2001.

39Post-cessation receipts

1

Chapter 18 (post-cessation receipts) is amended as follows.

2

In section 246 (basic meaning of “post-cessation receipt”), after subsection (2) insert—

2A

If, immediately before a person permanently ceases to carry on a trade, an election under section 25A (cash basis for small businesses) has effect in relation to the trade, a sum is to be treated as a post-cessation receipt only if it would have been brought into account in calculating the profits of the trade on the cash basis had it been received at that time.

3

In section 254 (allowable deductions), after subsection (2) insert—

2A

If, immediately before the person permanently ceases to carry on the trade, an election under section 25A (cash basis for small businesses) has effect in relation to the trade, assume for the purposes of subsection (2) that such an election has effect in relation to the trade.

40Rent-a-room relief

In Chapter 1 of Part 7 of ITTOIA 2005 (rent-a-room relief), in section 786 (meaning of “rent-a-room receipts”), after subsection (4) insert—

5

Subsections (6) and (7) apply if—

a

the receipts would otherwise be brought into account in calculating the profits of a trade, and

b

an election under section 25A (cash basis for small businesses) has effect in relation to the trade.

6

Any amounts brought into account under section 96A (capital receipts) as a receipt in calculating the profits of the trade are to be treated as receipts within paragraph (a) of subsection (1) above.

7

The reference in subsection (1)(b) to receipts that accrue to an individual during the income period for those receipts is to be read as a reference to receipts that are received by the individual during that period.

Qualifying care relief

41

Chapter 2 of Part 7 of ITTOIA 2005 (qualifying care relief) is amended as follows.

42

In section 805 (meaning of “qualifying care receipts”), after subsection (3) insert—

4

Subsections (5) and (6) apply if—

a

the receipts would otherwise be brought into account in calculating the profits of a trade, and

b

an election under section 25A (cash basis for small businesses) has effect in relation to the trade.

5

Any amounts brought into account under section 96A (capital receipts) as a receipt in calculating the profits of the trade are to be treated as receipts within paragraph (a) of subsection (1) above.

6

The reference in subsection (1)(b) to receipts that accrue to an individual during the income period for those receipts is to be read as a reference to receipts that are received by the individual during that period.

43

In section 820 (periods of account not ending on 5th April)—

a

the existing provision becomes subsection (1), and

b

after that subsection insert—

2

Where an election under section 25A (cash basis for small businesses) has effect in relation to the trade, any reference in this section or sections 821 to 823 to the period of account in which receipts accrue is to be read as a reference to the period of account in which receipts are received.

PART 2Consequential amendments

44TMA 1970

In section 42 of TMA 1970 (procedure for making claims etc), in subsection (7)(e), after “sections” insert “25A,”.

45TCGA 1992

After section 47 of TCGA 1992 insert—

Cash basis accounting

47AExemption for disposals by persons using cash basis

1

No chargeable gain shall accrue on the disposal of, or of an interest in, an asset if conditions A to D are met in relation to the asset.

2

Condition A is that the asset is—

a

tangible movable property, and

b

a wasting asset.

3

Condition B is that, at any time during the period of ownership of the person making the disposal, the asset has been used for the purposes of a trade, profession or vocation carried on by the person.

4

Condition C is that an election under section 25A of ITTOIA 2005 (cash basis for small businesses) has effect in relation to the trade, profession or vocation at the time of the disposal.

5

Condition D is that—

a

any expenditure attributable to the asset or interest under paragraph (a) or (b) of section 38(1) has been brought into account in calculating the profits of the trade, profession or vocation on the cash basis, or

b

any of that expenditure would have been so brought into account if an election under section 25A of ITTOIA 2005 had had effect in relation to the trade, profession or vocation at the time the expenditure was paid.

6

Subsection (7) applies in the case of the disposal of, or of an interest in, an asset which, in the period of ownership of the person making the disposal—

a

has been used partly for the purposes of the trade, profession or vocation and partly for other purposes, or

b

has been used for the purposes of the trade, profession or vocation for part of that period.

7

In such a case—

a

the consideration for the disposal, and any expenditure attributable to the asset or interest by virtue of section 38(1)(a) and (b), shall be apportioned by reference to the extent to which that expenditure was, or (as the case may be) would have been, brought into account as mentioned in subsection (5) above,

b

the computation of the gain shall be made separately in relation to the apportioned parts of the expenditure and consideration, and

c

subsection (1) above shall apply to any gain accruing by reference to the computation in relation to the part of the consideration apportioned to use for the purposes of the trade, profession or vocation.

47BDisposals made by persons after leaving cash basis

1

This section applies where—

a

a person disposes of, or of an interest in, an asset that has been used for the purposes of a trade, profession or vocation carried on by the person, and

b

conditions A and B are met in relation to the trade, profession or vocation.

2

Condition A is that—

a

any expenditure attributable to the asset or interest under paragraph (a) or (b) of section 38(1) was incurred at a time when an election under section 25A of ITTOIA 2005 (cash basis for small businesses) had effect in relation to the trade, profession or vocation, and

b

that expenditure (“the relevant expenditure”) has been brought into account in calculating the profits of the trade, profession or vocation on the cash basis.

