Finance (No. 2) Bill (HC Bill 193)

Part 1 Income tax, corporation tax and capital gains tax

CHAPTER 1 Charge, rates etc

Income tax

1 5Charge and rates for 2015-16

(1) Income tax is charged for the year 2015-16.

(2) For that tax year—

(a) the basic rate is 20%,

(b) the higher rate is 40%, and

(c) the additional rate is 45%.

2 Limits and allowances for 2015-16

(1) For the tax year 2015-16—

(a) the amount specified in section 37(2) of ITA 2007 (income limit for
5personal allowance for those born before 6 April 1938) is replaced with
“£27,700”,

(b) the amount specified in section 38(1) of that Act (blind person’s
allowance) is replaced with “£2,290”,

(c) the amount specified in section 43 of that Act (“minimum amount” for
10calculating tax reductions for married couples and civil partners) is
replaced with “£3,220”,

(d) the amount specified in section 45(3)(a) of that Act (amount for
calculating allowance in relation to marriages before 5 December 2005
where spouse is 75 over) is replaced with “£8,355”,

(e) 15the amount specified in section 45(4) of that Act (income limit for
calculating allowance in relation to marriages before 5 December 2005)
is replaced with “£27,700”,

(f) the amount specified in section 46(3)(a) of that Act (amount for
calculating allowance in relation to marriages and civil partnerships on
20or after 5 December 2005 where spouse or civil partner is 75 or over) is
replaced with “£8,355”, and

(g) the amount specified in section 46(4) of that Act (income limit for
calculating allowance in relation to marriages and civil partnerships on
or after 5 December 2005) is replaced with “£27,700”.

(2) 25Accordingly, for that tax year, section 57 of that Act (indexation of allowances),
so far as relating to the amounts specified in sections 37(2), 38(1), 43, 45(3)(a),
45(4), 46(3)(a) and 46(4) of that Act, does not apply.

3 Personal allowances for 2015-16

(1) Section 2 of FA 2014 (basic rate limit for 2015-16 and personal allowances from
302015) is amended as set out in subsections (2) and (3).

(2) In subsection (1)(b) (amount specified for 2015-16 in section 35(1) of ITA 2007
(personal allowance for those born after 5 April 1938)), for ““£10,500””
substitute ““£10,600””.

(3) In subsection (8) (amendments of section 57 of ITA 2007), omit the “and” at the
35end of paragraph (a) and after that paragraph insert—

“(aa) in subsection (1)(h), omit “36(2),”, and”.

(4) In section 55B(4)(a) of ITA 2007 (transferable tax allowance for married couples
and civil partners: entitlement to tax reduction), for “£1,050” substitute
“£1,060”.

(5) 40The amendments made by subsections (3) and (4) have effect for the tax year
2015-16 and subsequent tax years.

4 Basic rate limit from 2016

(1) The amount specified in section 10(5) of ITA 2007 (basic rate limit) is
replaced—

(a) for the tax year 2016-17, with “£31,900”, and

(b) for the tax year 2017-18, with “£32,300”.

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

5 5Personal allowance from 2016

(1) The amount specified in section 35(1) of ITA 2007 (personal allowance for those
born after 5 April 1938) is replaced—

(a) for the tax year 2016-17, with “£10,800”, and

(b) for the tax year 2017-18, with “£11,000”.

(2) 10Accordingly, for those tax years, 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.

(3) In section 34(1)(a) of that Act, for “sections 35 and 37 deal” substitute “section
35 deals”.

(4) 15In section 35 of that Act (personal allowance for those born after 5 April 1938)—

(a) for paragraphs (a) and (b) substitute “meets the requirements of section
56 (residence etc).”, and

(b) for the heading substitute “Personal allowance”.

(5) Omit section 37 of that Act (personal allowance for those born before 6 April
201938).

(6) In section 45(4) of that Act (marriages before 5 December 2005), for paragraphs
(a) and (b) substitute “half the excess”.

(7) In section 46(4) of that Act (marriages and civil partnerships on or after 5
December 2005), for paragraphs (a) and (b) substitute “half the excess”.

(8) 25In section 55B of that Act (transferable tax allowance for married couples and
civil partners: tax reduction: entitlement), in subsection (6) omit “or 37”.

(9) In section 55C of that Act (election to reduce personal allowance), in
subsections (1)(b) and (2), omit “or 37”.

