Finance Bill (HC Bill 1)

Finance BillPage 10

rates), before the entry (inserted by this Act) relating to section 12A insert—

  • “section 11C (income charged at the default basic, higher and
    additional rates: non-UK resident individuals),

  • section 11D (savings income charged at the savings basic, higher
    5and additional rates: individuals),

  • section 12 (savings income charged at the starting rate for
    savings),”.

(8) In section 11 (income charged at the basic rate: other persons)—

(a) in the heading, for “basic rate: other persons” substitute “default basic
10rate: non-individuals”, and

(b) in subsection (1), before “basic” insert “default”.

(9) After section 11B insert—

11C Income charged at the default basic, higher and additional rates: non-
UK resident individuals

(1) 15Income tax on a non-UK resident individual’s income up to the basic
rate limit is charged at the default basic rate.

(2) Income tax is charged at the default higher rate on a non-UK resident
individual’s income above the basic rate limit and up to the higher rate
limit.

(3) 20Income tax is charged at the default additional rate on a non-UK
resident individual’s income above the higher rate limit.

(4) Subsections (1) to (3) are subject to—

  • section 11D (savings income charged at the savings basic, higher
    and additional rates),

  • 25section 12 (savings income charged at the starting rate for
    savings),

  • section 12A (savings income charged at the savings nil rate),

  • section 13 (income charged at the dividend ordinary, upper and
    additional rates: individuals), and

  • 30any other provisions of the Income Tax Acts (apart from section
    10) which provide for income to be charged at different rates of
    income tax in some circumstances.

11D Income charged at the savings basic, higher and additional rates

(1) Income tax is charged at the savings basic rate on an individual’s
35income which—

(a) is saving income, and

(b) would otherwise be charged at the basic rate or the default basic
rate.

(2) Income tax is charged at the savings higher rate on an individual’s
40income which—

(a) is savings income, and

(b) would otherwise be charged at the higher rate or the default
higher rate.

(3) Income tax is charged at the savings additional rate on an individual’s
45income which—

Finance BillPage 11

(a) is savings income, and

(b) would otherwise be charged at the additional rate or the default
additional rate.

(4) Subsections (1) to (3)—

(a) 5have effect after sections 12 and 12A have been applied (so that
any reference in subsections (1) to (3) to income which would
otherwise be charged at a particular rate does not include
income charged at the starting rate for savings or at the savings
nil rate), and

(b) 10are subject to any other provisions of the Income Tax Acts (apart
from sections 10 and 11C) which provide for income to be
charged at different rates of income tax in some circumstances.

(5) Section 16 has effect for determining the extent to which an individual’s
savings income above the starting rate limit for savings would
15otherwise be charged at the basic, higher or additional rate or the
default basic, default higher or default additional rate.

(6) In relation to an individual who is a Scottish taxpayer, references in this
section to income which would otherwise be charged at a particular
rate are to be read as references to income that would, if the individual
20were not a Scottish taxpayer (but were UK resident), be charged at that
rate (and subsection (5) is to be read accordingly).”

(10) In section 12(1) (income charged at the starting rate for savings)—

(a) omit “(rather than the basic rate)”, and

(b) for “as is savings income” substitute as—

(a) 25is savings income, and

(b) would otherwise be charged at the basic rate or the
default basic rate”.

(11) In section 12A (inserted by this Act)—

(a) in each of subsections (3) and (4), after “rather than the basic, higher or
30additional rate” insert “or the default basic, default higher or default
additional rate”, and

(b) in subsection (5), for “section 10” substitute “sections 10 and 11C”.

(12) In section 12B (inserted by this Act), in subsection (8) (income charged at
savings nil-rate: meaning of “additional-rate income” and “higher-rate
35income”)—

(a) in paragraph (a)(i), after “at the additional rate” insert “, default
additional rate”,

(b) in paragraph (a)(ii), after “additional rate” insert “, or default additional
rate,”,

(c) 40in paragraph (a)(iv), after “additional rate” insert “or default additional
rate”,

(d) in paragraph (b)(i), after “at the higher rate” insert “, default higher
rate”,

(e) in paragraph (b)(ii), after “higher rate” insert “, or default higher rate,”,
45and

(f) in paragraph (b)(iv), after “higher rate” insert “or default higher rate”.

