Finance Bill (HC Bill 47)

• ““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
  and additional rates: individuals),

• 5section 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
rate: non-individuals”, and

(b) 10in 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) Income tax on a non-UK resident individual’s income up to the basic
15rate 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) Income tax is charged at the default additional rate on a non-UK
20resident 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),

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

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

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

• any other provisions of the Income Tax Acts (apart from section
  3010) 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
income which—

(a) 35is 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
income which—

(a) 40is 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
income which—

(a) 45is savings income, and

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

(4) Subsections (1) to (3)—

(a) have effect after sections 12 and 12A have been applied (so that
5any 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) are subject to any other provisions of the Income Tax Acts (apart
10from 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
otherwise be charged at the basic, higher or additional rate or the
15default 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
were not a Scottish taxpayer (but were UK resident), be charged at that
20rate (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) is savings income, and

(b) 25would 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
additional rate” insert “or the default basic, default higher or default
30additional 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
income”)—

(a) 35in 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) in paragraph (a)(iv), after “additional rate” insert “or default additional
40rate”,

(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,”,
and

(f) 45in 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
“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) In section 17(1) (repayment where tax paid at basic rate instead of starting rate
5for 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) in subsection (2)(b) as amended by section 5 of this Act, after “other
10than 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
becoming subject to higher rates) as amended by section 5 of this Act, after
15“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
tax year the individual is UK resident but not a Scottish taxpayer, by reference
20to 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
(i) insert—

“(“ia) 25at 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
individual who for that tax year is UK resident but not a Scottish taxpayer, by
30reference 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
“other than the basic rate” insert “, the savings basic rate”.

(21) 35In 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,

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

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

and—

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

and—

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

Finance BillPage 13

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

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

(23) 10In 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
higher 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
15under 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
Scotland Act 2016, and

(b) for subsequent tax years.

(25) The Treasury may by regulations make—

(a) 20such consequential provision as they consider appropriate in
connection with any preceding provision of this section;

(b) such 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) 25Regulations under this section may amend, repeal or revoke an enactment,
whenever passed or made (including this Act).

(27) Regulations 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
30made unless a draft of the instrument has been laid before and approved by a
resolution of the House of Commons.

(29) Any 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
35Commons.

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

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) Where this Chapter applies to any living accommodation—

(a) the living accommodation is a benefit for the purposes of this
Chapter (and accordingly it is immaterial whether the terms on
10which it is provided to any of those persons constitute a fair
bargain), and

(b) sections 102 to 108 provide for the cash equivalent of the benefit
of the living accommodation to be treated as earnings.””

(3) In section 109 (priority of Chapter 5 over Chapter 1), after subsection (3)
15insert—

“(4) In a case where the cash equivalent of the benefit of the living
accommodation is nil—

(a) subsections (2) and (3) do not apply, and

(b) the full amount mentioned in subsection (1)(b) constitutes
20earnings from the employment for the year under Chapter 1.””

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

“(1A) Where this Chapter applies to a car or van, the car or van is a benefit for
the purposes of this Chapter (and accordingly it is immaterial whether
25the terms on which it is made available to the employee or member
constitute a fair bargain).””

(5) 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
30employer 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) 35the 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
40cars 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
ordinary member of the public.””

(6) In section 120 (benefit of car treated as earnings)—

(a) in subsection (2) after “case” insert “(including a case where the cash
5equivalent of the benefit of the car is nil)”, and

(b) after subsection (2) insert—

“(3) Any reference in this Act to a case where the cash equivalent of
the benefit of a car is treated as the employee’s earnings for a
year by virtue of this section includes a case where the cash
10equivalent is nil.””

(7) In section 154 (benefit of van treated as earnings)—

(a) the existing text becomes subsection (1) of that section, and

(b) after that subsection insert—

“(2) In such a case (including a case where the cash equivalent of the
15benefit of the van is nil) the employee is referred to in this
Chapter as being chargeable to tax in respect of the van for that
year.

(3) Any reference in this Act to a case where the cash equivalent of
the benefit of a van is treated as the employee’s earnings for a
20year by virtue of this section includes a case where the cash
equivalent is nil.””

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

“(1A) Where this Chapter applies to a loan—

(a) the loan is a benefit for the purposes of this Chapter (and
25accordingly it is immaterial whether the terms of the loan
constitute a fair bargain), and

(b) sections 175 to 183 provide for the cash equivalent of the benefit
of the loan (where it is a taxable cheap loan) to be treated as
earnings in certain circumstances.””

(9) 30The amendments made by this section have effect for the tax year 2016-17 and
subsequent tax years.

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
35set out in subsections (3) and (4).

(3) In 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) 40In subsection (3), for “20%” substitute “23%”.

(5) Section 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) In 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
5percentage), in the Table—

(a) for “20%” substitute “23%”, and

(b) for “31%” substitute “34%”.

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

9 10Cars 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) The 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) 15The 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
(“the repealing provisions”)—

(a) subsection (2),

(b) 20subsection (6),

(c) subsection (10),

(d) subsection (11), and

(e) subsection (15).

(2) Any provision of ITEPA 2003 amended or omitted by the repealing provisions
25has effect for the tax year 2016-17 and subsequent tax years as if the repealing
provisions had not been enacted.

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) 30In subsection (1B)(a), for “2019-20” substitute “2021-22”.

(3)
In 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) 3560% for the tax year 2019-20;

(f) 80% 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

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

13 Exemption for trivial benefits provided by employers

(1) 5ITEPA 2003 is amended as follows.

(2) After section 323 insert—

“323A 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
10employee’s family or household if—

(a) conditions A to D are met, or

(b) in 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) 15the employee is—

(i) a person who is a director or other office-holder of the
employer, 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
20meaning of section 75.

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

(5) In 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
25nature of the benefit or the scale of its provision means it is
impracticable to calculate the cost of providing it to each person
to whom it is provided, the average cost per person of
providing the benefit.

(6) For the purposes of subsection (5)(b), the average cost per person of
30providing 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
salary sacrifice arrangements or any other contractual obligation.

(8) “Relevant salary sacrifice arrangements”, in relation to the provision of
35a 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
right to receive an amount of general earnings or specific employment
income in return for the provision of the benefit.

(9) 40Condition 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) Condition 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
5employee 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
10employer, 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
15subsection (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) 20For 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) 25is 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) 30a 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

(c) a former employee of the employer who—

(i) was a director or other office-holder at any time when
35the employer was a close company, or

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

(6) In 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
40conditions which must be met for the exemption conferred by section
323A(1) to apply.

(2) Regulations 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
resolution of the House of Commons.””

(3) In section 716 (alteration of amounts by Treasury order) in subsection (2), after
5paragraph (f) insert—

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

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

(4) 10In 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) The amendments made by this section have effect for the tax year 2016-17 and
subsequent tax years.

14 15Travel 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 Travel for necessary attendance: employment intermediaries

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

(a) 20personally provides services (which are not excluded services)
to another person (“the client”), and

(b) the services are provided not under a contract directly between
the client or a person connected with the client and the worker
but under arrangements involving an employment
25intermediary.

This is subject to the following provisions of this section.

(2) Where this section applies, each engagement is for the purposes of
sections 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
30worker provides the services is not subject to (or to the right of)
supervision, direction or control by any person.

(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
35employment intermediary, and

(c) the 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
40merely because the circumstances in section 49(1)(c) are not
met,

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