Finance Bill

House of Lords

Session 2013 - 14
Internet Publications
Other Bills before Parliament

Finance Bill

Finance Bill
Schedule 4 — Cash basis for small businesses
Part 3 — Commencement and transitional provision
187

(2)
No sideways relief or capital gains relief may be given to the person
for the loss.
(3)
For the purposes of this section—
(a)
capital gains relief is, in relation to a loss, the treatment of a
loss as an allowable loss by virtue of section 261B of TCGA
5
1992 (use of trading loss as a CGT loss), and
(b)
capital gains relief is given for a loss when it is so treated.”
55    (1)
Chapter 1 of Part 8 of ITA 2007 (relief for interest payments) is amended as
follows.
      (2)
In section 383(5), after paragraph (a) insert—
10
“(aa)
section 384B (restriction on relief where cash basis applies),”.
      (3)
After section 384A insert—
“384B
Restriction on relief where cash basis applies
(1)
Relief is not to be given under this Chapter for a tax year for interest
paid by a person on a relevant loan if the partnership to which the
15
loan relates has made an election under section 25A of ITTOIA 2005
(cash basis for small businesses) for the tax year.
(2)
A loan is a “relevant loan” if—
(a)
it is a loan to which section 388 applies (loan to buy plant or
machinery for partnership use), or
20
(b)
it is a loan to which section 398 applies (loan to invest in
partnership) and which is not used for purchasing a share in
a partnership.”
Part 3
Commencement and transitional provision
25
56
Subject to paragraph 57, the amendments made by this Schedule have effect
for the tax year 2013-14 and subsequent tax years.
57    (1)
In a case where—
(a)
the profits of a barrister or advocate in independent practice for a
period of account ending in the tax year 2012-13 have been calculated
30
in accordance with section 160 of ITTOIA 2005 (barristers and
advocates: alternative basis of calculation in early years of practice),
and
(b)
if that section had not been repealed by this Schedule, the profits of
the barrister or advocate for any subsequent period of account could
35
have been calculated in accordance with that section,

the profits of the barrister or advocate for that subsequent period of account
may be calculated in accordance with that section.
      (2)
The repeal of sections 238 and 239 of ITTOIA 2005 (spreading of adjustment
income: barristers and advocates) does not have effect in relation to any
40
individual whose profits for a period of account ending in or before the tax
year 2012-13 have been calculated in accordance with section 160 of ITTOIA
2005.

Finance Bill
Schedule 5 — Deductions allowable at a fixed rate
188

Schedule 5
Section 18

Deductions allowable at a fixed rate
1
Part 2 of ITTOIA 2005 (trading income) is amended as follows.
2
After Chapter 5 insert—
“Chapter 5A
5
Trade profits: deductions allowable at a fixed rate
Introduction
94B
Professions and vocations

The provisions of this Chapter apply to professions and vocations as
they apply to trades.
10
94C
Provisions not applicable to certain firms

The provisions of this Chapter do not apply in calculating the profits
of a trade carried on by a firm for a period if one or more of the
persons who have been partners in the firm at any time during the
period was not an individual at that time.
15
Expenditure on vehicles
94D
Expenditure on vehicles
(1)
This section applies if, in calculating the profits of a trade of a person
for a period—
(a)
a deduction would otherwise be allowable for the period in
20
respect of qualifying expenditure incurred in relation to a
relevant vehicle (see subsection (2)), or
(b)
a deduction would be so allowable in respect of such
expenditure but for the fact it is capital expenditure.
(2)
In this section “relevant vehicle” means a car, motor cycle or goods
25
vehicle that—
(a)
is used for the purposes of the trade, and
(b)
is not an excluded vehicle (see section 94E).
(3)
The person may make a deduction under this section for the period
in respect of the qualifying expenditure.
30
(4)
If a deduction for a period is made under this section—
(a)
no other deduction is allowed (for that or any other period)
in respect of the qualifying expenditure, and
(b)
this section applies in relation to the relevant vehicle for
every subsequent period for which the vehicle is used for the
35
purposes of the trade.
(5)
The amount of the deduction is the appropriate mileage amount in
relation to the relevant vehicle for the period (see section 94F).