(13) In section 16(1) (purposes of rules about highest part of income), before the

Finance BillPage 12

“and” at the end of the paragraph (aa) (inserted by this Act) insert—

(ab) the rate at which income tax would be charged on a person’s
savings income above the starting rate limit for savings apart
from sections 11D and 12A,”.

(14) 5In section 17(1) (repayment where tax paid at basic rate instead of starting rate
for savings), for “at the basic rate” substitute “at a rate greater than the starting
rate for savings”.

(15) In section 55B (entitlement to transferable tax allowances for married couples
and civil partners)—

(a) 10in subsection (2)(b) as amended by section 5 of this Act, after “other
than the basic rate,” insert “the default basic rate, the savings basic
rate,”, and

(b) in subsection (3), after “is the basic rate” insert “or default basic rate”.

(16) In section 55C(1)(c) (election to reduce personal allowance conditional on not
15becoming subject to higher rates) as amended by section 5 of this Act, after
“other than the basic rate,” insert “the default basic rate, the savings basic
rate,”.

(17) In section 58(2) (“adjusted net income” includes grossed-up gift aid donations),
after “grossed up by reference to the basic rate for the tax year” insert “if for the
20tax year the individual is UK resident but not a Scottish taxpayer, by reference
to the default basic rate for the tax year if for the tax year the individual is non-
UK resident”.

(18) In section 414(2)(a) (gift aid donation treated as made after deduction of tax at
the basic rate or Scottish basic rate), before the “or” at the end of sub-paragraph
25(i) insert—

(“ia) at the default basic rate if for the tax year the individual
is non-UK resident,”.

(19) In section 415 (grossing-up rate for gift aid purposes), after “the basic rate for
the tax year in which the gift is made” insert “if the gift is made by an
30individual who for that tax year is UK resident but not a Scottish taxpayer, by
reference to the default basic rate for that tax year if the gift is made by an
individual who for that tax year is non-UK resident”.

(20) In section 828B(5) (exemption for non-domiciled UK residents conditional on
not being subject to higher rates) as amended by section 4 of this Act, after
35“other than the basic rate” insert “, the savings basic rate”.

(21) In section 989 (definitions for the purposes of the Income Tax Acts), at the
appropriate places insert—

  • ““default additional rate” means the rate of income tax of that
    name determined pursuant to section 6C,

  • 40“default basic rate” means the rate of income tax of that name
    determined pursuant to section 6C,

  • “default higher rate” means the rate of income tax of that name
    determined pursuant to section 6C,”

and—

  • 45““savings additional rate” means the rate of income tax of that
    name determined pursuant to section 7A,”

Finance BillPage 13

and—

  • ““savings basic rate” means the rate of income tax of that name
    determined pursuant to section 7A,

  • “savings higher rate” means the rate of income tax of that name
    5determined pursuant to section 7A,”.

(22) In Schedule 4 (index of defined expressions), at the appropriate places insert—

“default additional rate section 6C (as applied by section 989)”
“default basic rate section 6C (as applied by section 989)”
“default higher rate section 6C (as applied by section 989)”
“savings additional rate 10section 7A (as applied by section 989)”
“savings basic rate section 7A (as applied by section 989)”
“savings higher rate section 7A (as applied by section 989)”

(23) In sections 4(4) and (5) and 4BA(1) of TCGA 1992 (rate of capital gains tax
depends on individual’s liability to higher rates of income tax), after “at the
15higher rate” insert “, the default higher rate, the savings higher rate”.

(24) Subject to any provision made by virtue of subsection (25)(b), the amendments
made by this section come into force on the day appointed by the Treasury
under section 13(14) of the Scotland Act 2016 and have effect—

(a) for the tax year appointed by the Treasury under section 13(15) of the
20Scotland Act 2016, and

(b) for subsequent tax years.

(25) The Treasury may by regulations make—

(a) such consequential provision as they consider appropriate in
connection with any preceding provision of this section;

(b) 25such transitional or saving provision as they consider appropriate in
connection with the coming into force of any provision of the preceding
subsections of this section.

(26) Regulations under this section may amend, repeal or revoke an enactment,
whenever passed or made (including this Act).