3

Condition B is that no such election has effect in relation to the trade, profession or vocation at the time of the disposal.

4

Section 39 (exclusion of expenditure by reference to tax on income) does not apply in relation to the relevant expenditure.

5

Section 41 (restriction of losses by reference to capital allowances and renewals allowances) has effect as if—

a

the election mentioned in subsection (2)(a) above had not had effect at the time the relevant expenditure was incurred, and

b

the reference in subsection (7) to qualifying expenditure included a reference to expenditure which, if that election had not had effect at that time, would have been qualifying expenditure.

6

Section 45 (exemption for certain wasting assets) and section 47 (wasting assets qualifying for capital allowances) have effect as if the election mentioned in subsection (2)(a) above had not had effect at the time the relevant expenditure was incurred.

Accordingly, any reference in those sections to expenditure qualifying for capital allowances is to be read as a reference to expenditure that would, in the absence of the election, have qualified for such allowances.

CAA 2001

46

In section 1 of CAA 2001 (capital allowances), after subsection (3) insert—

4

But a person is not entitled to any allowance or liable to any charge under this Act in calculating the profits of a trade, profession or vocation of the person in relation to which an election under section 25A of ITTOIA 2005 (cash basis for small businesses) has effect, other than an allowance in respect of expenditure incurred on the provision of a car (or a charge in connection with such an allowance).

5

In subsection (4) “car” has the same meaning as in Part 2 (see section 268A).

47

In section 59 of CAA 2001 (unrelieved qualifying expenditure), after subsection (3) insert—

4

If a person carrying on a trade, profession or vocation enters the cash basis for a tax year, no amount may be carried forward as unrelieved qualifying expenditure from the chargeable period ending with the basis period for the previous tax year.

5

But subsection (4) does not apply to unrelieved qualifying expenditure incurred on the provision of a car.

6

Where a person has unrelieved qualifying expenditure to carry forward from a chargeable period that is not expenditure allocated to a single asset pool, the amount of unrelieved qualifying expenditure incurred on the provision of a car is to be determined on such basis as is just and reasonable in all the circumstances.

7

Section 240B of ITTOIA 2005 (meaning of “entering the cash basis”) applies for the purposes of this section as it applies for the purposes of Chapter 17A of Part 2 of that Act.

48

In Chapter 5 of Part 2 of CAA 2001 (plant and machinery allowances and charges), after section 66 insert—

Application of Chapter to person leaving cash basis

66APersons leaving cash basis

1

This section applies if—

a

a person carrying on a trade, profession or vocation leaves the cash basis in a chargeable period, and

b

the person has at any time incurred expenditure which, if an election under section 25A of ITTOIA 2005 (cash basis for small businesses) had not had effect at that time, would have been qualifying expenditure.

2

In this section—

a

the “relieved portion” of the expenditure is the amount of that expenditure for which—

i

a deduction was allowed in calculating the profits of the trade, profession or vocation, or

ii

a deduction would have been so allowed if the expenditure had been incurred wholly and exclusively for the purposes of the trade, profession or vocation;

b

the “unrelieved portion” of the expenditure is any remaining amount of the expenditure.

3

For the purposes of determining any entitlement of the person to an annual investment allowance or a first-year allowance, the person is to be treated as incurring the unrelieved portion of the expenditure in the chargeable period.

4

For the purposes of determining the person’s available qualifying expenditure in a pool for the chargeable period (see section 58)—

a

the whole of the expenditure must be allocated to the appropriate pool (or pools) in that chargeable period, and

b

the available qualifying expenditure in a pool to which the expenditure (or some of it) is allocated is reduced by the relieved portion of that expenditure.

5

For the purposes of determining any disposal receipts (see section 60), the expenditure incurred by the person is to be regarded as qualifying expenditure.

6

For the purposes of this section a person carrying on a trade, profession or vocation leaves the cash basis in a chargeable period if—

a

immediately before the beginning of the chargeable period an election under section 25A had effect in relation to the trade, profession or vocation, and

b

such an election does not have effect in relation to the trade, profession or vocation for the chargeable period.

ITTOIA 2005

49

In section 31 of ITTOIA 2005 (relationship between rules prohibiting and allowing deductions), in subsection (2), omit the “or” at the end of paragraph (b) and after paragraph (c) insert

or

d

Chapter 17A,

50

In section 56 of ITTOIA 2005 (rules allowing deductions: professions and vocations), after “marks)” insert “and section 97A (cash basis: value of trading stock on cessation of trade)”.

51

Omit section 160 of ITTOIA 2005 (cash basis of calculation for barristers and advocates in early years of practice).

52

1

Chapter 17 of Part 2 of ITTOIA 2005 (adjustment income) is amended as follows.

2

In section 229(2)(a), for “sections 237 to 239” substitute “sections 237 to 239B”.

3

Omit sections 238 and 239 (spreading of adjustment income: barristers and advocates).