Finance Bill
Schedule 5 — Deductions allowable at a fixed rate
189

(6)
In this section “qualifying expenditure”, in relation to a vehicle,
means any expenditure incurred in respect of the acquisition,
ownership, hire, leasing or use of the vehicle, other than incidental
expenses incurred in connection with a particular journey.
(7)
For provision preventing capital allowances from being claimed in
5
respect of qualifying expenditure incurred in relation to a relevant
vehicle, see section 38ZA of CAA 2001.
94E
Excluded vehicles
(1)
A car, motor cycle or goods vehicle that is used for the purposes of a
trade is an “excluded vehicle” for the purposes of section 94D if
10
condition A or B is met in relation to the vehicle.
(2)
Condition A is that the person who is or has been carrying on the
trade has at any time claimed any capital allowances under Part 2 of
CAA 2001 in respect of any expenditure incurred on the provision of
the vehicle.
15
(3)
Condition B is that—
(a)
the vehicle is a goods vehicle or a motor cycle, and
(b)
any of the expenditure incurred on acquiring the vehicle has
been deducted in calculating the profits of the trade for a
period on the cash basis (see section 25A).
20
94F
The appropriate mileage amount
(1)
In calculating the profits of a trade for a period, the appropriate
mileage amount in relation to a relevant vehicle for the period is—

where—
M is the number of miles of business journeys made by a person
25
(other than as a passenger) using that vehicle in the period,
and
R is the rate applicable to that kind of vehicle.
(2)
The rates applicable are as follows—
Table
30

Kind of vehicle
Rate per mile

Car or goods vehicle
45p for the first 10,000 miles

25p after that

Motor cycle
24p

(3)
In a case where the total number of miles of relevant business
35
journeys made in the period is greater than 10,000, the rate of 45p per
mile is available only in relation to 10,000 of those miles.
(4)
“Relevant business journey” means any business journey made in
the period by a car or goods vehicle—
(a)
that is used for the purposes of the trade, and
40

Finance Bill
Schedule 5 — Deductions allowable at a fixed rate
190

(b)
in relation to which section 94D applies for the period.
(5)
In this section—
“business journey”, in relation to a vehicle used for the purposes
of a trade, means any journey, or any identifiable part or
proportion of a journey, that is made wholly and exclusively
5
for the purposes of the trade, and
“relevant vehicle” has the same meaning as in section 94D.
(6)
The Treasury may by regulations amend subsection (2) so as to alter
the rates or rate bands.

Regulations under this subsection may also make consequential
10
amendments to subsection (3).
94G
Definitions of types of vehicle
(1)
This section applies for the purposes of sections 94D to 94F (and this
section).
(2)
“Car” means a mechanically propelled road vehicle which is not—
15
(a)
a goods vehicle,
(b)
a motor cycle,
(c)
an invalid carriage, or
(d)
a vehicle of a type not commonly used as a private vehicle
and unsuitable to be so used.
20
(3)
“Goods vehicle” means a mechanically propelled road vehicle
which—
(a)
is of a construction primarily suited for the conveyance of
goods or burden of any description, and
(b)
is not a motor cycle.
25
(4)
“Motor cycle” has the meaning given by section 185(1) of the Road
Traffic Act 1988.
(5)
For the purposes of this section “invalid carriage” has the meaning
given by section 185(1) of the Road Traffic Act 1988.
Use of home for business purposes
30
94H
Use of home for business purposes
(1)
This section applies if, in calculating the profits of a trade of a person
for a period, a deduction (“the standard deduction”) would
otherwise be allowable for the period in respect of the use of the
person’s home for the purposes of the trade.
35
(2)
The person may, instead of making the standard deduction, make a
deduction for the period under this section.
(3)
The amount of the deduction allowable for the period is the sum of
the applicable amounts for each month, or part of a month, falling
within the period.
40
(4)
The applicable amount for a month, or part of a month, is given by
the following Table—

Finance Bill
Schedule 5 — Deductions allowable at a fixed rate
191

Table

Number of hours worked
Applicable amount

25 or more
£10.00

51 or more
£18.00

101 or more
£26.00

5

where the “number of hours worked” in a month (or part of a month)
is the number of hours spent wholly and exclusively on work done
by the person, or any employee of the person, in the person’s home
wholly and exclusively for the purposes of the trade.
(5)
If the person has more than one home, this section has effect as if
10
those homes were a single home.
(6)
The Treasury may by regulations amend subsection (4) so as to alter
the rates or rate bands.
Premises used both as home and business premises
94I
Premises used both as a home and as business premises
15
(1)
This section applies if—
(a)
a person carries on a trade at any premises,
(b)
the premises are used mainly for the purposes of carrying on
the trade, but are also used by the person as a home,
(c)
the person incurs expenses in relation to the premises,
20
(d)
the expenses are incurred mainly (but not wholly and
exclusively) for the purposes of the trade, and
(e)
in calculating the profits of the trade for a period, a deduction
(“the standard deduction”) would otherwise be allowable for
the period in respect of a part or proportion of the expenses
25
in accordance with section 34(2).
(2)
The person may, instead of making the standard deduction, make a
deduction for the period under this section.
(3)
The amount of the deduction allowable for the period is the amount
of the expenses less the non-business use amount.
30
(4)
The non-business use amount is the sum of the applicable amounts
for each month, or part of a month, falling within the period.
(5)
The applicable amount for a month, or part of a month, is given by
the following Table—
Table
35

