(1)Section 831 of ITA 2007 (foreign income of individuals in United Kingdom for temporary purpose) is amended as follows.
(2)In subsection (1), for paragraph (b) substitute—
“(b)during the tax year in question the individual spends (in total) less than 183 days in the United Kingdom.”
(3)After that subsection insert—
“(1A)In determining whether an individual is within subsection (1)(b) treat a day as a day spent by the individual in the United Kingdom if (and only if) the individual is present in the United Kingdom at the end of the day.
(1B)But in determining that issue do not treat as a day spent by the individual in the United Kingdom any day on which the individual arrives in the United Kingdom as a passenger if—
(a)the individual departs from the United Kingdom on the next day, and
(b)during the time between arrival and departure the individual does not engage in activities that are to a substantial extent unrelated to the individual’s passage through the United Kingdom.”
(4)In section 832 of that Act (employment income of individuals in United Kingdom for temporary purpose), after subsection (1) insert—
“(1A)In determining whether an individual is within subsection (1)(b) treat a day as a day spent by the individual in the United Kingdom if (and only if) the individual is present in the United Kingdom at the end of the day.
(1B)But in determining that issue do not treat as a day spent by the individual in the United Kingdom any day on which the individual arrives in the United Kingdom as a passenger if—
(a)the individual departs from the United Kingdom on the next day, and
(b)during the time between arrival and departure the individual does not engage in activities that are to a substantial extent unrelated to the individual’s passage through the United Kingdom.”
(5)Section 9 of TCGA 1992 (residence, including temporary residence) is amended as follows.
(6)In subsection (3), for the words after “if and only if” substitute “the individual spends (in total) at least 183 days in the United Kingdom.”
(7)Insert at the end—
“(5)In determining for the purposes of subsection (3) above whether an individual spends (in total) at least 183 days in the United Kingdom treat a day as a day spent by the individual in the United Kingdom if (and only if) the individual is present in the United Kingdom at the end of the day.
(6)But in determining that issue for those purposes do not treat as a day spent by the individual in the United Kingdom any day on which the individual arrives in the United Kingdom as a passenger if—
(a)the individual departs from the United Kingdom on the next day, and
(b)during the time between arrival and departure the individual does not engage in activities that are to a substantial extent unrelated to the individual’s passage through the United Kingdom.”
(8)The amendments made by this section have effect for the tax year 2008-09 and subsequent tax years.
Schedule 7 contains provision for and in connection with the revision of the remittance basis.
Schedule 8 contains provision about the rates of research and development relief and vaccine research relief.
(1)Paragraph 5 of Schedule 20 to FA 2000 (R&D tax relief: staffing costs) is amended as follows.
(2)In sub-paragraph (1)(b), after “company;” insert—
“(ba)the compulsory contributions paid by the company in respect of benefits for directors or employees of the company under the social security legislation of an EEA State (other than the United Kingdom) or Switzerland;”.
(3)Before sub-paragraph (1A) insert—
“(1ZB)In sub-paragraph (1)(ba) “social security legislation” means legislation relating to any of the branches of social security listed in Article 3(1) of Regulation (EC) No 883/2004 of the European Parliament and of the Council of 29 April 2004 on the co-ordination of social security systems (as amended from time to time).”
(4)Schedule 13 to FA 2002 (vaccine research relief) is amended as follows.
(5)In paragraph 2 (qualifying expenditure)—
(a)in sub-paragraph (1)(a), at the end insert “or”,
(b)omit sub-paragraph (1)(c) (and the “or” before it), and
(c)omit sub-paragraph (4).
(6)In paragraph 6 (qualifying expenditure on sub-contracted research and development), omit—
(a)in sub-paragraph (1), the second sentence, and
(b)sub-paragraph (3) (expenditure on research sub-contracted to a charity, a university or a scientific research organisation).
(7)Omit paragraph 12 (qualifying expenditure on contributions to independent research and development).
(8)Omit paragraph 25 (refunds of qualifying expenditure on contributions to independent research and development).
(9)Accordingly, in paragraph 3 of Schedule 8 to this Act (changes to rates of vaccine research relief), omit sub-paragraphs (2)(e) and (3)(d).
(10)The amendments made by this section have effect in relation to expenditure incurred on or after such day as the Treasury may by order appoint.
(11)Paragraph 10(4) of Schedule 13 to FA 2002 (time limit for giving notice of election for connected persons treatment) does not apply to a notice of an election under that paragraph in relation to sub-contractor payments if—
(a)the sub-contractor falls within paragraph 6(3) of that Schedule (repealed by this section) (charity, university or scientific research organisation), and
(b)the notice is given before the end of the period of 12 months beginning with the day appointed under subsection (10).
Schedule 9 contains provision preventing a company from claiming research and development relief and vaccine research relief if it is not a going concern.
(1)A company is only entitled to R&D relief in respect of expenditure attributable to a research and development project if, or to the extent that, at that time, the total R&D aid in respect of expenditure by the company attributable to the project would not exceed 7.5 million euros.
(2)In subsection (1)—
“R&D relief” means any relief or tax credit under—
Schedule 20 to FA 2000 (tax relief for expenditure by SMEs on research and development), or
Schedule 13 to FA 2002 (tax relief for expenditure on vaccine research etc), and
“total R&D aid” means the total R&D aid calculated—
in accordance with Part 1 of Schedule 10, and
as if a claim or election had been made for the R&D relief mentioned in subsection (1).
(3)The Treasury may by regulations—
(a)increase the amount specified in subsection (1), and
(b)amend Part 1 of Schedule 10.
(4)Part 2 of Schedule 10 contains amendments consequential on this section.