53

In Part 2 of Schedule 4 to ITTOIA 2005 (index of defined expressions), at the appropriate place insert—

the cash basis (in Part 2)

section 25A”;

“entering the cash basis (in Chapter 17A of Part 2)

section 240B

ITA 2007

54

1

In Part 4 of ITA 2007 (loss relief), Chapter 2 (trade losses) is amended as follows.

2

In section 64 (deduction of losses from general income), in subsection (8), after paragraph (ba) insert—

bb

section 74E (restriction on the relief and early trade losses relief where cash basis applies),

3

In section 72 (relief for individuals for losses in first 4 years of trade), in subsection (5), after paragraph (ba) insert—

bb

section 74E (restriction on the relief and trade loss relief where cash basis applies),

4

After section 74D insert—

Restriction on sideways relief and capital gains relief where cash basis applies

74ENo relief where cash basis used to calculate losses

1

This section applies if—

a

a person makes a loss in any trade in a tax year, and

b

an election under section 25A of ITTOIA 2005 (cash basis for small businesses) has effect in relation to the trade for that tax year.

2

No sideways relief or capital gains relief may be given to the person for the loss.

3

For the purposes of this section—

a

capital gains relief is, in relation to a loss, the treatment of a loss as an allowable loss by virtue of section 261B of TCGA 1992 (use of trading loss as a CGT loss), and

b

capital gains relief is given for a loss when it is so treated.

55

1

Chapter 1 of Part 8 of ITA 2007 (relief for interest payments) is amended as follows.

2

In section 383(5), after paragraph (a) insert—

aa

section 384B (restriction on relief where cash basis applies),

3

After section 384A insert—

384BRestriction on relief where cash basis applies

1

Relief is not to be given under this Chapter for a tax year for interest paid by a person on a relevant loan if the partnership to which the loan relates has made an election under section 25A of ITTOIA 2005 (cash basis for small businesses) for the tax year.

2

A loan is a “relevant loan” if—

a

it is a loan to which section 388 applies (loan to buy plant or machinery for partnership use), or

b

it is a loan to which section 398 applies (loan to invest in partnership) and which is not used for purchasing a share in a partnership.

PART 3Commencement and transitional provision

56

Subject to paragraph 57, the amendments made by this Schedule have effect for the tax year 2013-14 and subsequent tax years.

57

1

In a case where—

a

the profits of a barrister or advocate in independent practice for a period of account ending in the tax year 2012-13 have been calculated in accordance with section 160 of ITTOIA 2005 (barristers and advocates: alternative basis of calculation in early years of practice), and

b

if that section had not been repealed by this Schedule, the profits of the barrister or advocate for any subsequent period of account could have been calculated in accordance with that section,

the profits of the barrister or advocate for that subsequent period of account may be calculated in accordance with that section.

2

The repeal of sections 238 and 239 of ITTOIA 2005 (spreading of adjustment income: barristers and advocates) does not have effect in relation to any individual whose profits for a period of account ending in or before the tax year 2012-13 have been calculated in accordance with section 160 of ITTOIA 2005.

SCHEDULE 5Deductions allowable at a fixed rate

Section 18

1

Part 2 of ITTOIA 2005 (trading income) is amended as follows.

2

After Chapter 5 insert—

CHAPTER 5ATrade profits: deductions allowable at a fixed rate

Introduction

94BProfessions and vocations

The provisions of this Chapter apply to professions and vocations as they apply to trades.

94CProvisions not applicable to certain firms

The provisions of this Chapter do not apply in calculating the profits of a trade carried on by a firm for a period if one or more of the persons who have been partners in the firm at any time during the period was not an individual at that time.

Expenditure on vehicles

94DExpenditure on vehicles

1

This section applies if, in calculating the profits of a trade of a person for a period—

a

a deduction would otherwise be allowable for the period in respect of qualifying expenditure incurred in relation to a relevant vehicle (see subsection (2)), or

b

a deduction would be so allowable in respect of such expenditure but for the fact it is capital expenditure.

2

In this section “relevant vehicle” means a car, motor cycle or goods vehicle that—

a

is used for the purposes of the trade, and

b

is not an excluded vehicle (see section 94E).

3

The person may make a deduction under this section for the period in respect of the qualifying expenditure.

4

If a deduction for a period is made under this section—

a

no other deduction is allowed (for that or any other period) in respect of the qualifying expenditure, and

b

this section applies in relation to the relevant vehicle for every subsequent period for which the vehicle is used for the purposes of the trade.

5

The amount of the deduction is the appropriate mileage amount in relation to the relevant vehicle for the period (see section 94F).

6

In this section “qualifying expenditure”, in relation to a vehicle, means any expenditure incurred in respect of the acquisition, ownership, hire, leasing or use of the vehicle, other than incidental expenses incurred in connection with a particular journey.

7

For provision preventing capital allowances from being claimed in respect of qualifying expenditure incurred in relation to a relevant vehicle, see section 38ZA of CAA 2001.

94EExcluded vehicles

1

A car, motor cycle or goods vehicle that is used for the purposes of a trade is an “excluded vehicle” for the purposes of section 94D if condition A or B is met in relation to the vehicle.