(10) In section 57 of that Act (indexation of allowances)—

(a) 30in subsection (1)(a), for the words following “35(1)” substitute
“(personal allowance)”,

(b) in subsection (1)(h), omit “37(2),”, and

(c) in subsection (4), omit “37(2),”.

(11) The amendments made by subsections (3) to (10) have effect for the tax year
352016-17 and subsequent tax years.

Corporation tax

6 Charge for financial year 2016

(1) Corporation tax is charged for the financial year 2016.

(2) For that year the main rate of corporation tax is 20%.

CHAPTER 2 Income tax: general

7 Cars: the appropriate percentage for 2017-18

(1) ITEPA 2003 is amended as follows.

(2) Section 139 (car with a CO₂ figure: the appropriate percentage) is amended as
5set out in subsections (3) and (4).

(3) In subsection (2)—

(a) in paragraph (a), for “7%” substitute “9%”,

(b) in paragraph (aa), for “11%” substitute “13%”, and

(c) in paragraph (b), for “15%” substitute “17%”.

(4) 10In subsection (3), for “16%” substitute “18%”.

(5) In section 140(2) (car without a CO₂ figure: the appropriate percentage), in the
Table—

(a) for “16%” substitute “18%”, and

(b) for “27%” substitute “29%”.

(6) 15In section 142(2) (car first registered before 1 January 1998: the appropriate
percentage), in the Table—

(a) for “16%” substitute “18%”, and

(b) for “27%” substitute “29%”.

(7) The amendments made by this section have effect for the tax year 2017-18.

8 20Cars: the appropriate percentage for subsequent tax years

(1) ITEPA 2003 is amended as follows.

(2) Section 139 (car with a CO₂ figure: the appropriate percentage) is amended as
set out in subsections (3) and (4).

(3) In subsection (2)—

(a) 25in paragraph (a), for “9%” substitute “13%”,

(b) in paragraph (aa), for “13%” substitute “16%”, and

(c) in paragraph (b), for “17%” substitute “19%”.

(4) In subsection (3), for “18%” substitute “20%”.

(5) In section 140(2) (car without a CO₂ figure: the appropriate percentage), in the
30Table—

(a) for “18%” substitute “20%”, and

(b) for “29%” substitute “31%”.

(6) In section 142(2) (car first registered before 1 January 1998: the appropriate
percentage), in the Table—

(a) 35for “18%” substitute “20%”, and

(b) for “29%” substitute “31%”.

(7) The amendments made by this section have effect for the tax year 2018-19 and
subsequent tax years.

9 Diesel cars: the appropriate percentage for 2015-16

(1) In section 141(2) of ITEPA 2003 (diesel cars: the appropriate percentage), in
Step 3, for “35%” substitute “37%”.

(2) The amendment made by this section has effect for the tax year 2015-16.

10 5Zero-emission vans

(1) ITEPA 2003 is amended as follows.

(2) In section 155 (cash equivalent of the benefit of a van), for subsections (1) and
(2) substitute—

“(1) The cash equivalent of the benefit of a van for a tax year is calculated as
10follows.

(1A) If the restricted private use condition is met in relation to the van for the
tax year, the cash equivalent is nil.

(1B) If that condition is not met in relation to the van for the tax year—

(a) if the van cannot in any circumstances emit CO₂ by being driven
15and the tax year is any of the tax years 2015-16 to 2019-20, the
cash equivalent is the appropriate percentage of £3,150, and

(b) in any other case, the cash equivalent is £3,150.

(1C) The appropriate percentage for the purposes of subsection (1B)(a) is—

(a) 20% for the tax year 2015-16,

(b) 2040% for the tax year 2016-17,

(c) 60% for the tax year 2017-18,

(d) 80% for the tax year 2018-19, and

(e) 90% for the tax year 2019-20.”

(3) In section 156(1) (reduction for periods when van unavailable), for “155(1)”
25substitute “155”.

(4) In section 158(1) (reduction for payments for private use), for “155(1)”
substitute “155”.

(5) In section 160(1)(c) (benefit of fuel treated as earnings), for “section 155(1)(b)”
substitute “section 155(1B)(b)”.

(6) 30In section 170 (orders etc relating to Chapter 6 of Part 3), for subsection (1A)
substitute—

“(1A) The Treasury may by order substitute a different amount for the
amount for the time being specified in—

(a) section 155(1A) (cash equivalent where van subject only to
35restricted private use by employee),

(b) section 155(1B)(a) (cash equivalent for zero-emission van), and

(c) section 155(1B)(b) (cash equivalent in other cases).”

