Finance Bill (HL Bill 71)

Part 1 Direct taxes

Income tax: employment and pensions

1 Taxable benefits: time limit for making good

(1) 5Part 3 of ITEPA 2003 (employment income: earnings and benefits etc treated as
earnings) is amended as follows.

(2) In section 87 (cash equivalent of benefit of non-cash voucher)—

(a) in subsection (2)(b), for “to the person incurring it” substitute “, to the
person incurring it, on or before 6 July following the relevant tax year”,
10and

(b) after subsection (2) insert—

“(2A) If the voucher is a non-cash voucher other than a cheque
voucher, the relevant tax year is—

(a) the tax year in which the cost of provision is incurred, or

(b) if later, the tax year in which the employee receives the
voucher.

(2B) If the voucher is a cheque voucher, the relevant tax year is the
5tax year in which the voucher is handed over in exchange for
money, goods or services.”

(3) In section 88(3) (time at which cheque voucher treated as handed over), at the
beginning insert “For the purposes of subsection (2) and sections 87(2B) and
87A(6),”.

(4) 10In section 94(2) (cash equivalent of benefit of credit-token), in paragraph (b), for
the words from “employee” to the end substitute “employee—

(i) to the person incurring it, and

(ii) on or before 6 July following the tax year which contains
the occasion in question.”

(5) 15In section 105(2) (cash equivalent of benefit of living accommodation costing
£75,000 or less), in paragraph (b), after “made good” insert “, on or before 6 July
following the tax year which contains the taxable period,”.

(6) In section 106(3) (cash equivalent of benefit of living accommodation costing
over £75,000), in paragraph (a), for the words from “paid” to “exceeds”
20substitute “paid—

(i) by the employee,

(ii) in respect of the accommodation,

(iii) to the person providing it, and

(iv) on or before 6 July following the tax year which contains
25the taxable period,

exceeds”.

(7) In section 144 (deduction for payments for private use of car)—

(a) in subsection (1)(b), for “in” substitute “on or before 6 July following”,

(b) in subsection (2), after “paid” insert “as mentioned in subsection (1)(b)”,
30and

(c) in subsection (3), after “paid” insert “as mentioned in subsection (1)(b)”.

(8) In section 151(2) (when cash equivalent of benefit of car fuel is nil)—

(a) in the words before paragraph (a) omit “in the tax year in question”,

(b) in paragraph (a), at the beginning insert “in the tax year in question,”,
35and

(c) in paragraph (b), at the end insert “on or before 6 July following that tax
year”.

(9) In section 152(2) (car fuel: proportionate reduction of cash equivalent)—

(a) in the words before paragraph (a) omit “for any part of the tax year in
40question”,

(b) in paragraph (a), at the beginning insert “for any part of the tax year in
question,”,

(c) in paragraph (b), at the beginning insert “for any part of the tax year in
question,”, and

(d) 45in paragraph (c)—

(i) after “employee”, in the first place it occurs, insert “—

(i) for any part of the tax year in question,”,
and

(ii) for “and the employee does make good that expense” substitute
5“, and

“(ii) the employee does make good that
expense on or before 6 July following that
tax year”.

(10) In section 158 (reduction for payments for private use of van)—

(a) 10in subsection (1)(b), for “in” substitute “on or before 6 July following”,

(b) in subsection (2), after “paid” insert “as mentioned in subsection (1)(b)”,
and

(c) in subsection (3), after “paid” insert “as mentioned in subsection (1)(b)”.

(11) In section 162(2) (when cash equivalent of benefit of van fuel is nil)—

(a) 15in the words before paragraph (a) omit “in the tax year in question”,

(b) in paragraph (a), at the beginning insert “in the tax year in question,”,
and

(c) in paragraph (b), at the end insert “on or before 6 July following that tax
year”.

(12) 20In section 163(3) (van fuel: proportionate reduction of cash equivalent)—

(a) in the words before paragraph (a) omit “for any part of the tax year in
question”,

(b) in paragraph (a), at the beginning insert “for any part of the tax year in
question,”,

(c) 25in paragraph (b), at the beginning insert “for any part of the tax year in
question,”, and

(d) in paragraph (c)—

(i) after “employee”, in the first place it occurs, insert “—

(i) for any part of the tax year in question,”,
30and

(ii) for “and the employee does make good that expense” substitute
“, and

“(ii) the employee does make good that
expense on or before 6 July following that
35tax year”.

