|
| |
|
92 (1) | Omit paragraph 78 (acquisition of shares from employee share ownership |
| |
| |
(2) | A trust instrument made before the day on which this Act is passed has |
| |
effect with the omission of any provision falling within a provision of |
| |
Schedule 2 to ITEPA 2003 omitted by this paragraph. |
| 5 |
| |
Enterprise management incentives: consequences of disqualifying events |
| |
93 (1) | In section 532 of ITEPA 2003 (modified tax consequences following |
| |
disqualifying events) in subsection (1)(b) for “40” substitute “90”. |
| |
(2) | The amendment made by this paragraph has effect in relation to |
| 10 |
disqualifying events occurring on or after the day on which this Act is |
| |
| |
| |
| |
Limit on income tax reliefs |
| |
| 15 |
1 | In Chapter 3 of Part 2 of ITA 2007 (calculation of income tax liability) after |
| |
| |
“24A | Limit on Step 2 deductions |
| |
(1) | If the taxpayer is an individual, there is a limit on certain deductions |
| |
which may be made for the tax year at Step 2. |
| 20 |
(2) | The limit is determined as follows. |
| |
(3) | Amount A must not exceed amount B. |
| |
| |
(a) | the deductions for the tax year at Step 2 for the reliefs listed |
| |
in subsection (6) taken together, less |
| 25 |
(b) | so much of those deductions as fall within subsection (7). |
| |
| |
| |
(b) | if more, 25% of the taxpayer’s adjusted total income for the |
| |
tax year (see subsection (8)). |
| 30 |
| |
(a) | relief under section 64 (trade loss relief against general |
| |
| |
(b) | relief under section 72 (early trade losses relief); |
| |
(c) | relief under section 96 (post-cessation trade relief); |
| 35 |
(d) | relief under section 120 (property loss relief against general |
| |
| |
(e) | relief under section 125 (post-cessation property relief); |
| |
|
| |
|
| |
|
(f) | relief under section 128 (employment loss relief against |
| |
| |
(g) | relief under Chapter 6 of Part 4 (share loss relief); |
| |
(h) | relief under Chapter 1 of Part 8 (interest payments); |
| |
(i) | relief under section 555 of ITEPA 2003 (deduction for |
| 5 |
liabilities relating to former employment); |
| |
(j) | relief under section 446 of ITTOIA 2005 (strips of government |
| |
securities: relief for losses); |
| |
(k) | relief under section 454(4) of ITTOIA 2005 (listed securities |
| |
held since 26 March 2003: relief for losses: persons other than |
| 10 |
| |
(7) | The deductions falling within this subsection are— |
| |
(a) | deductions for amounts of relief so far as attributable to |
| |
allowances under Part 3A of CAA 2001 (business premises |
| |
| 15 |
(b) | deductions for amounts of relief under a provision |
| |
mentioned in subsection (6)(a) to (e) so far as made from |
| |
profits of the trade or business to which the relief in question |
| |
| |
(c) | deductions for amounts of relief under the provision |
| 20 |
mentioned in subsection (6)(a) or (b) so far as attributable to |
| |
a deduction allowed under section 205 or 220 of ITTOIA 2005 |
| |
(deduction for overlap profit in final tax year or on change of |
| |
| |
(d) | deductions for amounts of relief under the provision |
| 25 |
mentioned in subsection (6)(g)— |
| |
(i) | where the shares in question fall within section |
| |
131(2)(a) (qualifying shares to which EIS relief is |
| |
| |
(ii) | where SEIS relief is attributable to the shares in |
| 30 |
question as determined in accordance with Part 5A |
| |
(seed enterprise investment scheme). |
| |
(8) | The taxpayer’s “adjusted total income” for the tax year is calculated |
| |
| |
| 35 |
| Take the amount of the taxpayer’s total income for the tax year. |
| |
| |
| Add back the amounts of any deductions allowed under Part 12 of |
| |
ITEPA 2003 (payroll giving) in calculating the taxpayer’s income |
| |
which is charged to tax for the tax year. |
| 40 |
| |
| If the taxpayer is given relief in accordance with section 192 of FA |
| |
2004 (pension schemes: relief at source) in respect of any contribution |
| |
paid in the tax year under a pension scheme, deduct the gross |
| |
amount of the contribution. |
| 45 |
| The “gross” amount of a contribution is the amount of the |
| |
contribution before deduction of tax under section 192(1) of FA 2004. |
| |
| |
|
| |
|
| |
|
| If the taxpayer is entitled to a deduction for relief under section |
| |
193(4) or 194(1) of FA 2004 (pension schemes: excess relief under net |
| |
payment arrangements or relief on making a claim) for the tax year, |
| |
deduct the amount of the excess or contribution (as the case may be). |
| |
| The result is the taxpayer’s adjusted total income for the tax year.” |