(5)Subsections (1) to (4) and that Schedule come into force on such day as the Treasury may by order appoint.
(1)In paragraph 21 of Schedule 13 to FA 2002 (tax relief for expenditure by large companies on vaccine research etc), after sub-paragraph (3) insert—
“(3A)A claim under this paragraph must include a declaration that the availability of the relief claimed has resulted in an increase in—
(a)the amount, scope or speed of the research and development undertaken by the company, or
(b)the company’s expenditure on research and development.”
(2)The amendment made by subsection (1) has effect in relation to claims made on or after such day as the Treasury may by order appoint.
(1)In section 158(2)(b) of ITA 2007 (form and amount of EIS relief), for “£400,000” substitute “£500,000”.
(2)The amendment made by subsection (1) has effect for—
(a)such tax year as the Treasury may by order specify, and
(b)all tax years subsequent to the specified tax year.
(3)An order under subsection (2) may specify the tax year in which it is made.
(4)Section 1014(4) of ITA 2007 (orders etc subject to annulment) does not apply in relation to an order under subsection (2).
Schedule 11 contains provision about venture capital schemes.
(1)Part 3 of Schedule 5 to ITEPA 2003 (enterprise management incentives: qualifying companies) is amended as follows.
(2)In paragraph 8 (qualifying companies: introduction), omit the “and” at the end of the entry relating to paragraph 12, and after that entry insert—
“number of employees (see paragraph 12A), and”.
(3)After paragraph 12 insert—
12A(1)The number of employees requirement in the case of a single company is that the full-time equivalent employee number for it is less than 250.
(2)The number of employees requirement in the case of a parent company is that the sum of—
(a)the full-time equivalent employee number for it, and
(b)the full-time equivalent employee numbers for each of its qualifying subsidiaries,
is less than 250.
(3)The full-time equivalent employee number for a company is calculated as follows—
Step 1
Find the number of full-time employees of the company.
Step 2
Add, for each employee of the company who is not a full-time employee, such fraction as is just and reasonable.
The result is the full-time equivalent employee number.
(4)In this paragraph references to an employee—
(a)include a director, but
(b)do not include—
(i)an employee on maternity or paternity leave, or
(ii)a student on vocational training.”
(4)In paragraph 16 (excluded activities), after paragraph (i) insert—
“(ia)shipbuilding (see also paragraph 20A);
(ib)producing coal (see also paragraph 20B);
(ic)producing steel (see also paragraph 20C);”.
(5)After paragraph 20 insert—
20AIn paragraph 16(ia) “shipbuilding” has the same meaning as in the Framework on state aid to shipbuilding (2003/C 317/06), published in the Official Journal on 30 December 2003.
20B(1)This paragraph supplements paragraph 16(ib).
(2)“Coal” has the meaning given by Article 2 of Council Regulation (EC) No. 1407/2002 (state aid to coal industry).
(3)The production of coal includes the extraction of it.
20CIn paragraph 16(ic) “steel” means any of the steel products listed in Annex 1 to the Guidelines on national regional aid (2006/C 54/08), published in the Official Journal on 4 March 2006.”
(6)The amendments made by this section have effect in relation to options granted on or after the day on which this Act is passed.
(1)Schedule 12 contains provision about tax credits for certain foreign distributions.
(2)The amendments made by that Schedule have effect for the tax year 2008-09 and subsequent tax years.
(1)Section 13 of ICTA (small companies' relief) is amended as follows.
(2)In the second sentence of subsection (4) (meaning of “control” for purposes of definition of “associated company”), insert at the end “except that, in the application of subsection (6) of that section in relation to the company (“the taxpayer company”) and another company or companies for the purposes of this section, the references to an associate of a person (“P”) include a partner of the person only if the condition in subsection (4A) below is met.”
(3)After that subsection insert—
“(4A)The condition referred to in subsection (4) above is that relevant tax planning arrangements have at any time had effect in relation to the taxpayer company (whether in connection with its formation or otherwise).
(4B)In subsection (4A) above “relevant tax planning arrangements” means arrangements which—
(a)involve P and the partner, and
(b)secure a relevant tax advantage.
(4C)In subsection (4B) above—
“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable), other than any guarantee, security or charge given to or taken by a bank, and
“relevant tax advantage” means a reduction of the taxpayer company’s liability to corporation tax by virtue of an increase in relief under this section.”
(4)The amendments made by this section are treated as having come into force on 1 April 2008.
(1)Schedule 13 contains provisions about company gains from investment life insurance contracts.
(2)Schedule 14 contains amendments and repeals consequential on that Schedule etc.
(1)Schedule 15 contains provision about the effect of certain changes in trading stock on the calculation of profits of trades for the purposes of income tax or corporation tax.
(2)The amendments made by that Schedule have effect in relation to changes in trading stock occurring on or after 12 March 2008.
(3)In subsection (2) “change in trading stock” means—
(a)in relation to new section 172B of ITTOIA 2005, or paragraph 6 of Schedule 15, an appropriation of trading stock,
(b)in relation to new section 172C of ITTOIA 2005, or paragraph 7 of Schedule 15, a thing becoming trading stock,
(c)in relation to new section 172D of ITTOIA 2005, or paragraph 8 of Schedule 15, a disposal of trading stock, and
(d)in relation to new section 172E of ITTOIA 2005, or paragraph 9 of Schedule 15, an acquisition of trading stock.
Schedule 16 contains provision about—
(a)the eligibility of an investment manager to be the UK representative of a non-resident, or an agent of independent status in relation to a non-resident, and
(b)profits or income of non-residents that are to be disregarded if derived from certain investment transactions carried out by investment managers.