(13) In section 203(2) (cash equivalent of benefit treated as earnings), for “to the
persons providing the benefit” substitute “, to the persons providing the
benefit, on or before 6 July following the tax year in which it is provided”.

(14) The amendments made by this section have effect for the purpose of
40calculating income tax charged for the tax year 2017-18 or any subsequent tax
year.

2 Taxable benefits: ultra-low emission vehicles

(1) ITEPA 2003 is amended as follows.

(2) In section 139 (car with a CO₂ emissions figure: the appropriate percentage),

for subsections (1) to (6) substitute—

“(1) The appropriate percentage for a year for a car with a CO₂ emissions
figure of less than 75 is determined in accordance with the following
table.

(2) For the purposes of subsection (1) and the table, if a CO₂ emissions
20figure or an electric range figure is not a whole number, round it down
to the nearest whole number.

(3) The appropriate percentage for a year for a car with a CO₂ emissions
figure of 75 or more is whichever is the lesser of—

(a) 20% plus one percentage point for each 5 grams per kilometre
25driven by which the CO₂ emissions figure exceeds 75, and

(b) 37%.

(4) For the purposes of subsection (3), if a CO₂ emissions figure is not a
multiple of 5, round it down to the nearest multiple of 5.

(5) In this section, an “electric range figure” is the number of miles which
30is the equivalent of the number of kilometres specified in an EC
certificate of conformity, an EC type-approval certificate or a UK
approval certificate on the basis of which a car is registered, as being the
maximum distance for which the car can be driven in electric mode
without recharging the battery.”

(3) 35In section 140 (car without a CO₂ emissions figure: the appropriate
percentage)—

(a) in subsection (2), in the table —

(i) for “23%” substitute “24%”, and

(ii) for “34%” substitute “35%”;

(b) in subsection (3)(a), for “16%” substitute “2%”.

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

(a) 5for “23%” substitute “24%”, and

(b) for “34%” substitute “35%”.

(5) Omit subsection 170(3).

(6) The amendments made by this section have effect for the tax year 2020-21 and
subsequent tax years.

3 10Pensions advice

(1) In Chapter 9 of Part 4 of ITEPA 2003, after section 308B insert—

“308C Provision of pensions advice: limited exemption

(1) No liability to income tax arises in respect of—

(a) the provision of relevant pensions advice to an employee or
15former or prospective employee, or

(b) the payment or reimbursement of costs incurred, by or in
respect of an employee or former or prospective employee, in
obtaining relevant pensions advice,

if Condition A or B is met.

(2) 20But subsection (1) does not apply in relation to a person in a tax year so
far as the value of the exemption in the person’s case in that year
exceeds £500.

(3) The “value of the exemption”, in relation to a person and a tax year, is
the amount exempted by subsection (1) from income tax in the person’s
25case in that year, disregarding subsection (2) for this purpose.

(4) If in a tax year there is in relation to an individual more than one person
who is an employer or former employer, subsections (1) to (3) apply in
relation to the individual as employee or former or prospective
employee of any one of those persons separately from their application
30in relation to the individual as employee or former or prospective
employee of any other of those persons.

(5) “Relevant pensions advice”, in relation to a person, means information,
or advice, in connection with—

(a) the person’s pension arrangements, or

(b) 35the use of the person’s pension funds.

(6) Condition A is that the relevant pensions advice, or payment or
reimbursement, is provided under a scheme that is open—

(a) to the employer’s employees generally, or

(b) generally to the employer’s employees at a particular location.

(7) 40Condition B is that the relevant pensions advice, or payment or
reimbursement, is provided under a scheme that is open generally to
the employer’s employees, or generally to those of the employer’s
employees at a particular location, who—

(a) have reached the minimum qualifying age, or

(b) meet the ill-health condition.

