Finance Bill (HC Bill 49)

Part 1 Income tax, corporation tax and capital gains tax

CHAPTER 1 Income tax and corporation tax charges and rate bands

Income tax

1 5Charge for 2012-13 and rates for 2012-13 and subsequent tax years

(1) Income tax is charged for the tax year 2012-13, and for that tax year—

(a) the basic rate is 20%,

(b) the higher rate is 40%, and

(c) the additional rate is 50%.

(2) For the tax year 2013-14—

(a) the basic rate is 20%,

(b) 5the higher rate is 40%, and

(c) the additional rate is 45%.

(3) In Chapter 2 of Part 2 of ITA 2007 (rates at which income tax is charged)—

(a) in section 8(3) (dividend additional rate), for “42.5%” substitute
“37.5%”,

(b) 10in section 9(1) (trust rate), for “50%” substitute “45%”, and

(c) in section 9(2) (dividend trust rate), for “42.5%” substitute “37.5%”.

(4) In section 394 of ITEPA 2003 (charge on relevant benefits provided under
employer-financed retirement benefits scheme), in subsection (4) for “50%”
substitute “45%”.

(5) 15In section 640 of ITTOIA 2005 (capital sums treated as income of the settlor:
grossing-up of deemed income), in subsection (6)(b)—

(a) omit the “and” at the end of sub-paragraph (ii),

(b) in sub-paragraph (iii) for “or any subsequent tax year.” substitute “,
2011-12 or 2012-13, and”, and

(c) 20after that sub-paragraph insert—

“( iv) 45%, if the relevant year is the year 2013-14 or
any subsequent tax year.”

(6) The amendments made by subsections (3) to (5) have effect for the tax year
2013-14 and subsequent tax years.

2 25Basic rate limit for 2012-13

(1) For the tax year 2012-13 the amount specified in section 10(5) of ITA 2007 (basic
rate limit) is replaced with “£34,370”.

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

3 30Personal allowance for 2012-13 for those aged under 65

(1) For the tax year 2012-13 the amount specified in section 35(1) of ITA 2007
(personal allowance for those aged under 65) is replaced with “£8,105”.

(2) Accordingly section 57 of that Act (indexation of allowances), so far as relating
to the amount specified in section 35(1) of that Act, does not apply for that tax
35year.

4 Personal allowances from 2013

(1) Chapter 2 of Part 3 of ITA 2007 (personal allowance etc) is amended in
accordance with subsections (2) to (6).

(2) In section 35 (personal allowance for those aged under 65)—

(a) 40in subsection (1), for paragraph (a) substitute—

“(a) was born after 5 April 1948, and”, and

(b) in the heading for “aged under 65” substitute “born after 5 April 1948”.

(3) In section 36 (personal allowance for those aged 65 to 74)—

(a) for subsection (1) substitute—

“(1) An individual who makes a claim is entitled to a personal
5allowance of £10,500, or (if greater) the section 35 amount, for a
tax year if the individual—

(a) was born after 5 April 1938 but before 6 April 1948, and

(b) meets the requirements of section 56 (residence etc).”,

(b) in subsection (2)—

(i) 10for “For” substitute “If the allowance under subsection (1) is
greater than the section 35 amount, for”,

(ii) in paragraph (a), for “half the excess” substitute “an amount
equal to half of that excess income”, and

(iii) in paragraph (b), for the words from “amount” to the end
15substitute “section 35 amount.”,

(c) after that subsection insert—

“(2A) In this section “the section 35 amount” means the amount of any
allowance to which the individual would be entitled under
section 35 for the tax year if the individual had been born after
205 April 1948.”, and

(d) in the heading for “aged 65 to 74” substitute “born after 5 April 1938
but before 6 April 1948”.