2

Condition A is that the person who is or has been carrying on the trade has at any time claimed any capital allowances under Part 2 of CAA 2001 in respect of any expenditure incurred on the provision of the vehicle.

3

Condition B is that—

a

the vehicle is a goods vehicle or a motor cycle, and

b

any of the expenditure incurred on acquiring the vehicle has been deducted in calculating the profits of the trade for a period on the cash basis (see section 25A).

94FThe appropriate mileage amount

1

In calculating the profits of a trade for a period, the appropriate mileage amount in relation to a relevant vehicle for the period is—

M×R

where—

M is the number of miles of business journeys made by a person (other than as a passenger) using that vehicle in the period, and

R is the rate applicable to that kind of vehicle.

2

The rates applicable are as follows—

Table

Kind of vehicle

Rate per mile

Car or goods vehicle

45p for the first 10,000 miles

25p after that

Motor cycle

24p

3

In a case where the total number of miles of relevant business journeys made in the period is greater than 10,000, the rate of 45p per mile is available only in relation to 10,000 of those miles.

4

“Relevant business journey” means any business journey made in the period by a car or goods vehicle—

a

that is used for the purposes of the trade, and

b

in relation to which section 94D applies for the period.

5

In this section—

“business journey”, in relation to a vehicle used for the purposes of a trade, means any journey, or any identifiable part or proportion of a journey, that is made wholly and exclusively for the purposes of the trade, and

“relevant vehicle” has the same meaning as in section 94D.

6

The Treasury may by regulations amend subsection (2) so as to alter the rates or rate bands.

Regulations under this subsection may also make consequential amendments to subsection (3).

94GDefinitions of types of vehicle

1

This section applies for the purposes of sections 94D to 94F (and this section).

2

“Car” means a mechanically propelled road vehicle which is not—

a

a goods vehicle,

b

a motor cycle,

c

an invalid carriage, or

d

a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used.

3

“Goods vehicle” means a mechanically propelled road vehicle which—

a

is of a construction primarily suited for the conveyance of goods or burden of any description, and

b

is not a motor cycle.

4

“Motor cycle” has the meaning given by section 185(1) of the Road Traffic Act 1988.

5

For the purposes of this section “invalid carriage” has the meaning given by section 185(1) of the Road Traffic Act 1988.

Use of home for business purposes

94HUse of home for business purposes

1

This section applies if, in calculating the profits of a trade of a person for a period, a deduction (“the standard deduction”) would otherwise be allowable for the period in respect of the use of the person’s home for the purposes of the trade.

2

The person may, instead of making the standard deduction, make a deduction for the period under this section.

3

The amount of the deduction allowable for the period is the sum of the applicable amounts for each month, or part of a month, falling within the period.

4

The applicable amount for a month, or part of a month, is given by the following Table—

Table

Number of hours worked

Applicable amount

25 or more

£10.00

51 or more

£18.00

101 or more

£26.00

where the “number of hours worked” in a month (or part of a month) is the number of hours spent wholly and exclusively on work done by the person, or any employee of the person, in the person’s home wholly and exclusively for the purposes of the trade.

5

If the person has more than one home, this section has effect as if those homes were a single home.

6

The Treasury may by regulations amend subsection (4) so as to alter the rates or rate bands.

Premises used both as home and business premises

94IPremises used both as a home and as business premises

1

This section applies if—

a

a person carries on a trade at any premises,

b

the premises are used mainly for the purposes of carrying on the trade, but are also used by the person as a home,

c

the person incurs expenses in relation to the premises,

d

the expenses are incurred mainly (but not wholly and exclusively) for the purposes of the trade, and

e

in calculating the profits of the trade for a period, a deduction (“the standard deduction”) would otherwise be allowable for the period in respect of a part or proportion of the expenses in accordance with section 34(2).

2

The person may, instead of making the standard deduction, make a deduction for the period under this section.

3

The amount of the deduction allowable for the period is the amount of the expenses less the non-business use amount.

4

The non-business use amount is the sum of the applicable amounts for each month, or part of a month, falling within the period.

5

The applicable amount for a month, or part of a month, is given by the following Table—

Table

Number of relevant occupants

Applicable amount

1

£350

2

£500

3 or more

£650

6

For the purposes of subsection (5) “relevant occupant”, in relation to a month (or part of a month), means an individual who, at any time during that month (or that part of a month)—

a

occupies the premises as a home, or

b

stays at the premises otherwise than in the course of the trade.

7

The Treasury may by regulations amend subsection (5) so as to alter the rates or rate bands.

Kind of vehicle	Rate per mile
Car or goods vehicle	45p for the first 10,000 miles
25p after that
Motor cycle	24p

Number of hours worked	Applicable amount
25 or more	£10.00
51 or more	£18.00
101 or more	£26.00

Number of relevant occupants	Applicable amount
1	£350
2	£500
3 or more	£650

3

In section 31 (relationship between rules prohibiting and allowing deductions), in subsection (2), after paragraph (a) insert—

aa

Chapter 5A,

4

In Chapter 18 (post-cessation receipts), in section 254 (allowable deductions), after subsection (2A) (inserted by paragraph 39 of Schedule 4) insert—

2B

If—

a

the loss or expense is incurred, or the debit arises, in relation to a vehicle, and

b

immediately before the person permanently ceases to carry on the trade, section 94D (deduction allowable at fixed rate for expenditure on vehicles) applies in relation to the vehicle,

assume for the purposes of subsection (2) that that section applies in relation to the vehicle.