(27) 30Regulations under this section must be made by statutory instrument.

(28) A statutory instrument containing regulations under this section which
includes provision amending or repealing a provision of an Act may not be
made unless a draft of the instrument has been laid before and approved by a
resolution of the House of Commons.

(29) 35Any other statutory instrument containing regulations under this section, if
made without a draft having been approved by a resolution of the House of
Commons, is subject to annulment in pursuance of a resolution of the House of
Commons.

(30) In subsection (26) “enactment” includes an enactment contained in subordinate
40legislation (within the meaning of the Interpretation Act 1978).

Finance BillPage 14

Employment income: taxable benefits

7 Taxable benefits: application of Chapters 5 to 7 of Part 3 of ITEPA 2003

(1) Part 3 of ITEPA 2003 (employment income: earnings and benefits etc treated as
earnings) is amended as follows.

(2) 5In section 97 (living accommodation to which Chapter 5 applies), after
subsection (1) insert—

(1A) In determining for the purposes of this Chapter whether this Chapter
applies to living accommodation provided for an individual it is
immaterial whether or not the terms on which it is provided constitute
10a fair bargain.”

(3) In section 114 (cars, vans and related benefits to which Chapter 6 applies), after
subsection (1) insert—

(1A) In determining for the purposes of this Chapter whether this Chapter
applies by virtue of subsection (1) to a car or van made available to an
15individual it is immaterial whether or not the terms on which the car or
van is made available constitute a fair bargain.”

(4) For section 117 substitute—

117 Meaning of car or van made available by reason of employment

(1) For the purposes of this Chapter a car or van made available by an
20employer to an employee or member of an employee’s family or
household is to be regarded as made available by reason of the
employment unless subsection (2) or (3) excludes the application of this
subsection.

(2) Subsection (1) does not apply where—

(a) 25the employer is an individual, and

(b) the car or van in question is made available in the normal course
of the employer’s domestic, family or personal relationships.

(3) Subsection (1) does not apply where—

(a) the employer carries on a vehicle hire business under which
30cars or vans of the same kind are made available to members of
the public for hire,

(b) the car or van in question is hired to the employee or member in
the normal course of that business, and

(c) in hiring that car or van the employee or member is acting as an
35ordinary member of the public.”

(5) In section 173 (loans to which Chapter 7 applies), after subsection (1) insert—

(1A) In determining for the purposes of this Chapter whether a loan is an
employment-related loan it is immaterial whether or not the terms of
the loan constitute a fair bargain.”

(6) 40The amendments made by this section have effect for the tax year 2016-17 and
subsequent tax years.

Finance BillPage 15

8 Cars: appropriate percentage for 2019-20 and 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) 5In subsection (2)—

(a) in paragraph (a), for “13%” substitute “16%”,

(b) in paragraph (aa), for “16%” substitute “19%”, and

(c) in paragraph (b), for “19%” substitute “22%”.

(4) In subsection (3), for “20%” substitute “23%”.

(5) 10Section 140 (car without a CO2 figure: the appropriate percentage) is amended
as set out in subsections (6) and (7).

(6) In subsection (2), in the Table—

(a) for “20%” substitute “23%”, and

(b) for “31%” substitute “34%”.

(7) 15In subsection (3)(a), for “13%” (as substituted by section 9(3)) substitute “16%”.

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

(a) for “20%” substitute “23%”, and

(b) for “31%” substitute “34%”.

(9) 20The amendments made by this section have effect for the tax year 2019-20 and
subsequent tax years.

9 Cars which cannot emit CO2: appropriate percentage for 2017-18 and 2018-19

(1) In section 140(3)(a) of ITEPA 2003 (car which cannot emit CO2: the appropriate
percentage), for “7%” substitute “9%”.

(2) 25The amendment made by subsection (1) has effect for the tax year 2017-18.

(3) In section 140(3)(a) of ITEPA 2003, for “9%” substitute “13%”.

(4) The amendment made by subsection (3) has effect for the tax year 2018-19.

10 Diesel cars: appropriate percentage

(1) In section 24 of FA 2014 (cars: the appropriate percentage), omit the following
30(“the repealing provisions”)—

(a) subsection (2),

(b) subsection (6),

(c) subsection (10),

(d) subsection (11), and

(e) 35subsection (15).