(1)The Commissioners for Her Majesty’s Revenue and Customs may by regulations—
(a)modify section 17 of TMA 1970 (banks etc required to report interest payments) in relation to interest paid or credited in respect of a relevant dormant account,
(b)modify Chapters 2 and 3 of Part 15 of ITA 2007 (deduction of income tax on interest payments at source) in relation to such interest, and
(c)provide that, for the purposes of Chapter 2 of Part 4 of ITTOIA 2005 (charge to income tax on interest), such interest is to be treated as not being paid until the time (if any) at which the balance of the dormant account is paid out following a claim made by virtue of section 1(2)(b) or 2(2)(b) of the 2008 Act.
(2)A relevant dormant account is a dormant account the balance of which is to be, or has been, transferred—
(a)to an authorised reclaim fund, with the result that section 1 of the 2008 Act will apply, or applies, in relation to the account, or
(b)to an authorised reclaim fund and one or more charities, with the result that section 2 of the 2008 Act will apply, or applies, in relation to the account.
(3)Interest paid or credited in respect of a relevant dormant account includes interest paid or credited by a person who administers the account on behalf of an authorised reclaim fund after the balance has been transferred.
(4)“The 2008 Act” means the Dormant Bank and Building Society Accounts Act 2008; and terms used in this section and in that Act have the same meaning in this section as in that Act.
(5)Regulations under subsection (1) are to be made by statutory instrument.
(6)A statutory instrument containing regulations under that subsection is subject to annulment in pursuance of a resolution of the House of Commons.
(7)In TCGA 1992, after section 26 insert—
(1)This section applies where the balance of a dormant account held by a person with a bank or building society is transferred—
(a)to an authorised reclaim fund, with the result that section 1 of the Dormant Bank and Building Society Accounts Act 2008 applies in relation to the account, or
(b)to an authorised reclaim fund and one or more charities, with the result that section 2 of that Act applies in relation to the account.
(2)For the purposes of this Act—
(a)the transfer is not to be treated as involving any acquisition or disposal of an asset, and
(b)the person’s rights under Part 1 of that Act are to be treated as the same asset as the original rights, acquired as the original rights were acquired and having the same characteristics as those rights.
(3)“The original rights” are the person’s rights against the bank or building society immediately before the transfer.
(4)Terms used in this section and in the Dormant Bank and Building Society Accounts Act 2008 have the same meaning in this section as in that Act.”
(8)Subsection (7) comes into force in accordance with provision made by order made by the Treasury.
In section 701 of ITTOIA 2005 (investment plan regulations: general and supplementary), insert at the end—
“(4)They may include provision having effect in relation to times before they are made if the provision does not impose or increase any liability to tax.
(5)They may make different provision for different cases or circumstances.”
(1)The Treasury may by regulations make provision about the treatment of participants in an offshore fund for the purposes of enactments relating to income tax, capital gains tax or corporation tax.
(2)In subsection (1)—
“enactment” includes subordinate legislation (within the meaning of the Interpretation Act 1978 (c. 30)), and
“offshore fund” has the same meaning as in Chapter 5 of Part 17 of ICTA (see sections 756A to 756C of that Act).
(3)Regulations under subsection (1) are to be made by statutory instrument.
(4)The first regulations under subsection (1) may not be made unless a draft of the instrument containing them has been laid before, and approved by a resolution of, the House of Commons.
(5)Any other statutory instrument containing regulations under subsection (1) is subject to annulment in pursuance of a resolution of the House of Commons.
(6)In Chapter 5 of Part 17 of ICTA (offshore funds)—
(a)in section 756A (general definition of offshore fund), omit subsection (4),
(b)in section 756B (treatment of umbrella funds)—
(i)in subsection (1), omit the words following paragraph (b), and
(ii)omit subsection (3),
(c)in section 756C (treatment of funds comprising more than one class of interest)—
(i)in subsection (2), omit paragraph (b) (and the “or” before it), and
(ii)omit subsection (3),
(d)omit sections 757 to 763 (further provision about offshore funds), and
(e)omit Schedules 27 and 28 (distributing funds and computation of offshore gains).
(7)In consequence of subsection (6), omit—
(a)paragraph 12 of Schedule 13 to FA 1988,
(b)paragraphs 10 and 11 of Schedule 14 to FA 1990,
(c)paragraph 14(43) to (45), (47) to (49) and (63) of Schedule 10 to TCGA 1992,
(d)section 134(4) of FA 1995,
(e)in paragraph 6 of Schedule 28 to FA 1996, “and in paragraph 5(5) of Schedule 27 to that Act”,
(f)paragraph 4(5) and (6) of Schedule 9 to FA 2002,
(g)paragraphs 1(1), 2(1), 4, 5, 6(3) to (6), 7 to 9, 14(2), (3), (5)(b) and (7), 15 and 16(1) of Schedule 26 to FA 2004,
(h)paragraphs 308, 309 and 350(4) of Schedule 1 to ITTOIA 2005,
(i)section 23 of F(No.2)A 2005,
(j)paragraph 47(1) of Schedule 12 to FA 2006,
(k)paragraphs 179(2)(a) and (b), 180 and 181 of Schedule 1 to ITA 2007, and
(l)in this Act, paragraphs 92 to 94 of Schedule 7 and paragraph 30 of Schedule 17.
(8)Subsections (6) and (7) come into force on such day as the Treasury may appoint by order made by statutory instrument.
(9)An order under subsection (8)—
(a)may appoint different days for different purposes, and
(b)may include savings.
