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Income Tax (Earnings and Pensions) Bill


Income Tax (Earnings and Pensions) Bill
Schedule 7 — Transitionals and savings
Part 3 — Employment income: earnings and benefits etc. treated as earnings

    536

 

          (3)      In subsection (6)—

              (a)             omit paragraph (a), and

              (b)             in paragraph (b) substitute “the tax years after the tax year in which

the contribution was made which are” for “subsequent”.

  24      (1)      This paragraph applies to the operation of section 156(4) (meaning of shared

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van) in relation to times before 6th April 2003.

          (2)      The following references are to be read in accordance with section 66

(meaning of “employment” and related expressions) as modified by sub-

paragraph (3)—

              (a)             the reference to an “employee” in section 156(4), and

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              (b)             the references to “employee”, “employment” and “employer” in

sections 116 and 117 (meaning of van is available to employee) as

applied for the purposes of section 156(4).

          (3)      In section 66(1)(a) substitute “an employment the emoluments of which fall

to be assessed under Schedule E” for “a taxable employment under Part 2”.

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Taxable benefits: loans

  25      (1)      Chapter 7 of Part 3 applies to a loan made at any time, including one made

before 29th July 1976 (the date on which FA 1976 was passed).

          (2)      But section 188 (loan released or written off: amount treated as earnings)

does not apply to benefits received in pursuance of arrangements made at

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any time with a view to protecting the holder of shares acquired before 6th

April 1976 from a fall in their market value.

  26      (1)      This paragraph relates to the operation of section 183 (alternative method of

calculation) in relation to section 177(2) (exceptions for loans at fixed rate of

interest) in the case of a loan made before 6th April 2003.

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          (2)      Where section 183 applies, then for the purpose of calculating under section

177(2) the amount of interest that would have been payable on the loan at

the official rate of interest for the year in which the loan was made, in step 3

in section 183(3) for “the number of days in the tax year” substitute “365”.

  27      (1)      Subject to paragraph 25(2), where a loan is made before 6th April 2003,

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section 188 (loan released or written off: amount treated as earnings) applies

with the following modifications.

          (2)      References to the employment in relation to which a loan is an employment-

related loan are to be read, in relation to times before 6th April 2003, as

references to the employment referred to in section 174 (employment-

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related loans) as modified by paragraph 17.

          (3)      In relation to times before 6th April 2003—

              (a)             in subsection (2)(c), substitute “an employment to which Chapter 2

of Part 5 of ICTA applies” for “not an excluded employment”, and

              (b)             in subsection (3)(a), substitute “an employment to which Chapter 2

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of Part 5 of ICTA does not apply” for “excluded employment”.

Taxable benefits: notional loans in respect of acquisitions of shares

  28       Chapter 8 of Part 3 does not apply in relation to acquisitions on or before 6th

April 1976.

 

 

Income Tax (Earnings and Pensions) Bill
Schedule 7 — Transitionals and savings
Part 3 — Employment income: earnings and benefits etc. treated as earnings

    537

 

  29      (1)      This paragraph relates to the operation of Chapter 8 of Part 3 in relation to

an acquisition made before 6th April 2003.

          (2)      If—

              (a)             the acquisition gave rise to a notional loan under section 162(1) of

ICTA, and

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              (b)             the notional loan has not terminated under section 162(4) of ICTA

before 6th April 2003,

                   the condition in section 193(1) (notional loan where acquisition for less than

market value) is taken to be met and section 193(3) and (4) apply

accordingly.

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          (3)      In such a case, the amount initially outstanding of the notional loan for the

purposes of Chapter 8 of Part 3 is taken to be the amount initially

outstanding calculated under section 162 of ICTA in relation to the tax year

2002-03.

          (4)      In such a case, section 195(3)(c) (discharge of notional loan: amount treated

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as earnings) applies, in relation to times before 6th April 2003, with the

substitution of “an employment to which Chapter 2 of Part 5 of ICTA

applies” for “not an excluded employment”.

Taxable benefits: disposals of shares for more than market value

  30       Chapter 9 of Part 3 does not apply in relation to shares or an interest in

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shares acquired on or before 6th April 1976.

  31      (1)      This paragraph relates to the operation of section 199 (disposal for more than

market value: amount treated as earnings) in relation to an acquisition made

before 6th April 2003.