| 5 |
| |
2 (1) | ITA 2007 is amended as follows. |
| |
(2) | In section 23 (calculation of income tax liability) at step 2 for “section 25” |
| |
substitute “sections 24A and 25”. |
| |
(3) | In the following provisions (which explain how certain reliefs work) for |
| 10 |
“section 25(4) and (5)” substitute “sections 24A and 25(4) and (5)”— |
| |
| |
| |
| |
| 15 |
| |
(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),”. |
| 20 |
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 |
| 25 |
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 |
| |
| |
(3) | For this purpose, section 24A(6) of ITA 2007 (as inserted by paragraph 1 |
| 30 |
above) is treated as having effect for tax years before the tax year 2013-14 as |
| |
| |
(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 |
| |
| 35 |
(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 |
| |
| |
|
| |
|
| |
|
| |
| |
Cash basis for small businesses |
| |
| |
| |
| 5 |
1 | 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 |
| 10 |
of practice)” substitute “section 25A (cash basis for small businesses)”. |
| |
4 | After section 25 insert— |
| |
“25A | Cash 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 |
| 15 |
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 |
| 20 |
(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 |
| |
| |
5 | After Chapter 3 insert— |
| 25 |
| |
Trade profits: cash basis |
| |
| |
31A | Conditions 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 |
| 30 |
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 |
| |
| 35 |
|
| |
|
| |
|
(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 |
| 5 |
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). |
| 10 |
(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 |
| |
| |
(a) | are received during the basis period for the tax year, and |
| |
(b) | would be brought into account in calculating the profits of |
| 15 |
the trade, profession or vocation for that tax year on the cash |
| |
| |
| |
(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 |
| 20 |
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 |
| |
| |
(3) | Condition B is that the aggregate of the cash basis receipts of each |
| 25 |
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 |
| 30 |
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 |
| 35 |
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 |
| |
| 40 |
(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 |
| |
| |
| |
“universal credit claimant”, in relation to a tax year, means a |
| 45 |
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 relevant legislation” means— |
| |
(a) | Part 1 of the Welfare Reform Act 2012, or |
| |
(b) | any provision made for Northern Ireland which |
| 5 |
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 |
| |
| |
(8) | The Treasury may by order amend this section. |
| 10 |
(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. |
| 15 |
| |
(1) | A person is an excluded person in relation to a tax year if the person |
| |
meets any of conditions A to H. |
| |
| |
(a) | the person is a firm, and |
| 20 |
(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. |
| 25 |
(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 |
| |
| |
(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 |
| 30 |
| |
(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 |
| 35 |
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 |
| 40 |
as in Part 5 of CAA 2001 (see section 394(2) of that Act). |
| |
| |
(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 |
| 45 |
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 |
| |
| |
(10) | The Treasury may by order amend this section. |
| |
(11) | A statutory instrument containing an order under subsection (10) |
| 5 |
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 |
| 10 |
31D | Effect 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). |
| 15 |
(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 |
| |
| |
(3) | An election made by a person under section 25A ceases to have effect |
| |
| 20 |
(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 |
| |
| 25 |
(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. |
| |
| |
(a) | is made by a person under section 25A, and |
| 30 |
(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 |
| 35 |
respect of expenditure incurred on the provision of a car), see section |
| |
| |
Calculation of profits on cash basis |
| |
31E | Calculation of profits on cash basis |
| |
(1) | This section applies to professions and vocations as it applies to |
| 40 |
| |
(2) | To determine the profits of a trade for a tax year on the cash basis— |
| |
|
| |
|