(1)Regulations under section 41 may, in particular—
(a)make provision for an offshore fund, or a trustee or officer of an offshore fund, to make elections relating to the treatment of participants in the offshore fund for the purposes of income tax, capital gains tax or corporation tax,
(b)make provision about—
(i)the provision of information to Her Majesty’s Revenue and Customs,
(ii)the provision of information to participants,
(iii)the preparation of accounts, and
(iv)the keeping of records,
by offshore funds or trustees or officers of offshore funds, and
(c)make other provision about the administration of offshore funds.
(2)Regulations under section 41 may, in particular, make special provision about the treatment of participants in—
(a)an umbrella fund (within the meaning of section 756B of ICTA), and
(b)an offshore fund which comprises a class of interest in another fund (within the meaning of section 756C of ICTA).
(3)Regulations under section 41 may include provision consequential on the repeals made by that section.
(4)Regulations under section 41 may, in particular—
(a)provide for Her Majesty’s Revenue and Customs to exercise a discretion in dealing with any matter,
(b)make provision by reference to standards or other documents issued by any person,
(c)modify an enactment (whenever passed or made),
(d)make different provision for different cases or different purposes, and
(e)make incidental, consequential, supplementary or transitional provision.
(5)Regulations under section 41 may, in particular, make provision having effect—
(a)in the case of provision relating to income tax or capital gains tax, in relation to the tax year current on the day on which the regulations are made, and
(b)in the case of provision relating to corporation tax, in relation to accounting periods current on that day.
(6)In this section—
“enactment” and “offshore fund” have the same meaning as in section 41, and
“modify” includes amend, repeal or revoke.
Schedule 17 contains provisions relating to insurance companies etc.
Schedule 18 contains provision relating to friendly societies.
(1)In ITEPA 2003, after section 100 insert—
(1)This Chapter does not apply to living accommodation outside the United Kingdom provided by a company for a director or other officer of the company (“D”) or a member of D’s family or household if—
(a)the company is wholly owned by D or D and other individuals (and no interest in the company is partnership property), and
(b)the company has been the holding company of the property at all times after the relevant time.
(2)The company is “the holding company of the property” when—
(a)it owns a relevant interest in the property,
(b)its main or only asset is that interest, and
(c)the only activities undertaken by it are ones that are incidental to its ownership of that interest.
(3)The company is also “the holding company of the property” when—
(a)a company (“the subsidiary”) which is wholly owned by the company meets the conditions in paragraphs (a) to (c) of subsection (2),
(b)the company’s main or only asset is its interest in the subsidiary, and
(c)the only activities undertaken by the company are ones that are incidental to its ownership of that interest.
(4)“Relevant interest in the property” means an interest under the law of any territory that confers (or would but for any inferior interest confer) a right to exclusive possession of the property at all times or at certain times.
(5)“The relevant time” is the time the company first owned a relevant interest in the property; but this is subject to subsection (6).
(6)If—
(a)none of D’s interest in the company was acquired directly or indirectly from a person connected with D, and
(b)the company owned a relevant interest in the property at the time D first acquired an interest in the company,
“the relevant time” is the time D first acquired such an interest.
(1)Section 100A(1) does not apply if subsection (2), (3) or (4) applies.
(2)This subsection applies if—
(a)the company’s interest in the property was acquired directly or indirectly from a connected company at an undervalue, or
(b)the company’s interest in the property derives from an interest that was so acquired.
(3)This subsection applies if, at any time after the relevant time—
(a)expenditure in respect of the property has been incurred directly or indirectly by a connected company, or
(b)any borrowing of the company directly or indirectly from a connected company has been outstanding (but see subsection (7)).
(4)This subsection applies if the living accommodation is provided in pursuance of an arrangement the main purpose, or one of the main purposes, of which is the avoidance of tax or national insurance contributions.
(5)In subsection (2) references to the acquisition of an interest include the grant of an interest.
(6)For the purposes of that subsection, an interest is acquired at an undervalue if the total consideration for it is less than that which might reasonably have been expected to be obtained on a disposal of the interest on the open market; and “consideration” here means consideration provided at any time (and, for example, includes payments by way of rent).
(7)For the purposes of subsection (3)(b), no account is to be taken of—
(a)any borrowing at a commercial rate, or
(b)any borrowing which results in D being treated under Chapter 7 (taxable benefits: loans) as receiving earnings.
(8)In subsection (4) “arrangement” includes any scheme, agreement or understanding, whether or not enforceable.
(9)In this section “connected company” means—
(a)a company connected with D, with a member of D’s family or with an employer of D, or
(b)a company connected with such a company.”
(2)The amendment made by subsection (1) is treated as always having had effect.
(3)Section 145 of ICTA (living accommodation provided for employee) is to be treated as never having applied to living accommodation outside the United Kingdom provided in circumstances in which, had it been provided on or after 6 April 2003, section 100A(1) of ITEPA 2003 would cause Chapter 5 of Part 3 of ITEPA 2003 (taxable benefits: living accommodation) not to apply.
(1)In section 677(1) of ITEPA 2003 (UK social security benefits wholly exempt from tax), in Part 1 of Table B (benefits payable under primary legislation), insert at the appropriate places—
| “In-work credit | ETA 1973 | Section 2 |
| ETA(NI) 1950 | Section 1 | |
| In-work emergency discretion fund payment | ETA 1973 | Section 2 |
| In-work emergency fund payment | ETA(NI) 1950 | Section 1”, and |
| “Return to work credit | ETA 1973 | Section 2 |
| ETA(NI) 1950 | Section 1”. |
(2)In Part 1 of Schedule 1 to that Act (abbreviations of Acts etc), insert at the appropriate places—
| “ETA(NI) 1950 | The Employment and Training Act (Northern Ireland) 1950 (c. 29 (N.I.))”, and |
| “ETA 1973 | The Employment and Training Act 1973 (c. 50)”. |
(3)The amendments made by this section have effect for the tax year 2008-09 and subsequent tax years.