Number of relevant
Applicable amount

occupants

Finance Bill
Schedule 5 — Deductions allowable at a fixed rate
192

1
£350

2
£500

3 or more
£650

(6)
For the purposes of subsection (5) “relevant occupant”, in relation to
a month (or part of a month), means an individual who, at any time
5
during that month (or that part of a month)—
(a)
occupies the premises as a home, or
(b)
stays at the premises otherwise than in the course of the
trade.
(7)
The Treasury may by regulations amend subsection (5) so as to alter
10
the rates or rate bands.”
3
In section 31 (relationship between rules prohibiting and allowing
deductions), in subsection (2), after paragraph (a) insert—
“(aa)
Chapter 5A,”.
4
In Chapter 18 (post-cessation receipts), in section 254 (allowable
15
deductions), after subsection (2A) (inserted by paragraph 39 of Schedule 4)
insert—
“(2B)
If—
(a)
the loss or expense is incurred, or the debit arises, in relation
to a vehicle, and
20
(b)
immediately before the person permanently ceases to carry
on the trade, section 94D (deduction allowable at fixed rate
for expenditure on vehicles) applies in relation to the vehicle,

assume for the purposes of subsection (2) that that section applies in
relation to the vehicle.”
25
5     (1)
Part 2 of CAA 2001 (plant and machinery allowances) is amended as follows.
      (2)
In Chapter 3 (qualifying expenditure), after section 38 insert—
“38ZA
Vehicles for which deductions allowed at fixed rate under Part 2 of
ITTOIA 2005

Expenditure is not qualifying expenditure if—
30
(a)
it is incurred in respect of a vehicle in a period, and
(b)
a deduction is made for the period in respect of the
expenditure under section 94D of ITTOIA 2005 (deduction
allowable at fixed rate for expenditure on vehicles).”
      (3)
In Chapter 5 (allowances and charges), in section 59 (unrelieved qualifying
35
expenditure), at the end insert—
“(8)
Subsection (9) applies if—
(a)
a person carrying on a trade, profession or vocation incurs
expenditure in relation to a vehicle,
(b)
at the end of the basis period for a tax year, the person has
40
unrelieved qualifying expenditure incurred in relation to the
vehicle to carry forward from the chargeable period ending
with that basis period (“the relevant chargeable period”),

Finance Bill
Schedule 6 — Employment income: duties performed in the UK and overseas
Part 2 — Remittance basis of taxation: special mixed fund rules
193

(c)
in calculating the profits of a trade, profession or vocation of
a person for the following tax year, a deduction is made
under section 94D of ITTOIA 2005 in respect of expenditure
incurred in relation to the vehicle, and
(d)
the person does not enter the cash basis for that tax year.
5
(9)
None of the unrelieved qualifying expenditure incurred in relation
to the vehicle may be carried forward as unrelieved qualifying
expenditure from the relevant chargeable period.
(10)
Where a person has unrelieved qualifying expenditure to carry
forward from a chargeable period that is not expenditure allocated to
10
a single asset pool, the amount of the unrelieved qualifying
expenditure incurred in relation to the vehicle is to be determined on
such basis as is just and reasonable in all the circumstances.”
6
The amendments made by this Schedule have effect for the tax year 2013-14
and subsequent tax years.
15
Schedule 6
Section 19

Employment income: duties performed in the UK and overseas
Part 1
Apportionment of earnings
1
Part 2 of ITEPA 2003 (employment income: charge to tax) is amended as
20
follows.
2
In section 15 (earnings for year when employee UK resident), as amended
by Schedule 45 to this Act, in subsection (5)—
(a)
after paragraph (a) omit “and”, and
(b)
after paragraph (b) insert “, and
25
(c)
section 41ZA (which is about determining the extent
to which general earnings are in respect of United
Kingdom duties).”
3
In Chapter 5 (taxable earnings: remittance basis rules and rules for non-UK
resident employees), after section 41 insert—
30
“Apportionment of earnings
41ZA
Basis of apportionment
The extent to which general earnings are in respect of duties
performed in the United Kingdom is to be determined under this
Chapter on a just and reasonable basis.”
35
Part 2
Remittance basis of taxation: special mixed fund rules
4
Chapter A1 of Part 14 of ITA 2007 (remittance basis) is amended as follows.