5

1

Part 2 of CAA 2001 (plant and machinery allowances) is amended as follows.

2

In Chapter 3 (qualifying expenditure), after section 38 insert—

38ZAVehicles for which deductions allowed at fixed rate under Part 2 of ITTOIA 2005

Expenditure is not qualifying expenditure if—

a

it is incurred in respect of a vehicle in a period, and

b

a deduction is made for the period in respect of the expenditure under section 94D of ITTOIA 2005 (deduction allowable at fixed rate for expenditure on vehicles).

3

In Chapter 5 (allowances and charges), in section 59 (unrelieved qualifying expenditure), at the end insert—

8

Subsection (9) applies if—

a

a person carrying on a trade, profession or vocation incurs expenditure in relation to a vehicle,

b

at the end of the basis period for a tax year, the person has unrelieved qualifying expenditure incurred in relation to the vehicle to carry forward from the chargeable period ending with that basis period (“the relevant chargeable period”),

c

in calculating the profits of a trade, profession or vocation of a person for the following tax year, a deduction is made under section 94D of ITTOIA 2005 in respect of expenditure incurred in relation to the vehicle, and

d

the person does not enter the cash basis for that tax year.

9

None of the unrelieved qualifying expenditure incurred in relation to the vehicle may be carried forward as unrelieved qualifying expenditure from the relevant chargeable period.

10

Where a person has unrelieved qualifying expenditure to carry forward from a chargeable period that is not expenditure allocated to a single asset pool, the amount of the unrelieved qualifying expenditure incurred in relation to the vehicle is to be determined on such basis as is just and reasonable in all the circumstances.

6

The amendments made by this Schedule have effect for the tax year 2013-14 and subsequent tax years.

SCHEDULE 6Employment income: duties performed in the UK and overseas

Section 19

PART 1Apportionment of earnings

1

Part 2 of ITEPA 2003 (employment income: charge to tax) is amended as follows.

2

In section 15 (earnings for year when employee UK resident), as amended by Schedule 45 to this Act, in subsection (5)—

a

after paragraph (a) omit “and”, and

b

after paragraph (b) insert

, and

c

section 41ZA (which is about determining the extent to which general earnings are in respect of United Kingdom duties).

3

In Chapter 5 (taxable earnings: remittance basis rules and rules for non-UK resident employees), after section 41 insert—

Apportionment of earnings

41ZABasis of apportionment

The extent to which general earnings are in respect of duties performed in the United Kingdom is to be determined under this Chapter on a just and reasonable basis.

PART 2Remittance basis of taxation: special mixed fund rules

4

Chapter A1 of Part 14 of ITA 2007 (remittance basis) is amended as follows.

5

In section 809Q (sections 809L and 809P: transfers from mixed funds), after subsection (1) insert—

1A

But this section must be read subject to section 809RA.

6

After section 809R insert—

809RASpecial mixed fund rules for certain employment cases

1

This section applies if—

a

an individual has general earnings from an employment for a tax year,

b

those earnings include both general earnings within section 15(1) of ITEPA 2003 (“section 15(1) earnings”) and general earnings within section 26(1) of that Act (“section 26(1) earnings”),

c

at least some of the section 15(1) earnings, or sums deriving (wholly or in part, and directly or indirectly) from at least some of the section 15(1) earnings, are paid into an account in that tax year at a time (a “relevant time”) when the account is a qualifying account of the individual, and

d

at least some of the section 26(1) earnings, or sums deriving (wholly or in part, and directly or indirectly) from at least some of the section 26(1) earnings, are also paid into the account in that tax year at a relevant time.

2

If this section applies, the composition of each transfer made from the account in that tax year at a relevant time is to be determined as follows—

Step 1 Suppose that all the condition A transfers made from the account in the tax year at a relevant time had been a single transfer made from the account at the end of the tax year.

Step 2 Suppose that all the other transfers made from the account in the tax year at a relevant time had been a single offshore transfer made at the end of the tax year immediately after the single transfer mentioned in step 1.

Step 3 Applying those suppositions—

a

find under section 809Q(3) the extent to which the single transfer mentioned in step 1 is of the individual’s income or chargeable gains, and

b

find under section 809R(4) the content of the single offshore transfer mentioned in step 2.

Step 4 Each transfer made from the account in the tax year at a relevant time is to be treated as containing the specified proportion of each kind of income or capital contained in the relevant deemed transfer.

“The specified proportion” is the amount of the transfer divided by the amount of the relevant deemed transfer.

“The relevant deemed transfer” is—

a

if the transfer is a condition A transfer, the single transfer mentioned in step 1, and

b

otherwise, the single offshore transfer mentioned in step 2.

3

Subsection (2) applies in determining the composition of a transfer for the purposes of sections 809Q and 809R but it does not otherwise affect the date on which a transfer is considered to occur for the purposes of this Chapter.