(4) In section 37 (personal allowance for those aged 75 and over)—

(a) for subsection (1) substitute—

“(1) 25An individual who makes a claim is entitled to a personal
allowance of £10,660, or (if greater) the section 35 amount, for a
tax year if the individual—

(a) was born before 6 April 1938, and

(b) meets the requirements of section 56 (residence etc).”,

(b) 30in subsection (2)—

(i) for “For” substitute “If the allowance under subsection (1) is
greater than the section 35 amount, for”,

(ii) in paragraph (a), for “half the excess” substitute “an amount
equal to half of that excess income”, and

(iii) 35in paragraph (b), for the words from “amount” to the end
substitute “section 35 amount.”,

(c) after that subsection insert—

“(2A) In this section “the section 35 amount” means the amount of any
allowance to which the individual would be entitled under
40section 35 for the tax year if the individual had been born after
5 April 1948.”, and

(d) in the heading for “aged 75 and over” substitute “born before 6 April
1938”.

(5) In section 41 (allowances in year of death), omit subsections (2) and (3).

(6) 45In section 57 (indexation of allowances)—

(a) in subsection (1)—

(i) in paragraph (a) for “aged under 65” substitute “born after 5
April 1948”, and

(ii) omit paragraphs (b) and (c), and

(b) in subsection (3)(a), for “, 36(1), 37(1),” substitute “and”.

(7) 5In section 508A of ICTA (contemplative religious communities: profits exempt
from corporation tax), in subsections (5) and (9)(b) for “under 65” substitute
“born after 5 April 1948”.

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

10Corporation tax

5 Main rate of corporation tax for financial year 2012

(1) In section 5(2)(a) of FA 2011 (main corporation tax rate for financial year 2012
on profits other than ring fence profits), for “25%” substitute “24%”.

(2) The amendment made by this section is treated as having come into force on 1
15April 2012.

6 Charge and main rate for financial year 2013

(1) Corporation tax is charged for the financial year 2013.

(2) For that year the rate of corporation tax is—

(a) 23% on profits of companies other than ring fence profits, and

(b) 2030% 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).

7 Small profits rate and fractions for financial year 2012

(1) For the financial year 2012 the small profits rate is—

(a) 2520% on profits of companies other than ring fence profits, and

(b) 19% on ring fence profits of companies.

(2) For the purposes of Part 3 of CTA 2010, for that year—

(a) the standard fraction is 1/100th, and

(b) the ring fence fraction is 11/400ths.

(3) 30In subsection (1) “ring fence profits” has the same meaning as in Part 8 of that
Act (see section 276 of that Act).

CHAPTER 2 Income tax: general

Child benefit

8 High income child benefit charge

Schedule 1 contains provision for and in connection with a high income child
5benefit charge.

Anti-avoidance

9 Post-cessation trade or property relief: tax-generated payments or events

(1) Part 4 of ITA 2007 (loss relief) is amended as follows.

(2) In section 96(7) (post-cessation trade relief), after paragraph (b) insert—

“(ba) 10section 98A (denial of relief for tax-generated payments or
events),”.

(3) After section 98 insert—

“98A Denial of relief for tax-generated payments or events

(1) Post-cessation trade relief is not available to a person in respect of a
15payment or an event which is made or occurs directly or indirectly in
consequence of, or otherwise in connection with, relevant tax
avoidance arrangements (and, accordingly, no section 261D claim may
be made in respect of the payment or event).

(2) For this purpose “relevant tax avoidance arrangements” means
20arrangements—

(a) to which the person is a party, and

(b) the main purpose, or one of the main purposes, of which is the
obtaining of a reduction in tax liability as a result of the
availability of post-cessation trade relief (whether by making a
25claim for that relief or a section 261D claim).

(3) In this section—

(a) “arrangements” includes any agreement, understanding,
scheme, transaction or series of transactions (whether or not
legally enforceable), and

(b) 30“section 261D claim” means a claim under section 261D of
TCGA 1992.”

(4) In section 125(6) (post-cessation property relief), after paragraph (b) insert—

“(ba) section 98A (denial of relief for tax-generated payments or
events),”.