(2) Any provision of ITEPA 2003 amended or omitted by the repealing provisions
has effect for the tax year 2016-17 and subsequent tax years as if the repealing
provisions had not been enacted.

Finance BillPage 16

11 Cash equivalent of benefit of a van

(1) Section 155 of ITEPA 2003 (cash equivalent of the benefit of a van) is amended
as follows.

(2) In subsection (1B)(a), for “2019-20” substitute “2021-22”.

(3)
5In subsection (1C), for paragraphs (b) to (e) substitute—

(b) 20% for the tax year 2016-17;

(c) 20% for the tax year 2017-18;

(d) 40% for the tax year 2018-19;

(e) 60% for the tax year 2019-20;

(f) 1080% for the tax year 2020-21;

(g) 90% for the tax year 2021-22.”

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

12 Tax treatment of payments from sporting testimonials

15Schedule 2 contains provision about the tax treatment of payments from
sporting testimonials.

13 Exemption for trivial benefits provided by employers

(1) ITEPA 2003 is amended as follows.

(2) After section 323 insert—

323A 20 Trivial benefits provided by employers

(1) No liability to income tax arises in respect of a benefit provided by, or
on behalf of, an employer to an employee or a member of the
employee’s family or household if—

(a) conditions A to D are met, or

(b) 25in a case where subsection (2) applies, conditions A to E are met.

(2) This subsection applies where—

(a) the employer is a close company, and

(b) the employee is—

(i) a person who is a director or other office-holder of the
30employer, or

(ii) a member of the family or household of such a person.

(3) Condition A is that the benefit is not cash or a cash voucher within the
meaning of section 75.

(4) Condition B is that the benefit cost of the benefit does not exceed £50.

(5) 35In this section “benefit cost”, in relation to a benefit, means—

(a) the cost of providing the benefit, or

(b) if the benefit is provided to more than one person and the
nature of the benefit or the scale of its provision means it is
impracticable to calculate the cost of providing it to each person
40to whom it is provided, the average cost per person of
providing the benefit.

Finance BillPage 17

(6) For the purposes of subsection (5)(b), the average cost per person of
providing a benefit is found by dividing the total cost of providing the
benefit by the number of persons to whom the benefit is provided.

(7) Condition C is that the benefit is not provided pursuant to relevant
5salary sacrifice arrangements or any other contractual obligation.

(8) “Relevant salary sacrifice arrangements”, in relation to the provision of
a benefit to an employee or to a member of an employee’s family or
household, means arrangements (whenever made, whether before or
after the employment began) under which the employee gives up the
10right to receive an amount of general earnings or specific employment
income in return for the provision of the benefit.

(9) Condition D is that the benefit is not provided in recognition of
particular services performed by the employee in the course of the
employment or in anticipation of such services.

(10) 15Condition E is that—

(a) the benefit cost of the benefit provided to the employee, or

(b) in a case where the benefit is provided to a member of the
employee’s family or household who is not an employee of the
employer, the amount of the benefit cost allocated to the
20employee in accordance with section 323B(4),

does not exceed the employee’s available exempt amount (see section
323B).

323B Section 323A: calculation of available exempt amount

(1) The “available exempt amount”, in relation to an employee of an
25employer, is the amount found by deducting from the annual exempt
amount the aggregate of—

(a) the benefit cost of eligible benefits provided earlier in the tax
year by, or on behalf of, the employer to the employee, and

(b) any amounts allocated to the employee in accordance with
30subsection (4) in respect of eligible benefits provided earlier in
the tax year by, or on behalf of, the employer to a member of the
employee’s family or household who was not at that time an
employee of the employer.

(2) The annual exempt amount is £300.

(3) 35For the purposes of subsection (1) “eligible benefits” means benefits in
respect of which conditions A to D in section 323A are met.

(4) The amount allocated to an employee of an employer in respect of a
benefit provided to a person (“P”) who—

(a) is a member of the employee’s family or household, and

(b) 40is not an employee of the employer,

is the benefit cost of that benefit divided by the number of persons who
meet the condition in subsection (5) and are members of P’s family or
household.