(1)In section 139(4) of ITEPA 2003 (car with a CO2emissions figure: the appropriate percentage), for the table substitute—
| “Tax year | Lower threshold (in g/km) |
|---|---|
| 2008-09 or 2009-10 | 135 |
| 2010-11 and subsequent tax years | 130”. |
(2)In consequence of the amendment made by subsection (1), omit—
(a)in FA 2003, section 138(3), and
(b)in FA 2006, section 59(6).
(3)The amendments made by this section have effect for the tax year 2008-09 and subsequent tax years.
(1)In section 239(3) of ITEPA 2003 (exemption in respect of payments and benefits connected with taxable cars and vans subject to section 149), insert at the end “or section 160 (benefit of van fuel treated as earnings).”
(2)In section 269(2) of that Act (exemption in respect of non-cash vouchers and credit-tokens where benefits or money obtained in connection with taxable car or subject to section 149)—
(a)for “, but see section 149(3)” substitute “or van, but see section 149(3) or section 160(3)”, and
(b)after “earnings)” insert “or section 160 (benefit of van fuel treated as earnings)”.
(1)In section 149AA of TCGA 1992 (restricted and convertible employment-related securities), after subsection (6) insert—
“(7)In subsection (1) the reference to any amount that constituted earnings under Chapter 1 of Part 3 of ITEPA 2003 does not include any amount of exempt income (within the meaning of section 8 of that Act).”
(2)ITEPA 2003 is amended as follows.
(3)In section 428(2)(b) as originally enacted (conditional interests in shares: amount of charge), insert at the end “(other than an amount of exempt income)”.
(4)In section 428(7)(b) (restricted securities: amount of charge), insert at the end “(other than an amount of exempt income)”.
(5)In section 446T(3)(b) (securities acquired for less than market value: amount of charge), insert at the end “(other than an amount of exempt income)”.
(6)In section 480(5)(a) (securities options: deductible amounts), insert at the end “(other than an amount of exempt income)”.
(7)In paragraph 21(3) of Schedule 23 to FA 2003 (corporation tax relief for employee share acquisition: amount of relief in case of restricted shares), insert at the end—
“For this purpose the amount that constitutes such earnings does not include any amount of exempt income (within the meaning of section 8 of that Act).”
(8)In paragraph 22C(3) of that Schedule (corporation tax relief for employee share acquisition: amount of relief in case of convertible shares), insert at the end—
“For this purpose the amount that constitutes such earnings does not include any amount of exempt income (within the meaning of section 8 of that Act).”
(9)The amendment made by subsection (1) has effect in relation to disposals made on or after 12 March 2008.
(10)The amendment made by subsection (3) has effect in relation to events within section 427(1)(a) or (b) of ITEPA 2003 (as originally enacted) occurring on or after that date.
(11)The amendments made by subsections (4) and (6) have effect in relation to chargeable events occurring on or after that date.
(12)The amendment made by subsection (5) has effect in relation to employment-related securities acquired (or treated as acquired) on or after that date.
(13)The amendments made by subsections (7) and (8) have effect in relation to awards of shares made on or after that date.
(1)In ICTA, omit sections 138 and 139 (share acquisitions by directors and employees: shares acquired before 26 October 1987).
(2)In ITEPA 2003—
(a)in section 418 (other related provisions), omit subsection (4), and
(b)in Schedule 7 (transitionals and savings), omit paragraph 57.
(3)The amendments made by this section have effect for the tax year 2008-09 and subsequent tax years.
(1)In ITEPA 2003, after section 297A insert—
(1)No liability to income tax arises in respect of payments of the Council Tax Relief to members of the armed forces of the Crown.
(2)Payments of the Council Tax Relief are payments designated as such by the Secretary of State.”
(2)The amendment made by subsection (1) has effect in relation to payments made on or after 1 April 2008.
(1)Section 291(2) of ITEPA 2003 (termination payments to MPs and others ceasing to hold office) is amended as follows.
(2)In paragraph (ea), omit “or”.
(3)At the end of paragraph (f) insert “, or
(g)made under section 26A of the Greater London Authority Act 1999 (payments on ceasing to hold office as Mayor of London or as a member of the London Assembly).”
(4)The amendments made by this section have effect in relation to payments made on or after 6 April 2008.
Schedule 19 contains provision for the Commissioners for Her Majesty’s Revenue and Customs to make payments to charities which receive donations under the gift aid scheme.
(1)Paragraph 35 of Schedule 16 to FA 2002 (community investment tax relief) is amended as follows.
(2)After sub-paragraph (1) insert—
“(1A)But if the investor is a bank, the investor does not receive value from the CDFI when the CDFI makes a deposit with the investor in the course of its ordinary banking arrangements.”
(3)In subsection (5), after “paragraph—” insert—
““bank” has the meaning given by section 840A of the Taxes Act 1988;”.
(4)The amendments made by this section are treated as always having had effect.
Schedule 20 contains provision about leases of plant or machinery.
(1)Schedule 10 to FA 2006 (sale etc of lessor companies etc) is amended as follows.
(2)In paragraph 23 (leasing business carried on in partnership: change in company’s interest in the business), after sub-paragraph (4) insert—
“(4A)But if at the end of the relevant day the other company is the only person carrying on the business, the expense—
(a)is treated as an expense incurred by the other company in its carrying on of the business (at a time when it is the only person carrying it on), and
(b)is allowed as a deduction in calculating for corporation tax purposes the profits of the business for the accounting period in which it is treated as incurred.”