4

If the tax year is the tax year in which the account becomes a qualifying account, for the purpose of applying section 809Q(3) in relation to the single transfer mentioned in step 1 of subsection (2), treat the part of the tax year falling before the qualifying date for the account as a separate tax year.

5

If the account ceases to be a qualifying account of the individual during the tax year other than as a result of a breach of the deposit rule—

a

subsection (2) has effect as if references to the end of the tax year were to the end of the day on which the account ceases to be a qualifying account, and

b

for the purpose of applying section 809Q(3) in relation to the single transfer mentioned in step 1 of subsection (2), treat the part of the tax year falling after the day mentioned in paragraph (a) as a separate tax year.

6

A transfer from the account is a “condition A transfer” if and to the extent that—

a

condition A in section 809L is met, and

b

either—

i

the property or consideration for the service is (wholly or in part), or derives (wholly or in part, and directly or indirectly) from, the transfer, or

ii

the transfer, or anything deriving (wholly or in part, and directly or indirectly) from the transfer, is used as mentioned in section 809L(3)(c).

7

A transfer from the account is an “other transfer” if and to the extent that it is not a condition A transfer.

8

Treat a transfer as an “other transfer” if and to the extent that, at the end of the tax year—

a

it is not a condition A transfer, and

b

on the basis of the best estimate that can reasonably be made at that time, it will not become a condition A transfer.

9

If the account ceases to be a qualifying account of the individual during the tax year other than as a result of a breach of the deposit rule, subsection (8) has effect as if the reference to the end of the tax year were to the end of the day on which the account ceases to be a qualifying account.

10

“Qualifying account” and “the qualifying date” for an account are defined in section 809RB.

11

For the purposes of this section and sections 809RB to 809RD—

a

“employment” is to be read in accordance with section 4(1) of ITEPA 2003, and includes an office (as read in accordance with section 5(3) of that Act),

b

whether general earnings are “for” a tax year is to be determined as for the purposes of the employment income Parts of ITEPA 2003 (see section 3(2) of that Act),

c

a reference to anything “paid into” an account includes anything credited to the account by whatever means, and

d

references to a breach of the deposit rule are to be read in accordance with section 809RC.

809RBQualifying accounts

1

An individual may by notice to the Commissioners nominate an account to be a qualifying account of the individual for the purposes of section 809RA.

2

The notice must specify the qualifying date for the account.

3

“The qualifying date” for the account is the first date on which there is paid into the account sums falling within subsection (4) which (in total) are more than £10.

4

A sum falls within this subsection if it is, or derives wholly (whether directly or indirectly) from, general earnings of the individual from an employment for a tax year which is a relevant tax year in relation to the employment.

5

A tax year is a “relevant” tax year in relation to an employment if the general earnings which the individual has for the tax year from the employment include both general earnings within section 15(1) of ITEPA 2003 and general earnings within section 26(1) of that Act.

6

The individual may withdraw the nomination by giving a further notice to the Commissioners, specifying the date with effect from which the nomination is withdrawn.

7

A notice under subsection (1) or (6) must be in writing and include such information as the Commissioners may reasonably require.

8

A notice under subsection (1) or (6) must be given no later than—

a

31 January in the tax year following the tax year in which falls, as the case may be—

i

the qualifying date for the account, or

ii

the date with effect from which the nomination is withdrawn, or

b

such later date as the Commissioners may allow.

9

If an individual nominates an account under this section, the account is a “qualifying account” of the individual throughout the period—

a

beginning with the qualifying date, and

b

ending with the date before the earliest of the following dates—

i

the date on which the account is closed or ceases to be an ordinary bank account held by and for the benefit of the individual (alone or jointly with others);

ii

the date with effect from which the nomination is withdrawn under this section;

iii

the qualifying date for another qualifying account of the individual;

iv

6 April in a tax year in which there is a breach of the deposit rule which is not remedied or cannot be remedied;

v

6 April in a tax year for which the individual has no general earnings within section 26(1) of ITEPA 2003.

10

The account is not to be a qualifying account at all if—

a

at any time on the qualifying date, the account is not an ordinary bank account held by and for the benefit of the individual (alone or jointly with others), or

b

immediately before the qualifying date, the account has a credit balance of more than £10.

11

The account is not to be a qualifying account at all if the qualifying date falls in a tax year—

a

for which the individual has no general earnings within section 26(1) of ITEPA 2003, or

b

in which there is a breach of the deposit rule which is not remedied or cannot be remedied.

12

Subsection (9)(b)(iv) or (11)(b) (as relevant) is to be ignored if the breach occurs on or after a date falling within subsection (9)(b)(i) to (iii).

13

If, apart from this subsection, an individual might have nominated two or more accounts for which the qualifying date would be the same, the individual may nominate only one of those accounts.

14

If, apart from this subsection, an account would be a qualifying account of two or more individuals at any time, it is not to be a qualifying account of either or any of them at that time or any other time.