(5) This condition is met if the person is—

(a) 45a director or other office-holder of the employer,

(b) an employee of the employer who is a member of the family or
household of a person within paragraph (a), or

Finance BillPage 18

(c) a former employee of the employer who—

(i) was a director or other office-holder at any time when
the employer was a close company, or

(ii) is a member of the family or household of such a person.

(6) 5In this section “benefit cost” has the same meaning as in section 323A.

323C Power to amend sections 323A and 323B

(1) The Treasury may by regulations amend section 323A so as to alter the
conditions which must be met for the exemption conferred by section
323A(1) to apply.

(2) 10Regulations under subsection (1) may include any amendment of
section 323B that is appropriate in consequence of an amendment made
under subsection (1).

(3) The Treasury must not make regulations under subsection (1) unless a
draft of the regulations has been laid before and approved by a
15resolution of the House of Commons.”

(3) In section 716 (alteration of amounts by Treasury order) in subsection (2), after
paragraph (f) insert—

(fa) section 323A(4) (trivial benefits provided by employers: cost of
providing benefit),

(fb) 20section 323B(2) (trivial benefits provided by employers: annual
exempt amount),”.

(4) In section 717(4) (negative procedure not to apply to certain statutory
instruments) after “other care: meaning of “eligible employee”),” insert
“section 323C(1) (trivial benefits provided by employers),”.

(5) 25The amendments made by this section have effect for the tax year 2016-17 and
subsequent tax years.

14 Travel expenses of workers providing services through intermediaries

(1) In Chapter 2 of Part 5 of ITEPA 2003 (deductions for employee’s expenses),
after section 339 insert—

339A 30 Travel for necessary attendance: employment intermediaries

(1) This section applies where an individual (“the worker”)—

(a) personally provides services (which are not excluded services)
to another person (“the client”), and

(b) the services are provided not under a contract directly between
35the client or a person connected with the client and the worker
but under arrangements involving an employment
intermediary.

This is subject to the following provisions of this section.

(2) Where this section applies, each engagement is for the purposes of
40sections 338 and 339 to be regarded as a separate employment.

(3) This section does not apply if it is shown that the manner in which the
worker provides the services is not subject to (or to the right of)
supervision, direction or control by any person.

Finance BillPage 19

(4) Subsection (3) does not apply in relation to an engagement if—

(a) Chapter 8 of Part 2 applies in relation to the engagement,

(b) the conditions in section 51, 52 or 53 are met in relation to the
employment intermediary, and

(c) 5the employment intermediary is not a managed service
company.

(5) This section does not apply in relation to an engagement if—

(a) Chapter 8 of Part 2 does not apply in relation to the engagement
merely because the circumstances in section 49(1)(c) are not
10met,

(b) assuming those circumstances were met, the conditions in
section 51, 52 or 53 would be met in relation to the employment
intermediary, and

(c) the employment intermediary is not a managed service
15company.

(6) In determining for the purposes of subsection (4) or (5) whether the
conditions in section 51, 52 or 53 are or would be met in relation to the
employment intermediary—

(a) in section 50(1)(b), disregard the words “that is not employment
20income”, and

(b) read references to the intermediary as references to the
employment intermediary.

(7) Subsection (8) applies if—

(a) the client or a relevant person provides the employment
25intermediary (whether before or after the worker begins to
provide the services) with a fraudulent document which is
intended to constitute evidence that, by virtue of subsection (3),
this section does not or will not apply in relation to the services,

(b) that section is taken not to apply in relation to the services, and

(c) 30in consequence, the employment intermediary does not under
PAYE regulations deduct and account for an amount that
would have been deducted and accounted for under those
regulations if this section had been taken to apply in relation to
the services.

(8) 35For the purpose of recovering the amount referred to in subsection
(7)(c) (“the unpaid tax”)—

(a) the worker is to be treated as having an employment with the
client or relevant person who provided the document, the
duties of which consist of the services, and

(b) 40the client or relevant person is under PAYE regulations to
account for the unpaid tax as if it arose in respect of earnings
from that employment.

(9) In subsections (7) and (8) “relevant person” means a person, other than
the client, the worker or a person connected with the employment
45intermediary, who—

(a) is resident, or has a place of business, in the United Kingdom,
and