(3)In paragraph 32 (amount of expense)—
(a)in sub-paragraph (2), for “The” substitute “Except in a case where sub-paragraph (3A) applies, the”, and
(b)after sub-paragraph (3) insert—
“(3A)If paragraph 23(4A) applies (business carried on by the other company alone), the amount of the expense of the other company is equal to the amount of the income.”
(4)In paragraph 39 (relief for certain expenses otherwise giving rise to carried forward loss)—
(a)after sub-paragraph (1) insert—
“(1A)This paragraph also applies if—
(a)a company is treated under paragraph 23(4A) as incurring an expense of a business in an accounting period,
(b)the company makes a loss in that accounting period, and
(c)some or all of that loss would otherwise be carried forward to the next accounting period of the company (“the subsequent accounting period”).”,
(b)in sub-paragraph (2), after “3” insert “, 23(4A)”, and
(c)in sub-paragraph (4), after “3” insert “, 23(4A)”,
and, accordingly, in the heading before that paragraph, after “3” insert “, 23(4A)”.
(5)The amendments made by this section are treated as always having had effect.
(1)Section 798 of ICTA (limits on foreign tax credit: trade income) is amended as follows.
(2)After subsection (1) insert—
“(1A)The references in section 796 and this section to income in respect of which a credit for foreign tax is to be allowed are to be treated as referring only to income arising out of the transaction, arrangement or asset in connection with which the credit for foreign tax arises.”
(3)In subsection (3), after “income” insert “in respect of which the credit is to be allowed”.
(4)The amendments made by this section have effect in relation to a credit for foreign tax which relates to—
(a)a payment of foreign tax on or after 6 April 2008, or
(b)income received on or after that date in respect of which foreign tax has been deducted at source.
(1)In section 115 of ICTA (partnerships involving companies: supplementary), after subsection (5B) insert—
“(5C)For the purposes of subsections (5) to (5B) the members of a partnership include any company which is entitled to a share of income or capital gains of the partnership.”
(2)In section 59 of TCGA 1992 (partnerships), insert at the end—
“(4)For the purposes of subsections (2) and (3) the members of a partnership include any person entitled to a share of capital gains of the partnership.”
(3)In section 858 of ITTOIA 2005 (resident partners and double taxation agreements), insert at the end—
“(4)For the purposes of this section the members of a firm include any person entitled to a share of income of the firm.”
(4)The amendments made by subsections (1) to (3) are treated as always having had effect.
(5)For the purposes of the predecessor provisions, the members of a partnership are to be treated as having included, at all times to which those provisions applied, a person entitled to a share of income or capital gains of the partnership.
(6)“The predecessor provisions” means—
(a)section 153(4) and (5) of the Income and Corporation Taxes Act 1970 (c. 10) (as it had effect under section 62(2) of F(No.2)A 1987), and
(b)sections 112(4) to (6) and 115(5) of ICTA.
(1)In ICTA, after section 815A insert—
(1)Where arrangements having effect under section 788 make the provision mentioned in subsection (2) (however expressed), that provision does not prevent income of a person resident in the United Kingdom being chargeable to income tax or corporation tax.
(2)The provision is that the profits of an enterprise which is resident outside the United Kingdom, or carries on a trade, profession or business the control or management of which is situated outside the United Kingdom, are not to be subject to United Kingdom tax except in so far as they are attributable to a permanent establishment of the enterprise in the United Kingdom.
(3)A person is resident in the United Kingdom for the purposes of this section if the person is so resident for the purposes of the arrangements having effect under section 788.
(4)This section does not apply in relation to—
(a)income of a company resident in the United Kingdom to which section 115(5A) applies, or
(b)income of a person resident in the United Kingdom to which section 858 of ITTOIA 2005 applies.”
(2)The amendment made by subsection (1) has effect in relation to income arising on or after 12 March 2008.
Schedule 21 contains provision restricting relief for losses made by individuals who, otherwise than in partnership, carry on trades in a non-active capacity.
(1)In section 103B(2) of ITA 2007 (meaning of “non-active partner” for purposes of provisions restricting trade loss relief), for “carried on for the purposes of the trade” substitute “of the trade and those activities are carried on—
(a)on a commercial basis, and
(b)with a view to the realisation of profits as a result of the activities.”
(2)The amendment made by subsection (1) has effect in relation to relevant periods ending on or after 12 March 2008.
Schedule 22 contains provision about avoidance involving financial arrangements.
(1)Schedule 23 contains anti-avoidance provisions about manufactured payments.
(2)The amendments made by that Schedule have effect in relation to manufactured payments (including deemed manufactured payments) made (or treated as made) on or after 31 January 2008.
(1)Chapter 4 of Part 17 of ICTA (controlled foreign companies) is amended as follows.
(2)In section 747 (imputation of chargeable profits of controlled foreign companies)—
(a)in subsection (6), before “and” at the end of paragraph (a) insert—
“(aa)any reference in this Chapter to its chargeable profits for an accounting period includes (subject to subsections (7) to (9)) income which accrues during that accounting period to the trustees of a settlement in relation to which the company is a settlor or a beneficiary;”, and
(b)after that subsection insert—
“(7)Where there is more than one settlor or beneficiary in relation to the settlement mentioned in subsection (6)(aa), the income is to be apportioned between the company and the other settlors or beneficiaries on a just and reasonable basis.
(8)Where income within subsection (6)(aa) is included in the chargeable profits of a company, any dividend or other distribution received by the company which derives from that income is not included in the chargeable profits of the company to the extent that it is so derived.
