Clause 289: Relief for certain bridging loans not qualifying for exemption under section 288

1185.     This clause provides a measure of relief for those loans that do not qualify under the provisions of the clause 288. It derives from section 191B(8) and part of (13) of ICTA.

1186.     Subsection (1) describes the circumstances in which this section applies.

1187.     An employee who has a bridging loan that would otherwise come within the provisions of the preceding clause may not repay that loan until after the day determined by the formula set out in clause 288(4). If so, the employee would not come within the exemption now set out in that clause. In such a case the employee's liability in respect of the beneficial loan under clause 175 is worked out as if the loan had been made on the day determined by that formula. Subsection (2) rewrites the corresponding provision from the source legislation.

1188.     Subsection (3) maintains the position in the source legislation whereby that extension only applies to those matters covered by what was section 160 of ICTA and not to the matters covered by what was section 161 of ICTA.

1189.     Subsection (4) provides for the tax payable to be decided on a provisional basis, should the whole circumstances surrounding the loan not be known at the time the need to make a decision arises.

Chapter 8: Exemptions: Special kinds of employees

Clause 290: Accommodation benefits of ministers of religion

1190.     This clause provides that there is no liability to tax in respect of benefits arising in connection with accommodation provided for a full-time minister (defined at subsection (5)) in premises owned by a charity or ecclesiastical corporation.

1191.     It derives from section 332 of ICTA.

1192.     Subsection (1) provides that no liability to tax arises in respect of the payment or reimbursement of a statutory amount or statutory deduction. Both these terms are defined at subsection (5).

1193.     Subsection (2) provides that no liability to tax arises in respect of expenses paid or reimbursed in connection with the provision of the accommodation where the minister is in "excluded employment". "Excluded employment" is defined in clause 239(9).

1194.     Subsection (3) excludes from the exemptions any parts of the property for which the minister is in receipt of rent.

1195.     Subsection (4) defines the premises in respect of which benefits qualify for the exemption.

1196.     Subsection (5) provides definitions for terms used in the clause, including a definition of "charity" drawn from section 506(1). See Note 34 in Annex 2.

Clause 291: Termination payments to MPs and others ceasing to hold office

1197.     This clause derives from section 190 of ICTA. It refers to Acts that give MPs, MEPs and certain other political office holders an entitlement to termination payments. That entitlement, established prior to termination, makes the payments chargeable to tax as earnings. The payments are in fact compensation for loss of office. If it were not for the predetermined entitlement they would normally fall within section 148 of ICTA and tax would be chargeable on an amount above the £30,000 threshold.

1198.     This clause ensures that such payments are not treated as earnings and are instead taxed as termination payments under Chapter 3 of Part 6 (which derives from section 148 of ICTA), subject to the threshold set out in that Chapter.

1199.     Section 190(3) of ICTA applies to "grants and payments if they are not pension payments". The reference to pension payments is unnecessary because section 190 applies to "emoluments" and pension payments are not taxed as emoluments. The reference to pension payments has not been included in the rewritten clause because they are not taxed as employment income.

1200.     The reference to the Parliamentary Pensions Act 1984 has been omitted as it was repealed by the Ministerial and other Pensions and Salaries Act 1991 and would only apply where the loss of office was before 28 February 1991. It is now spent. This removes unnecessary material.

1201.     The meaning of "a relevant office" is set out in section 4(6) Ministerial and Other Pensions and Salaries Act 1991. Broadly it covers all Government Ministers, Opposition Leaders and Whips, the Chairman and Deputy Chairmen of Ways and Means, and the Chairman and Deputy Chairman of Committees of the House of Lords.

Clause 292: Overnight expenses allowances of MPs

1202.     This clause derives from part of section 200 of ICTA. It provides an exemption from income tax for certain allowances paid to Members of Parliament which without the exemption would be chargeable to tax as earnings.

1203.     The allowances that qualify are those provided for by a resolution of the House of Commons covering the overnight expenses set out in the clause, where an MP has to stay away from home overnight either in London or in the constituency in order to carry out Parliamentary duties.

1204.     The material in sections 200 and 200ZA of ICTA has been rearranged. Overnight expense allowances to members of the House of Commons are dealt with in this clause. Those paid to members of the Scottish Parliament, the National Assembly for Wales and the Northern Ireland Assembly are covered in clause 293. Travel by members to European Union institutions or to the parliament of another member State is dealt with in clause 294.

1205.     Although the allowances are exempt from tax this clause does not prohibit a deduction for an MP's expenses in respect of which the allowances are paid. That prohibition is in section 198(4) of ICTA, which is rewritten as clause 360.

Clause 293: Overnight expenses of other elected representatives

1206.     This clause derives from the overnight expenses part of section 200ZA of ICTA in respect of elected representatives of the Scottish Parliament, the National Assembly for Wales and the Northern Ireland Assembly.

1207.     This exemption has not been combined with the similar one for Members of the House of Commons because the detailed rules are different. It is clearer to keep them separate. Again, this clause is supplemented by clause 360.

Clause 294: EU travel expenses of MPs and other representatives

1208.     This clause brings together the exemption for European Union travelling expenses paid to MPs and members of the Scottish Parliament, the National Assembly for Wales and the Northern Ireland Assembly. The clause derives from parts of sections 200 and 200ZA of ICTA.

1209.     The definition of European Union travel expenses is the same in both section 200 and section 200ZA of ICTA. It incorporates the extension to EU candidate countries made by section 41 of FA 2002. Combining the relevant parts of the two sections cuts out duplication. Again this clause is supplemented by clause 360.

Clause 295: Transport and subsistence for Government ministers etc.