(7) Article 3 of the Van Benefit and Car and Van Fuel Benefit Order 2014 (S.I. 2014/
2896) is revoked.

(8) 40The amendments made by this section have effect for the tax year 2015-16 and
subsequent tax years.

11 Exemption for amounts which would otherwise be deductible

(1) In Part 4 of ITEPA 2003 (employment income: exemptions) after Chapter 7
insert—

“CHAPTER 7A Exemptions: amounts which would otherwise be deductible

289A 5Exemption for paid or reimbursed expenses

(1) No liability to income tax arises by virtue of Chapter 3 of Part 3 (taxable
benefits: expenses payments) in respect of an amount (“amount A”)
paid or reimbursed by a person to an employee (whether or not an
employee of the person) in respect of expenses if—

(a) 10an amount equal to or exceeding amount A would (ignoring
this section) be allowed as a deduction from the employee’s
earnings under Chapter 2 or 5 of Part 5 in respect of the
expenses, and

(b) the payment or reimbursement is not provided pursuant to
15relevant salary sacrifice arrangements.

(2) No liability to income tax arises in respect of an amount paid or
reimbursed by a person (“the payer”) to an employee (whether or not
an employee of the payer) in respect of expenses if—

(a) the amount has been calculated and paid or reimbursed in an
20approved way (see subsection (6)),

(b) the payment or reimbursement is not provided pursuant to
relevant salary sacrifice arrangements, and

(c) conditions A and B are met.

(c)(c)conditions A and B are met.

(3) 25Condition A is that the payer or another person operates a system for
checking—

(a) that the employee is, or employees are, in fact incurring and
paying amounts in respect of expenses of the same kind, and

(b) that a deduction would (ignoring this section) be allowed under
30Chapter 2 or 5 of Part 5 in respect of those amounts.

(4) Condition B is that neither the payer nor any other person operating the
system knows or suspects, or could reasonably be expected to know or
suspect—

(a) that the employee has not incurred and paid an amount in
35respect of the expenses, or

(b) that a deduction from the employee’s earnings would not be
allowed under Chapter 2 or 5 of Part 5 in respect of the amount.

(5) “Relevant salary sacrifice arrangements”, in relation to an employee to
whom an amount is paid or reimbursed in respect of expenses, means
40arrangements (whenever made, whether before or after the
employment began) under which—

(a) the employee gives up the right to receive an amount of general
earnings or specific employment income in return for the
payment or reimbursement, or

(b) the amount of other general earnings or specific employment
income received by the employee depends on the amount of the
payment or reimbursement.

(6) For the purposes of this section, a sum is calculated and paid or
5reimbursed in an approved way if—

(a) it is calculated and paid or reimbursed in accordance with
regulations made by the Commissioners for Her Majesty’s
Revenue and Customs, or

(b) it is calculated and paid or reimbursed in accordance with an
10approval given under section 289B.

(7) Regulations made under subsection (6)(a) may make different
provision for different purposes.

289B Approval to pay or reimburse expenses at a flat rate

(1) A person (“the applicant”) may apply to Her Majesty’s Revenue and
15Customs for approval to pay or reimburse expenses of the applicant’s
employees, or employees of another person, at a rate set out in the
application (“the proposed rate”).

(2) An officer of Revenue and Customs may give the approval if satisfied
that any calculation of a payment or reimbursement of expenses in
20accordance with the proposed rate, or such other rate as is agreed
between the applicant and the officer, would be a reasonable estimate
of the amount of expenses actually incurred.

(3) An approval under subsection (2) takes effect in accordance with a
notice (an “approval notice”) given to the applicant by an officer of
25Revenue and Customs.

(4) An approval notice must specify—

(a) the rate at which expenses may be paid or reimbursed,

(b) the day from which the approval takes effect, that day not being
earlier than the day on which the approval notice is given,

(c) 30the day on which the approval ceases to have effect, that day not
being later than the end of the period of 5 years beginning with
the day on which the approval takes effect, and

(d) the type of expenses to which the approval relates.

(5) An approval notice may specify that the approval is subject to
35conditions specified or described in the notice.

(6) An application for an approval under this section must be in such form
and manner, and contain such information, as is specified by Her
Majesty’s Revenue and Customs.