          (2)      Subsection (4)(b) applies, in relation to times before 6th April 2003, with the

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substitution of “an employment to which Chapter 2 of Part 5 of ICTA

applies” for “not an excluded employment”.

Taxable benefits: residual liability to charge

  32      (1)      This paragraph applies in relation to Chapter 10 of Part 3.

          (2)      In section 206, the references in subsection (4) and step 2 in subsection (5) to

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the cost of a benefit determined under section 205 are to be read as including

a reference to the cost of a benefit determined under section 156(5) of ICTA.

          (3)      Sections 212, 213 and 215 do not have effect in relation to any payment if—

              (a)             it is made in respect of a scholarship awarded before 15th March

1983,

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              (b)             the first payment in respect of the scholarship was made before 6th

April 1984, and

              (c)             in relation to payments made after 5th April 1989, the person holding

the scholarship (“the scholar”) is receiving full-time instruction at the

university, college, school or other educational establishment at

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which the scholar was receiving such instruction on—

                    (i)                   15th March 1983, in a case where the first payment in respect

of the scholarship was made before that date, or

                    (ii)                  the date on which the first such payment was made, in any

other case.

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Income Tax (Earnings and Pensions) Bill
Schedule 7 — Transitionals and savings
Part 4 — Employment income: exemptions

    538

 

          (4)      For the purposes of sub-paragraph (3)(c), a payment made before 6th April

1989 in respect of any period beginning on or after that date is treated as

made at the beginning of that period.

Part 4

Employment income: exemptions

5

Incidental overnight expenses and benefits

  33       In determining whether section 240(1) or (2) or 268 applies—

              (a)             in the case of a period of absence which began before 6th April 2003

and ends on or after that date, or

              (b)             in the case of a period of absence which begins on or after that date

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and incidentally to which goods, services or money are obtained

using a non-cash voucher in relation to which section 141(6C) of

ICTA applies,

                   the question whether for the purposes of section 241 the exemption

provisions total exceeds the permitted amount is to be determined as if this

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Act had applied at any relevant time before that date.

  34       In determining—

              (a)             whether section 141(6C) and (6D), 142(3C) and (3D), 155(1B) and (1C)

or section 200A of ICTA applies in the case of a period of absence

which began before 6th April 2003 and ends on or after that date, or

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              (b)             whether section 141(6C) and (6D) applies in the case of a period of

absence which begins on or after that date,

           the question whether the authorised maximum (as defined in section

200A(4) of ICTA) is exceeded in relation to the absence is to be determined

as if in section 200A(5) after the words “exceeded by” there were inserted the

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words “the aggregate of the exemption provisions total in respect of the

period (as defined in section 241 of ITEPA 2003) and”.

Removal benefits and expenses

  35      (1)      Section 287 (limit on exemption for removal benefits and expenses) applies

with the modification in sub-paragraph (2) where—

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              (a)             a benefit is provided on or after 6th April 2003 in connection with a

change of an employee’s residence, or

              (b)             expenses are incurred on or after that day in connection with such a

change,

                   and any such benefits have been provided or expenses incurred before that

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date in connection with that change.

          (2)      In subsection (2) before paragraph (a) insert—

                                          “(aa) the total value to the employee immediately before 6th

April 2003, as defined in paragraph 24(2) of Schedule 11A to

ICTA,”.

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  36       A direction under paragraph 6(2) of Schedule 11A to ICTA (directions as to

meaning of “the relevant day”) by virtue of which a day on or after 6th April

2003 was directed to be the relevant day in relation to a change of

residence—

              (a)             is not affected by any repeals made by this Act, but

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Income Tax (Earnings and Pensions) Bill
Schedule 7 — Transitionals and savings
Part 5 — Employment income: deductions

    539

 

              (b)             continues in force as respects any benefit provided or expenses

incurred on or after that date as if it were a direction given under

section 274(2) (directions as to the limitation day), directing that day

to be the limitation day.

Retraining courses

5

  37      (1)      The repeal of sections 588(5)(a) and 589(3) and (4) of ICTA does not affect—

              (a)             the operation of section 588(5) of ICTA by virtue of paragraph (a) of

that provision where liability for a tax year before 2003-04 is

determined,

              (b)             the operation of section 588(5) of ICTA by virtue of paragraph (b) of

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that provision where liability is determined on the assumption that

the person undertaking the course fell within section 588(1) of ICTA

in such a tax year, or

              (c)             the operation of section 588(6) and (7) of ICTA as it applies by virtue

of sub-paragraph (2).