(8) The “minimum qualifying age”, in relation to an employee, means the
employee’s relevant pension age less 5 years.

(9) “Relevant pension age”, in relation to an employee, means—

(a) 5where paragraph 22 or 23 of Schedule 36 to FA 2004 applies in
relation to the employee and a registered pension scheme of
which the employee is a member, the employee’s protected
pension age (see paragraph 22(8) and 23(8) of Schedule 36 to FA
2004), or

(b) 10in any other case, the employee’s normal minimum pension
age, as defined by section 279(1) of FA 2004.

(10) The “ill-health condition” is met by an employee if the employer is
satisfied, on the basis of evidence provided by a registered medical
practitioner, that the employee is (and will continue to be) incapable of
15carrying on his or her occupation because of physical or mental
impairment.”

(2) In section 228 of ITEPA 2003 (effect of exemptions on liability under provisions
outside Part 2 of ITEPA 2003), in subsection (2), after paragraph (da) insert—

“(db) section 308C (provision of pensions advice),”.

(3) 20Regulation 5 of the Income Tax (Exemption of Minor Benefits) Regulations
2002 (S.I. 2002/205) (exemption in respect of the provision of pensions advice)
is revoked.

(4) In regulation 2 of the Income Tax (Exemption of Minor Benefits) (Amendment)
Regulations 2004 (S.I. 2004/3087) omit the inserted regulation 5.

(5) 25The amendments made by this section have effect for the tax year 2017-18 and
subsequent tax years.

4 Legal expenses etc

(1) ITEPA 2003 is amended as follows.

(2) In section 346 (deduction for employee liabilities)—

(a) 30in the heading, at the end insert “and expenses”,

(b) after paragraph B (in subsection (1)) insert—

“BA Payment of any costs or expenses not falling within
paragraph B which are incurred in connection with the
employee giving evidence about matters related to the
35employment in, or for the purposes of—

(a) a proceeding or other process (whether or not
involving the employee), or

(b) an investigation (whether or not likely to lead to any
proceeding or other process involving the employee).

BB 40Payment of any costs or expenses not falling within
paragraph B or BA which are incurred in connection with a
proceeding or other process, or an investigation, in which—

(a) acts of the employee related to the employment, or

(b) any other matters related to the employment,

45are being or are likely to be considered.”,

(c) in paragraph C(b) (in subsection (1)), after “B” insert “, BA or BB”,

(d) in subsection (2) for “or B” substitute “B, BA or BB”,

(e) in subsection (2A), for “paragraph A, B or C” substitute “any of
paragraphs A to C”, and

(f) 5after subsection (3) insert—

“(4) In this section and section 349—

(a) “acts” includes failures to act and acts are “related to the
employment” if the employee was acting—

(i) in the employee’s capacity as holder of the
10employment, or

(ii) in any other capacity in which the employee was
acting in the performance of the duties of the
employment,

(b) “giving evidence” includes making a formal or informal
15statement or answering questions,

(c) “proceeding or other process” includes any civil,
criminal or arbitration proceedings, any disciplinary or
regulatory proceedings of any kind and any process
operated for resolving disputes or adjudicating on
20complaints, and

(d) references to a proceeding or other process or an
investigation include a reference to a proceeding or
other process or an investigation that is likely to take
place.

(3) 25In section 349 (section 346: meaning of “qualifying insurance contract”), in
subsection (2)—

(a) after paragraph (c) insert—

“(ca) the payment of costs or expenses incurred in connection
with an employee giving evidence about matters related
30to the employee’s employment in, or for the purposes
of—

(i) a proceeding or other process (whether or not
involving the employee), or

(ii) an investigation (whether or not likely to lead to
35any proceeding or other process involving the
employee),

(cb) the payment of any costs or expenses incurred in
connection with a proceeding or other process, or an
investigation, in which—

(i) 40acts of an employee related to the employment,
or

(ii) any other matters related to the employment of
an employee,

are being or are likely to be considered,”, and

(b) 45in subsection (2)(d), after “(c)” insert “, (ca) or (cb)”.