289C Revocation of approvals

(1) 40An officer of Revenue and Customs may, if in the officer’s opinion there
is reason to do so, revoke an approval given under section 289B by
giving a further notice (a “revocation notice”) to either or both of the
following—

(a) the person who applied for the approval, and

(b) 45the person who is paying or reimbursing expenses in
accordance with the approval.

(2) A revocation notice may revoke the approval from—

(a) the day on which the approval took effect, or

(b) a later day specified in the notice.

(3) A revocation under subsection (1) may be in relation to all expenses or
5expenses of a description specified in the revocation notice.

(4) If the revocation notice revokes the approval from the day on which the
approval took effect—

(a) any liability to tax that would have arisen in respect of the
payment or reimbursement of expenses if the approval had
10never been given in relation to such expenses is to be treated as
having arisen, and

(b) any person who has made, and any employee who has received,
a payment or reimbursement of expenses calculated in
accordance with the approval must make all the returns which
15they would have had to make if the approval had never been
given in relation to such expenses.

(5) If the revocation notice revokes the approval from a later day—

(a) any liability to tax that would have arisen in respect of the
payment or reimbursement of expenses if the approval had
20ceased to have effect on that day in relation to such expenses is
to be treated as having arisen, and

(b) any person who has made, and any employee who has received,
a payment or reimbursement of expenses calculated in
accordance with the approval must make all the returns which
25they would have had to make if the approval had ceased to have
effect in relation to such expenses on that day.

289D Exemption for other benefits

(1) No liability to income tax arises by virtue of any provision of the
benefits code in respect of an amount (“amount A”) treated as earnings
30of an employee as a result of the provision of a benefit if—

(a) an amount equal to amount A would (ignoring this section) be
allowed as a deduction from the employee’s earnings under
Chapter 3 of Part 5 in respect of the provision of the benefit, and

(b) the benefit is not provided pursuant to relevant salary sacrifice
35arrangements.

(2) “Relevant salary sacrifice arrangements”, in relation to an employee to
whom a benefit is provided, means arrangements (whenever made,
whether before or after the employment began) under which—

(a) the employee gives up the right to receive an amount of general
40earnings or specific employment income in return for the
provision of the benefit, or

(b) the amount of other general earnings or specific employment
income received by the employee depends on the provision of
the benefit.

289E 45Anti-avoidance

(1) This section applies if conditions A to C are met.

(2) Condition A is that, pursuant to arrangements, an amount—

(a) is paid or reimbursed to an employee in respect of expenses, or

(b) is treated as earnings of an employee as a result of the provision
of a benefit,

which, in the absence of this section, would have been exempt from
5income tax.

(3) Condition B is that, in the absence of those arrangements, the employee
would have received a greater amount of general earnings or specific
employment income in respect of which—

(a) tax would have been chargeable, or

(b) 10national insurance contributions would have been payable
(whether by the employee or another person).

(4) Condition C is that the main purpose, or one of the main purposes, of
the arrangements is the avoidance of tax or national insurance
contributions.

(5) 15If this section applies—

(a) the exemption conferred by section 289A does not apply in
respect of the amount paid or reimbursed as mentioned in
subsection (2)(a), and

(b) the exemption conferred by section 289D does not apply in
20respect of the amount treated as earnings as mentioned in
subsection (2)(b).

(6) In this section “arrangements” includes any scheme, transaction or
series of transactions, agreement or understanding, whether or not
legally enforceable.”

(2) 25The amendment made by this section has effect for the tax year 2016-17 and
subsequent tax years.

12 Abolition of dispensation regime

(1) ITEPA 2003 is amended as follows.

(2) Omit section 65 (dispensations relating to benefits for certain employees).

(3) 30Omit section 96 (dispensations relating to vouchers or credit-tokens).

(4) Accordingly—

(a) in section 95 (disregard for money, services or goods obtained), omit
subsection (1)(b) and the “or” before it, and

(b) in Schedule 7 (transitionals and savings), omit paragraphs 15, 16, 19
35and 20 and the italic headings before paragraphs 15 and 19.

(5) The amendments made by this section have effect for the tax year 2016-17 and
subsequent tax years.

(6) The repeal of sections 65 and 96 of ITEPA 2003 does not affect the power of an
officer of Revenue and Customs to revoke a pre-commencement dispensation
40from a date earlier than 6 April 2016.

(7) Accordingly, sections 65(6) to (9) and 96(5) to (8) of ITEPA 2003 continue to
have effect in relation to a pre-commencement dispensation.