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          (2)      In any case where there has been such a determination as is mentioned in

sub-paragraph (1)(a) or (b), section 588(6) and (7) apply as if section 588(6)

referred to a failure to comply with any provision of section 589(3) or (4) of

ICTA instead of a failure to meet such a condition as is mentioned in section

312(1)(b)(i) or (ii) of this Act.

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Suggestion awards

  38      (1)      This paragraph applies for the purpose of determining the extent, if any, to

which section 321(2) (exemption of suggestion awards) applies in respect of

a financial benefit award for a suggestion (“the later award”) in a case where

such an award (“the earlier award”) has been made for the same suggestion

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on a previous occasion or occasions before the tax year 2003-04.

          (2)      For the purposes of the application of section 322(3) in relation to the later

award, “the residue of the suggestion maximum” means the suggestion

maximum, as defined in section 322(4), less the aggregate of—

              (a)             the total of the amounts exempted from income tax under section 321

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in respect of financial benefit awards for the same suggestion made

on previous occasions, and

              (b)             the total of the earlier awards.

Part 5

Employment income: deductions

35

Earnings charged on remittance

  39       In relation to expenses incurred before the tax year 2003-04, section 353

(deductions from earnings charged on remittance) applies as if the condition

in subsection (3) of that section were that the expenses would have been

deductible under section 193, 194, 195 or 198(1) of ICTA from emoluments

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of the office or employment if those emoluments had been chargeable under

Case I of Schedule E for the tax year in which the expenses were incurred.

 

 

Income Tax (Earnings and Pensions) Bill
Schedule 7 — Transitionals and savings
Part 6 — Employment income: income which is not earnings or share-related

    540

 

Non-domiciled employee’s travel costs and expenses: “qualifying arrival date”

  40       In relation to any time before 6th April 2003, section 375 (meaning of

“qualifying arrival date”) has effect as if the references in subsections (1)(a)

and (4) to the person receiving earnings for duties performed in the United

Kingdom included a reference to the person receiving emoluments for such

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duties.

Part 6

Employment income: income which is not earnings or share-related

Benefits from non-approved pension schemes

  41      (1)      Chapter 2 of Part 6 (benefits from non-approved pension schemes) applies

10

with the following modifications in relation to a benefit provided under a

non-approved retirement benefits scheme which—

              (a)             was entered into before 1 December 1993, and

              (b)             has not been varied on or after that day with a view to the provision

of the benefit.

15

          (2)      Section 393(2) does not apply.

          (3)      Section 394(4) does not apply.

          (4)      For sections 395, 396 and 397 substitute—

       “394A  Pre-December 1993 schemes: chargeability of certain lump sums

              (1)                             Section 394 does not apply to a lump sum to the extent that the lump

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sum is attributable to the payment of a sum—

                    (a)                   which is deemed to be the income of a person by virtue of

section 595(1) of ICTA and in respect of which that person has

been assessed to tax, or

                    (b)                   which counted as the employment income of an employee by

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virtue of section 386(1) of this Act.

              (2)                             For the purposes of subsection (1) it must be assumed that, unless the

contrary is shown, the provision of a lump sum is not attributable to

the payment of such a sum as is mentioned in that subsection.

       394B  Pre-December 1993 schemes: relationship between this Chapter and

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Part 2

              (1)             This section applies if, apart from this section, the provision of a

benefit to which this Chapter applies would give rise to two amounts

(“A” and “B”)—

                    (a)                   A being an amount of general earnings from an employment

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(see section 7), and

                    (b)                   B being an amount which is to count as employment income

of an individual by virtue of section 394(1).

              (2)             In such a case—

                    (a)                   A constitutes general earnings from the employment, and

40

 

 

Income Tax (Earnings and Pensions) Bill
Schedule 7 — Transitionals and savings
Part 7 — Employment income: share-related income

    541

 

                    (b)                   the amount, if any, by which B exceeds A is to count as

employment income of the individual by virtue of section

394(1).”

Payments and benefits on termination of employment etc.

  42       Section 403 (charge on payment or other benefit) does not apply in relation

5

to payments or other benefits received on or after 6th April 2003 that were

brought into charge to tax before 6th April 1998.