(4) In section 409 (payments and benefits on termination of employment etc:
exception for payments and benefits in respect of employee liabilities and
indemnity insurance)—

(a) in the heading, for “employee liabilities” substitute “certain legal
50expenses etc”, and

(b) in subsection (3), at the end insert “or by the employer or former
employer on behalf of the individual”.

(5) In section 410 (payments and benefits on termination of employment etc:
exception for certain payments and benefits received by personal
5representatives of deceased individual)—

(a) in the heading for “employee liabilities” substitute “certain legal
expenses etc”, and

(b) in subsection (3), at the end insert “or by the former employer on behalf
of the individual’s personal representatives”.

(6) 10In section 558 (deductions for liabilities of former employees: meaning of
“deductible payment”)—

(a) after paragraph B (in subsection (1)) insert—

“BA Payment of any costs or expenses not falling within
paragraph B which are incurred in connection with the
15former employee giving evidence about matters related to
the former employment in, or for the purposes of—

(a) a proceeding or other process (whether or not
involving the former employee), or

(b) an investigation (whether or not likely to lead to any
20proceeding or other process involving the former
employee).

BB Payment of any costs or expenses not falling within
paragraph B or BA which are incurred in connection with a
proceeding or other process, or an investigation, in which—

(a) 25acts of the former employee related to the former
employment, or

(b) any other matters related to the former employment,

are being or are likely to be considered.”, and

(b) in paragraph C(b) (in subsection (1)), after “B” insert “, BA or BB”,

(c) 30in subsection (2), for “or B” substitute “B, BA or BB”,

(d) after subsection (3) insert—

“(4) In this section and section 560—

(a) “acts” includes failures to act and acts are “related to the
former employment” if the former employee was
35acting—

(i) in the employee’s capacity as holder of the
former employment, or

(ii) in any other capacity in which the former
employee was acting in the performance of the
40duties of that employment,

(b) “giving evidence” includes making a formal or informal
statement or answering questions,

(c) “proceeding or other process” includes any civil,
criminal or arbitration proceedings, any disciplinary or
45regulatory proceedings of any kind and any process
operated for resolving disputes or adjudicating on
complaints, and

(d) references to a proceeding or other process or an
investigation include a reference to a proceeding or

other process or an investigation that is likely to take
place.”

(7) In section 560 (section 558: meaning of “qualifying insurance contract”), in
subsection (2)—

(a) 5after paragraph (c) insert—

“(ca) the payment of costs or expenses incurred in connection
with a former employee giving evidence about matters
related to the former employment in, or for the purposes
of—

(i) 10a proceeding or other process (whether or not
involving the former employee), or

(ii) an investigation (whether or not likely to lead to
any proceeding or other process involving the
former employee).

(cb) 15the payment of any costs or expenses incurred in
connection with a proceeding or other process, or an
investigation, in which—

(i) acts of a former employee related to the
employment, or

(ii) 20any other matters related to the former
employment of a former employee,

are being or are likely to be considered,”, and

(b) in paragraph (d), after “(c)” insert “, (ca) or (cb)”.

(8) The amendments made by this section have effect in relation to the tax year
252017-18 and subsequent tax years.

5 Termination payments etc: amounts chargeable on employment income

(1) ITEPA 2003 is amended in accordance with subsections (2) to (9).

(2) In section 7(5) (list of provisions under which amounts are treated as earnings),
before the “or” at the end of paragraph (c) insert—

“(ca) 30section 402B (termination payments, and other benefits, that
cannot benefit from section 403 threshold),”.

(3) Before section 403 (charge on payments and benefits in excess of £30,000
threshold) insert—

“402A Split of payments and other benefits between sections 402B and 403

(1) 35In this Chapter “termination award” means a payment or other benefit
to which this Chapter applies because of section 401(1)(a).

(2) Section 402B (termination awards not benefiting from threshold treated
as earnings) applies to termination awards to the extent determined
under section 402C.

(3) 40Section 403 (charge on payment or benefit where threshold applies)
applies to termination awards so far as they are not ones to which
section 402B applies.

(4) Section 403 also applies to payments and other benefits to which this
Chapter applies because of section 401(1)(b) or (c) (change in duties or
45earnings).