(9)Any income within subsection (6)(aa) which would (apart from this subsection)—
(a)be included in the chargeable profits of a company which is a beneficiary in relation to a settlement and apportioned under subsection (3), and
(b)be included in the chargeable profits of a company which is a settlor in relation to the settlement and apportioned under that subsection,
is not to be included in the chargeable profits of the company which is a settlor.”
(3)In section 755D (meaning of control)—
(a)after subsection (1) insert—
“(1A)For the purposes of this Chapter a person also controls a company if the person possesses, or is entitled to acquire, such rights as would—
(a)if the whole of the income of the company were distributed, entitle the person to receive the greater part of the amount so distributed,
(b)if the whole of the company’s share capital were disposed of, entitle the person to receive the greater part of the proceeds of the disposal, or
(c)in the event of the winding-up of the company or in any other circumstances, entitle the person to receive the greater part of the assets of the company which would then be available for distribution.”, and
(b)in subsection (2), after “above” insert “or satisfy subsection (1A) above”.
(4)In paragraph 2A of Schedule 25 (acceptable distribution policy)—
(a)in sub-paragraph (2), for “sub-paragraph (4)” substitute “sub-paragraphs (4) and (4A)”, and
(b)after sub-paragraph (4) insert—
“(4A)Sub-paragraph (2) does not apply where the distribution condition is satisfied in relation to the relevant accounting period, but—
(a)the relevant profits for that period do not include income within sub-paragraph (4B), and
(b)if that income were included, the distribution condition would not be satisfied in relation to that period.
(4B)The income within this sub-paragraph is—
(a)any income which accrues during the relevant accounting period to the trustees of a settlement in relation to which the company is a settlor or a beneficiary, and
(b)any income which accrues during that period to a partnership of which the company is a partner, apportioned between the company and the other partners on a just and reasonable basis.
(4C)Where there is more than one settlor or beneficiary in relation to the settlement mentioned in sub-paragraph (4B)(a), the income is to be apportioned between the company and the other settlors or beneficiaries on a just and reasonable basis.
(4D)In sub-paragraph (4B)(b) “partnership” includes an entity established under the law of a country or territory outside the United Kingdom of a similar character to a partnership; and “partner” is to be read accordingly.”
(5)In paragraph 6 of Schedule 25 (definition of exempt activities), after sub-paragraph (5B) insert—
“(5C)For the purposes of this paragraph, the gross income of a holding company or a superior holding company during an accounting period includes—
(a)any income which accrues during that period to the trustees of a settlement in relation to which the company is a settlor or a beneficiary, and
(b)any income which accrues during that period to a partnership of which the company is a partner, apportioned between the company and the other partners on a just and reasonable basis.
(5D)Where there is more than one settlor or beneficiary in relation to the settlement mentioned in sub-paragraph (5C)(a), the income is to be apportioned between the company and the other settlors or beneficiaries on a just and reasonable basis.
(5E)In sub-paragraph (5C)(b) “partnership” includes an entity established under the law of a country or territory outside the United Kingdom of a similar character to a partnership; and “partner” is to be read accordingly.”
(6)The amendments made by subsections (2) and (5) have effect in relation to income accruing on or after 12 March 2008.
(7)The amendments made by subsection (3) have effect for determining whether, at any time on or after 12 March 2008, a company is controlled by persons resident in the United Kingdom for the purposes of Chapter 4 of Part 17 of ICTA.
(8)The amendments made by subsection (4) have effect in relation to any dividend paid on or after 12 March 2008.
(9)In relation to an accounting period of a company beginning before, and ending on or after, 12 March 2008 (“the straddling period”), the amendments made by this section have effect as if, for the purposes of Chapter 4 of Part 17 of ICTA, 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.
(10)The company’s chargeable profits for the straddling period, and its creditable tax (if any) for that period, are to be apportioned to the two separate accounting periods on a just and reasonable basis.
(11)In this section “accounting period”, “chargeable profits” and “creditable tax” have the same meaning as in Chapter 4 of Part 17 of ICTA.
(1)In Schedule 29 to FA 2002 (gains and losses of a company from intangible fixed assets), after paragraph 95 (meaning of “related party”) insert—
95A(1)For the purposes of this Schedule, a person (“P”) shall be treated as a related party in relation to a company (“C”) within a Case in paragraph 95(1) if P would be a related party in relation to C within that Case but for any person (other than an individual) being the subject of—
(a)insolvency arrangements, or
(b)equivalent arrangements under the law of any country or territory (whether made when the person is solvent or insolvent).
(2)For the purpose of this paragraph, “insolvency arrangements” includes—
(a)arrangements under which a person acts as the liquidator, provisional liquidator, receiver, administrator or administrative receiver of a company or partnership, and
(b)voluntary arrangements proposed or approved in relation to a company or partnership under Part 1 of the Insolvency Act 1986 or Part 2 of the Insolvency (Northern Ireland) Order 1989.
(3)In this paragraph—
“administrative receiver” means an administrative receiver within the meaning of section 251 of the Insolvency Act 1986 or Article 5(1) of the Insolvency (Northern Ireland) Order 1989,
“administrator” means a person appointed to manage the affairs, business and property of the company or partnership under Schedule B1 to that Act or to that Order, and
“receiver” means a person appointed as receiver of some or all of the property of the company or partnership under an enactment or under an instrument issued for the purpose of representing security for, or the rights of creditors in respect of, any debt.”
(2)Subject to subsections (4) and (5), the amendment made by subsection (1) has effect in relation to the debits and credits to be brought into account for accounting periods beginning on or after 12 March 2008.
(3)For the purposes of subsection (2), an accounting period beginning before, and ending on or after, that day is treated as if so much of that period as falls before that day, and so much of that period as falls on or after that day, were separate periods.