  43      (1)      This paragraph applies for the purpose of determining how the £30,000

threshold referred to in sections 403 and 404 operates where—

              (a)             payments or other benefits to which Chapter 3 of Part 6 apply are

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received, and

              (b)             payments or benefits to which section 148 of ICTA applied were

received in respect of the same person—

                    (i)                   in respect of the same employment, or

                    (ii)                  in respect of different employments with the same employer

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or associated employers.

          (2)      For the purposes of section 403(4) and (5), section 415 (valuation of benefits)

does not apply to the payments and benefits referred to in sub-paragraph

(1)(b), and their aggregate amount is to be taken to be their aggregate

amount immediately before 6th April 2003.

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          (3)      The references in sections 403(4) and (5) and 404(3)(b) to payments or

benefits to which Chapter 3 of Part 6 applies include references to the

payments and benefits referred to in sub-paragraph (1)(b).

          (4)      Section 404(2) (when employers are associated) applies for the purposes of

this paragraph.

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Part 7

Employment income: share-related income

Conditional interests in shares

  44       Chapter 2 of Part 7 does not apply in relation to interests acquired before

17th March 1998.

30

  45      (1)      This paragraph relates to the operation of section 425 (cases where Chapter

2 of Part 7 does not apply).

          (2)      Section 425(1) applies in relation to any acquisition made before 6th April

2003 with the substitution of “if the person was not chargeable under Case 1

of Schedule E in respect of the office or employment in question” for the

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words from “if the earnings” onwards.

  46      (1)      This paragraph relates to the operation of section 428 (amount of charge

where interest in shares ceases to be only conditional or on disposal) in

relation to an acquisition made before 6th April 2003.

          (2)      For the purposes of section 428(1) each of the following is a “deductible

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amount”—

              (a)             any amounts on which the employee has become chargeable to tax

under Schedule E in respect of the acquisition of the employee’s

interest; and

 

 

Income Tax (Earnings and Pensions) Bill
Schedule 7 — Transitionals and savings
Part 7 — Employment income: share-related income

    542

 

              (b)             any amount on which the employee has become chargeable to tax in

respect of the shares under section 78 or 79 of FA 1988 (unapproved

employee share schemes) by virtue of an event that occurred before

6th April 2003.

  47      (1)      This paragraph applies where—

5

              (a)             in the tax year 2002-03 a person provided an individual with an

interest in shares which was only conditional, and

              (b)             the circumstances were such that subsequent events might have

given rise to a charge under section 140A of ICTA (charge on

conditional interest in shares ceasing to be conditional or on

10

disposal) on that individual.

          (2)      Section 432 (duty to notify provision of conditional interests in shares)

applies in relation to the provision subject to the following provisions.

          (3)      The particulars required by section 432(2) must be provided to the Inland

Revenue before 6th May 2003.

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          (4)      However, no particulars of the provision need be provided by a person

under section 432 if that person has already given particulars of it under

section 140G(1) of ICTA (which made provision corresponding to section

432 for tax years before 2003-04).

  48      (1)      This paragraph applies where—

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              (a)             a person had an interest in shares which was only conditional,

              (b)             in the tax year 2002-03 either—

                    (i)                   the shares ceased to be shares in which that person’s interest

was only conditional,

                    (ii)                  the shares were disposed of, or

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                    (iii)                 that person died, and

              (c)             that event gave rise to a charge under section 140A of ICTA (charge

on conditional interest in shares ceasing to be conditional or on

disposal).

          (2)      Section 433 (duty to notify events resulting in charges under section 427)

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applies in relation to the event subject to the following provisions.

          (3)      The particulars required by section 433(2) must be provided to the Inland

Revenue before 6th May 2003.

          (4)      However, no particulars of the provision need be provided by a person

under section 433 if that person has already given particulars of it under

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section 140G(2) of ICTA (which made provision corresponding to section

433 for tax years before 2003-04).

Convertible shares

  49       Chapter 3 of Part 7 does not apply in relation to shares acquired before 17th

March 1998.

40

  50      (1)      This paragraph relates to the operation of section 437 (cases where Chapter

3 of Part 7 does not apply).

          (2)      Section 437(1) applies in relation to any acquisition made before 6th April

2003 with the substitution of “if the person was not chargeable under Case 1

of Schedule E in respect of the office or employment in question” for the

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words from “if the earnings” onwards.

 

 

 
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