15

For the purposes of this section an account is an “ordinary bank account” if it is a cash account in a bank (whether a current or savings account) where sums standing to the credit of the account from time to time represent a debt owed by the bank to the account-holder.

809RCBreaches of the deposit rule

1

There is a breach of the deposit rule if a prohibited sum is paid into the account on or after the qualifying date.

2

A breach of the deposit rule is remedied if, within 30 days beginning with the day on which the individual became or ought reasonably to have become aware of the payment of the prohibited sum, the required amount is transferred out of the account by way of a single one-off transfer.

3

“The required amount” is an amount equal to—

a

the prohibited sum, plus

b

all the other prohibited sums (if any) that have been paid into the account since that sum was paid in.

4

If there are 3 breaches of the deposit rule in any 12 month period, subsection (2) does not apply to the third breach and, accordingly, the third breach cannot be remedied.

5

The payment of a prohibited sum (“the later prohibited sum”) into the account does not result in a breach of the deposit rule if—

a

a breach resulting from an earlier payment of a prohibited sum into the account is remedied, and

b

the later prohibited sum is represented by the required amount in relation to that breach.

6

A “prohibited sum” is anything other than a sum that is, or derives wholly (whether directly or indirectly) from, any of the following kinds of income or capital—

a

general earnings of the individual from an employment for a tax year which is a relevant tax year in relation to the employment,

b

general earnings of the individual from an employment which consist of money and are paid in a tax year which is a relevant tax year in relation to the employment,

c

an amount of specific employment income which, by virtue of Part 6, 7 or 7A of ITEPA 2003 or any other enactment, counts as employment income of the individual in respect of an employment for a tax year which is a relevant tax year in relation to the employment,

d

interest on the account, or

e

consideration for the disposal of employment-related securities or employment-related securities options in the circumstances described in subsection (7).

7

The circumstances are—

a

the securities or options were acquired pursuant to a right or opportunity available by reason of an employment of the individual,

b

the disposal is or occurs in conjunction with, or as soon as reasonably practicable after, a relevant event involving those securities or options, and

c

the tax year in which the relevant event occurs is a relevant tax year in relation to the employment.

8

For the purposes of subsection (7) each of the following is a “relevant event”—

a

the acquisition mentioned in subsection (7)(a), and

b

any event on the occurrence of which an amount (if positive) counts as employment income by virtue of Part 7 of ITEPA 2003 or would do so but for—

i

section 421E or 474 of that Act (exclusions: residence etc), or

ii

an election under section 430 or 431 of that Act.

9

For the purposes of this section a tax year is a “relevant” tax year in relation to an employment if—

a

the individual has general earnings from the employment for the tax year,

b

those earnings include both general earnings within section 15(1) of ITEPA 2003 (“section 15(1) earnings”) and general earnings within section 26(1) of that Act (“section 26(1) earnings”),

c

at least some of the section 15(1) earnings, or sums deriving (wholly or in part, and directly or indirectly) from at least some of the section 15(1) earnings, are paid into the account in the tax year, and

d

at least some of the section 26(1) earnings, or sums deriving (wholly or in part, and directly or indirectly) from at least some of the section 26(1) earnings, are also paid into the account in the tax year.

10

For the purposes of this section—

a

“employment-related securities” has the meaning given in section 421B(8) of ITEPA 2003, and

b

“employment-related securities options” has the meaning given in section 471(5) of that Act.

809RDEffect where 30-day deadline is met

1

This section applies if the required amount in relation to a breach of the deposit rule was transferred out of the account in accordance with section 809RC(2).

2

Sections 809Q and 809R have effect as if—

a

the intervening transactions had never taken place, and

b

each prohibited sum represented by the required amount had instead been transferred directly (at the time that sum was paid into the qualifying account) into the account or other property into which the required amount was transferred by virtue of the single one-off transfer.

3

Each of the following is an “intervening transaction”—

a

each payment into the qualifying account of a prohibited sum represented by the required amount, and

b

the single one-off transfer out of the qualifying account.

4

If it is supposed under step 1 or 2 of section 809RA(2) that a single transfer had been made in the intervening period, re-apply section 809Q or 809R in relation to that transfer taking account of subsection (2).

5

“The intervening period” is the period—

a

beginning with the day on which the breach occurred, and

b

ending with the day on which the single one-off transfer was made in accordance with section 809RC(2).

6

If more than one transfer of a sum equal to the required amount was transferred out of the qualifying account within the 30-day grace period, the first of those transfers is assumed to be the single one-off transfer.

7

“The 30-day grace period” is the period of 30 days mentioned in section 809RC(2).

PART 3Commencement

7

The amendments made by Part 1 of this Schedule have effect in relation to earnings for the tax year 2013-14 and subsequent tax years.

8

The amendments made by Part 2 of this Schedule have effect in relation to transfers from a mixed fund that are made in the tax year 2013-14 or any subsequent tax year.

SCHEDULE 7Remittance basis: exempt property

Section 20

1

Chapter A1 of Part 14 of ITA 2007 (remittance basis) is amended as follows.

2

In section 809X(3) (exempt property: public access rule), for “sections 809Z and 809Z1)” substitute “section 809Z)”.