(5) 35The amendments made by subsections (2) and (3) have effect in relation to—

(a) payments which are made on or after 12 January 2012 except where
they are made pursuant to an unconditional obligation in a contract
made before that date, or

(b) events which occur on or after that date.

(6) The amendment made by subsection (4) has effect in relation to—

(a) payments which are made on or after 13 March 2012 except where they
are made pursuant to an unconditional obligation in a contract made
before that date, or

(b) 5events which occur on or after that date.

(7) In subsections (5)(a) and (6)(a) “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).

(8) For the purposes of subsections (5)(b) and (6)(b) section 98 of ITA 2007 applies
10for determining when an event occurs.

10 Property loss relief against general income: tax-generated agricultural
expenses

(1) Chapter 4 of Part 4 of ITA 2007 (losses from property businesses) is amended
as follows.

(2) 15In section 117(3) (overview of Chapter), for “section 127A” substitute “sections
127A and 127B”.

(3) In section 120(7) (deduction of property losses from general income), at the end
insert “and section 127B (no relief for tax-generated agricultural expenses)”.

(4) After section 127A insert—

“127B 20 No relief for tax-generated agricultural expenses

(1) This section applies if—

(a) in a tax year a person makes a loss in a UK property business or
overseas property business (whether carried on alone or in
partnership),

(b) 25the business has a relevant agricultural connection for the
purposes of section 120 (see section 123(3) to (7)), and

(c) any allowable agricultural expenses deducted in calculating the
loss arise directly or indirectly in consequence of, or otherwise
in connection with, relevant tax avoidance arrangements.

(2) 30No property loss relief against general income may be given to the
person for so much of the applicable amount of the loss as is
attributable to expenses falling within subsection (1)(c).

(3) For the purposes of subsection (2), the applicable amount of the loss is
to be treated as attributable to expenses falling within subsection (1)(c)
35before anything else.

(4) In subsection (1) “relevant tax avoidance arrangements” means
arrangements—

(a) to which the person is a party, and

(b) the main purpose, or one of the main purposes, of which is the
40obtaining of a reduction in tax liability by means of property
loss relief against general income.

(5) In subsection (4) “arrangements” includes any agreement,
understanding, scheme, transaction or series of transactions (whether
or not legally enforceable).

(6) In this section “the applicable amount of the loss” has the meaning
given by section 122 and “allowable agricultural expenses” has the
meaning given by section 123.”

(5) The amendments made by this section have effect in relation to expenses
5arising directly or indirectly in consequence of, or otherwise in connection
with—

(a) arrangements which are entered into on or after 13 March 2012, or

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

(6) 10But 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
15otherwise).

11 Gains from contracts for life insurance etc

(1) In Chapter 9 of Part 4 of ITTOIA 2005 (gains from contracts for life insurance
etc), after section 473 insert—

“473A Connected policies or contracts treated as single policy or contract

(1) 20Policies or contracts which are connected with each other are treated as
a single policy or contract for the purposes of this Chapter.

(2) A policy or contract is “connected” with another policy or contract if—

(a) they meet the condition in subsection (3) in relation to each
other, and

(b) 25the terms on which either of them is issued are significantly
more or less favourable than would reasonably be expected if
the other were ignored or any policy or contract meeting the
condition in that subsection in relation to either of them were
ignored.

(3) 30A policy or contract meets the condition in this subsection in relation to
another policy or contract if—

(a) they are at any time simultaneously in force, and

(b) either of them is issued with reference to the other or with a
view to enabling the other to be issued on particular terms or
35facilitating its being issued on those terms.

(4) If—

(a) there is a policy or contract (“A”) with which two or more other
policies or contracts are connected as a result of subsection (2),
but

(b) 40the other policies or contracts are not connected with each other
as a result of that subsection,

A and the other policies or contracts are (as a result of this subsection)
to be regarded as “connected” with each other.”