(4)The amendment made by subsection (1) does not have effect for the purpose of determining whether a person was a related party in relation to a company at a time before 12 March 2008.
(5)That amendment has effect, for the purposes of paragraph 92 of Schedule 29 to FA 2002 as it applies otherwise than for determining the debits and credits to be brought into account under that Schedule, in relation to any transfer of an asset made on or after 12 March 2008.
(1)In Part 17 of ICTA (tax avoidance)—
(a)in section 704 (cancellation of corporation tax advantages: the prescribed circumstances), omit—
(i)paragraph B (and the “OR” after it), and
(ii)in paragraph C(1), paragraph (b) (and the “or” before it),
(b)in section 709 (definitions), omit subsection (2A),
(c)omit sections 731 to 735 (purchase and sale of securities), and
(d)omit section 736 (company dealing in securities: distribution materially reducing value of holding).
(2)In Part 13 of ITA 2007 (tax avoidance)—
(a)in section 684(2) (person liable to counteraction of income tax advantage), omit the entry relating to section 687 of that Act,
(b)omit section 687 (deductions from profits obtained following distribution or dealings), and
(c)in section 688 (receipt of consideration representing company’s assets, future receipts or trading stock), omit—
(i)in subsection (3), paragraph (b) (and the “or” before it), and
(ii)subsections (4), (5) and (9).
(3)In consequence of the amendments made by subsection (1)(a) and (b), omit—
(a)in FA 1997, section 73, and
(b)in ITA 2007, paragraph 155(4) and (5) and (6)(b) of Schedule 1.
(4)In consequence of the amendments made by subsection (1)(c) and (d), omit—
(a)in ICTA, sections 343(5) and 738,
(b)in FA 1990, section 53,
(c)in FA 1991, sections 55 and 56,
(d)in TCGA 1992, paragraph 14(40) and (41) of Schedule 10,
(e)in FA 1994, paragraph 17 of Schedule 16,
(f)in FA 1995, section 81,
(g)in FA 1996—
(i)paragraph 36 of Schedule 20, and
(ii)paragraph 9 of Schedule 38,
(h)in FA 1997, section 77,
(i)in F(No.2)A 1997—
(i)section 26, and
(ii)paragraph 14 of Schedule 6,
(j)in FA 2003, paragraph 6 of Schedule 38,
(k)in ITTOIA 2005, paragraphs 302 and 303 of Schedule 1,
(l)in ITA 2007—
(i)in section 64(8), paragraph (f) (and the “and” before it),
(ii)in section 72(5), paragraph (f) (and the “and” before it),
(iii)in section 448(3), “and section 451”,
(iv)in section 449(3), “and section 451”,
(v)section 451,
(vi)in section 505, in subsection (4) “and section 506” and, in subsection (5) “and in section 506”,
(vii)section 506, and
(viii)paragraphs 167 to 170 of Schedule 1, and
(m)in FA 2007, paragraph 6 of Schedule 14.
(5)The amendments made by subsections (1)(a) and (b), (2) and (3) have effect in relation to transactions in securities entered into on or after 1 April 2008.
(6)The amendment made by subsection (1)(c) has effect in relation to cases where the purchase by the first buyer (within the meaning of section 731(2) of ICTA) is made on or after that date.
(7)The amendment made by subsection (1)(d) has effect in relation to distributions made on or after that date.
(8)The amendments made by subsection (4) have effect in accordance with subsections (6) and (7).
(1)In section 685A of ITTOIA 2005 (settlor-interested settlements), after subsection (5) insert—
“(5A)If the recipient of the annual payment is treated by subsection (3) as having paid income tax in respect of the annual payment, the amount of the payment is treated as the highest part of the recipient’s total income for all income tax purposes except the purposes of sections 535 to 537 (gains from contracts for life insurance etc: top slicing relief).
(5B)See section 1012 of ITA 2007 (relationship between highest part rules) for the relationship between—
(a)the rule in subsection (5A), and
(b)other rules requiring particular income to be treated as the highest part of a person’s income.”
(2)In section 1012(4) of ITA 2007 (relationship between rules on highest part of total income), after the entry relating to section 465A of ITOIA 2005 insert—
“section 685A(5A) of ITTOIA 2005 (payments from trustees of settlor-interested settlements to be treated as highest part of total income),”.
(3)The amendments made by this section have effect for the tax year 2006-07 and subsequent tax years.
(1)In section 13(2) of ITA 2007 (income charged at dividend upper rate: individuals)—
(a)omit “and” at the end of paragraph (a), and
(b)at the end of paragraph (b) insert “, and
(c)is not relevant foreign income charged in accordance with section 832 of ITTOIA 2005.”
(2)The amendments made by subsection (1) have effect for the tax year 2008-09 and subsequent tax years.
(1)In section 964 of ITA 2007, omit subsection (5) (sums representing income tax deducted from annual payments not to be taken into account for the purpose of calculating amounts to be paid on account of income tax).
(2)The repeal made by subsection (1) has effect for the purpose of calculating the amount of any payments to be made under section 59A of TMA 1970 on account of liability to income tax for the tax year 2008-09 and subsequent tax years.
(1)In section 278 of ICTA (non-residents eligible for reliefs)—
(a)in subsection (2)(a), omit “or an EEA national”, and
(b)omit subsection (9).
(2)In section 56(3) of ITA 2007 (non-UK residents eligible for personal allowances and tax reductions), before paragraph (a) insert—
“(za)is a national of an EEA state,”.
(3)Accordingly, omit section 145 of FA 1996 (personal reliefs for non-resident EEA nationals).
(4)The amendments made by this section have effect for the tax year 2008-09 and subsequent tax years.