3

1

Section 809Y (property that ceases to be exempt property treated as remitted) is amended as follows.

2

In subsection (2), for “either” substitute “any”.

3

After subsection (4) insert—

4A

Where exempt property has been lost, stolen or destroyed, the first and second cases do not apply in relation to the property during any period—

a

beginning with the time at which it was lost, stolen or destroyed, and

b

(if lost or stolen) ending with the time at which it is recovered.

4B

The third case is where a compensation payment is released in respect of exempt property that has been lost, stolen or destroyed.

4

In subsection (6), after “exempt property” insert “by virtue of the first or second case”.

4

After section 809YE insert—

809YFException to section 809Y: compensation taken offshore or invested

1

Section 809Y(1) does not apply to property if—

a

it ceases to be exempt property because a compensation payment in respect of it is released, and

b

conditions A and B are met.

2

Condition A is that the whole of the compensation payment is taken offshore or used by a relevant person to make a qualifying investment within the period of 45 days beginning with the day on which the payment is released.

3

Condition B is that, if Condition A is satisfied wholly or in part by using the compensation payment to make a qualifying investment, the remittance basis user makes a claim for relief under subsection (4) on or before the first anniversary of the 31 January following the tax year in which the payment is released.

4

If section 809Y(1) does not apply to property by virtue of subsection (1), the income and gains treated under section 809X as not remitted to the United Kingdom continue to be treated after the compensation payment is released as not remitted to the United Kingdom even though the property has ceased to be exempt property.

5

But nothing in subsection (4) prevents anything done in relation to any part of the compensation payment after that payment is taken offshore (or used to make a qualifying investment) from counting as a remittance of the underlying income or gains to the United Kingdom at the time when the thing is done.

6

Treat the compensation payment as containing or deriving from an amount of each kind of income and gain mentioned in section 809Q(4)(a) to (h) equal to the amount of that kind of income or gain contained in the exempt property when it was brought to, or received or used in, the United Kingdom (as mentioned in section 809X).

7

Where Condition A was met by using the compensation payment to make a qualifying investment—

a

the business investment provisions apply to the income and gains that continue, by virtue of subsection (4), to be treated as not remitted as they apply to income or gains that are treated under section 809VA(2) as not remitted, and

b

if the investment was made using more than just the compensation payment, treat only the part of the investment made using the payment as “the investment” for the purposes of those provisions.

5

1

Section 809Z (public access rule: general) is amended as follows.

2

In subsection (1), for “A to D” substitute “B and C”.

3

Omit subsection (2).

4

After subsection (8) insert—

8A

But if the property is lost or stolen—

a

the relevant period ends with the time at which it is lost or stolen, and

b

a new relevant period begins with its importation or the time at which it is recovered.

5

Omit subsection (10).

6

Omit section 809Z1 (public access rule: relevant VAT relief).

7

1

Section 809Z4 (temporary importation rule) is amended as follows.

2

In subsection (1), after “days” insert “(subject to any increase under subsection (3B))”.

3

In subsection (3)—

a

before paragraph (a) insert—

za

the property meets the public access rule,

b

after paragraph (b) insert—

ba

subsection (3A) applies to the property,

c

in paragraph (d) for “or 809YC(2)” substitute “, 809YC(2) or 809YF(4)”.

4

After that subsection insert—

3A

This subsection applies to the property if—

a

it is not available to be used or enjoyed in the United Kingdom by or for the benefit of a relevant person because it has been lost, stolen or destroyed,

b

(if lost or stolen) it has not been recovered, and

c

no compensation payment has been released in respect of it.

3B

If—

a

property that has been lost or stolen is recovered,

b

the first day after the day on which it is recovered is a countable day, and

c

excluding that countable day there have already been 231 or more countable days in relation to the property,

the number of countable days specified in subsection (1) is read as being increased by the number necessary for there to be 45 countable days beginning with the countable day mentioned in paragraph (b).

5

Omit subsections (4) to (10).

8

In section 809Z6 (exempt property: other interpretation), after subsection (4) insert—

5

References to property being lost, stolen or destroyed are to the property being lost, stolen or destroyed whilst in the United Kingdom.

6

“Compensation payment”, in relation to property that has been lost, stolen or destroyed, means any payment of compensation (whether under an insurance policy or otherwise) in respect of the property.

7

A compensation payment is “released” on the day on which it first becomes available for use in the United Kingdom by or for the benefit of any relevant person.

8

Property that has been lost or stolen is “recovered” on the day on which it becomes available to be used or enjoyed in the United Kingdom by or for the benefit of a relevant person.

Universal credit	WRA 2012	Part 1
	Any provision made for Northern Ireland which corresponds to Part 1 of WRA 2012

1. Cigarettes	An amount equal to 16.5 per cent of the retail price plus £176.22 per thousand cigarettes
2. Cigars	£219.82 per kilogram
3. Hand-rolling tobacco	£172.74 per kilogram
4. Other smoking tobacco and chewing tobacco	£96.64 per kilogram

the cash basis (in Part 2)	section 25A”;
“entering the cash basis (in Chapter 17A of Part 2)	section 240B