(2) In section 491(2) of that Act (calculating gains from contracts for life insurance
45etc: general rules), in the definition of “PG”, at the end insert “but only in so far

as those gains have been, or fall to be, taken into account in calculating the total
income of a person as a result of this Chapter or Chapter 2 of Part 13 of ITA
2007”.

(3) In section 552 of ICTA (information: duty of insurers), for subsection (13)
substitute—

“(13) 5For the purposes of this section—

(a) section 491(2) of ITTOIA 2005 is taken to have effect as if, in the
definition of “PG”, the words from “but” to the end were
omitted, and

(b) no account is to be taken of the effect of section 541A of that
10Act.”

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

(a) any policy issued in respect of an insurance made on or after 21 March
2012, or

(b) any contract made on or after that date.

(5) 15The amendments made by this section also have effect in the case of any
insurance or contract made before 21 March 2012 if on or after that date—

(a) the policy or contract is varied with the result that there is an increase
in the benefits secured,

(b) there is an assignment of rights, or a share of the rights, conferred by
20the policy or contract (whether or not for money’s worth), or

(c) some or all of the rights conferred by the policy or contract become held
as security for a debt.

(6) For the purposes of subsection (5)(a)—

(a) an exercise of rights conferred by a policy or contract is to count as a
25variation of the policy or contract, and

(b) the reference to an increase in the benefits secured by a policy or
contract includes an increase in the benefits secured by another policy
or contract with which the policy or contract is connected (within the
meaning given by section 473A of ITTOIA 2005, as inserted by
30subsection (1)).

12 Settlements: income originating from settlors other than individuals

(1) ITTOIA 2005 is amended as follows.

(2) In section 627 (income where settlor retains an interest: exceptions), at the end
insert—

“(4) 35The rule in section 624(1) does not apply in relation to income which—

(a) arises under a settlement, and

(b) originates from any settlor who was not an individual.”

(3) In section 645 (property or income originating from settlor), in subsection (2),
for “section 644” substitute “sections 627 and 644”.

(4) 40The amendments made by this section have effect in relation to income arising
on or after 21 March 2012.

Reliefs

13 Champions League final 2013

(1) No liability to income tax arises in respect of any income from the 2013
Champions League final that arises to a person who is—

(a) 5an employee or contractor of an overseas team that competes in the
final, and

(b) non-UK resident at the time of the final.

(2) The reference in subsection (1) to income from the 2013 Champions League
final is to income related to duties or services performed by the person in the
10United Kingdom in connection with the final.

(3) The exemption under subsection (1) does not apply to—

(a) income that arises as a result of a contract entered into after the final, or
of any amendment, after the final, of a contract entered into before the
end of the final, or

(b) 15income that is the subject of tax avoidance arrangements.

(4) Income is the subject of tax avoidance arrangements if—

(a) arrangements have been made which, but for subsection (3)(b), would
result in a person obtaining an exemption under subsection (1) for the
income, and

(b) 20those arrangements, or other arrangements of which they form part,
have as their main purpose, or one of their main purposes, the
obtaining of that exemption.

(5) 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
25the exemption under subsection (1).

(6) In this section—

• “the 2013 Champions League final” means the final of the UEFA
  Champions League 2012/2013 competition held in England in 2013;

• “contractor”, in relation to an overseas team, means an individual who is
  30not an employee of the team but who performs services for the team—

  (a)

  under the terms of a contract with the team, or

  (b)

  under the terms of a contract, or that individual’s employment,
  with a company which is a member of the same group of
  companies as the team (within the meaning given by section 152
  35of CTA 2010);

• “employee” and “employment” are to be read in accordance with section
  4 of ITEPA 2003;

• “income” means employment income or profits of a trade, profession or
  vocation (including profits treated as arising as a result of section 13 or
  4014 of ITTOIA 2005);

• “overseas team” means a football club which is not a member of the
  Football Association, the Scottish Football Association, the Football
  Association of Wales or the Irish Football Association.

14 Cars: security features not to be regarded as accessories

(1) 45ITEPA 2003 is amended as follows.