1210.     This clause provides an exemption in respect of transport or subsistence provided for certain Government office-holders, mainly Ministers, and members of their families or households. It derives from section 200AA of ICTA. The exemption also covers payments and reimbursements of travel and subsistence expenses if they are made by or on behalf of the Crown.

1211.     The exemption was extended in FA 1999 to apply to Ministers and similar office-holders serving in the Scottish Parliament, the National Assembly for Wales and the Northern Ireland Assembly.

1212.     For the purposes of this exemption, the provision of transport includes the provision of a car, which would otherwise give rise to a charge to tax under the benefits code. The source legislation applies the exemption specifically to cars, but then goes on to define a car as "any mechanically propelled road vehicle" - a phrase which could include, for example, a van or a motorbike. This slight incongruity has been removed by applying the exemption to the provision of a "vehicle", and defining "vehicle" in the same way as "car" is defined in the source legislation. It therefore applies to vans and motorbikes as well as cars.

Clause 296: Armed forces' leave travel facilities

1213.     This clause provides there is no liability to tax on armed forces' leave travel facilities. It derives from section 197 of ICTA.

1214.     Subsection (1) sets out the exemption. It covers the various travel warrants and allowances, including allowances for the use of private cars, made available to service personnel.

1215.     The clause substitutes "the armed forces of the Crown" for the wording, "the naval, military or air forces of the Crown", in section 197 of ICTA. The two terms are construed as having the same meaning and include all United Kingdom service personnel, both members of a regular force and members of a reserve force. References to the "armed forces" now also include the women's services, which was not the position in 1977 when the original provision was introduced. The same term is used in this clause and in clause 297 for the same body of taxpayers.

1216.     Subsection (2) excludes the provision of a vehicle for leave travel. Such provision remains taxable as a benefit under Chapter 6 of Part 3 (taxable benefits: cars, vans and related benefits). "Travel facilities" are not otherwise defined or limited.

Clause 297: Armed forces' food, drink and mess allowances

1217.     This clause provides that no liability to income tax arises in respect of allowances paid to members of the armed forces, if those allowances are paid instead of food or drink, or as a contribution to the expenses of a mess. The clause is the first of two that derive from parts of section 316 of ICTA.

1218.     The legislation in section 316 originally derives from a number of different provisions enacted between 1946 and 1951. Those provisions were consolidated first as section 457 ITA 1952 and then as section 366 ICTA 1970 before becoming section 316. In the case of Lush (HM Inspector of Taxes) v Coles (1967) 44 TC 169, at 172G, Stamp J described them as containing "something of a hotchpot".

1219.     Section 316 has five subsections, which may be divided into three categories.

1220.     The first category consists of subsection (3), which deals with food and mess allowances. Subsection (3) is dealt with in this clause. The subsection makes provision for two different categories of allowances; and it has been found helpful to deal with the two categories separately.

1221.     The second category consists of subsection (4), which deals with training expenses allowances. Subsection (4) is dealt with in clause 298.

1222.     The third category consists of subsections (1), (2) and (5). These subsections deal with re-enlistment bounties and gratuities under schemes set up in 1946 and 1950 for certain categories of military personnel who had seen active service, either during the Second World War or in the years immediately following it. So far as may now be discovered, these schemes all came to an end many years ago; and consultations between the Inland Revenue and the Ministry of Defence have led to agreement that these provisions should not be retained. These subsections are not rewritten in this Bill on the grounds that they are obsolete.

Clause 298: Reserve and auxiliary forces' training allowances

1223.     This clause provides that no liability to income tax arises in respect of training allowances and bounties payable out of the public revenue to members of the reserve and auxiliary forces of the Crown. The clause is the second of two deriving from provisions contained in section 316, and derives from subsection (4) of that section.

1224.     This provision was litigated in Lush (HM Inspector of Taxes) v Coles (1967) 44 TC 169, where the taxpayer was an officer in the Civil Defence Corps who received a training bounty of £15 from local authority funds. The General Commissioners upheld his appeal against an assessment under Schedule E on the grounds that the bounty fell within what is now section 316(4). But the Inspector's appeal to the High Court was successful, because Stamp J held that a sum paid out of local authority funds could not be described as being paid "out of the public revenue".

Clause 299: Crown employees' foreign service allowances

1225.     This clause provides there is no liability to tax on allowances paid to Crown employees as compensation for the extra cost of having to live outside the United Kingdom when working abroad. It derives from section 319 of ICTA.

1226.     An allowance is exempt only if a certificate as to its purpose has been given by the Treasury or by an appropriate Minister.

1227.     Subsection (2) lists the persons who, in addition to the Treasury, may give such a certificate.

1228.     That list derives from the Transfer of Functions (Foreign Service Allowance) Order, SI 1996 No 313 (as varied by the Transfer of Functions (Lord Advocate and Secretary of State) Order, SI 1999 No 678 with effect from 19 May 1999, and The Ministry of Agriculture, Fisheries and Food (Dissolution) Order 2002, SI 2002 No 794 with effect from 27 March 2002).

Clause 300: Consuls

1229.     This clause provides that employment income from the office of a consul (defined in subsection (3)) in the United Kingdom in the service of a foreign state is not liable to income tax.

1230.     It derives from section 321 of ICTA.

1231.     Subsection (1) provides the exemption.

1232.     Subsection (2) provides that the income is also disregarded in estimating income for any other income tax purpose.

1233.     Subsection (3) defines "consul".

Clause 301: Official agents

1234.     This clause provides that employment income from an employment as an official agent (defined at subsection (5)) in the United Kingdom for a foreign state is not liable to tax if certain conditions are met.

1235.     It derives from section 321 of ICTA.

1236.     Subsection (1) provides that no liability arises on the employment income when two conditions are met.

1237.     Subsection (2) gives the first of those conditions.

1238.     Subsection (3) gives the second of those conditions.

1239.     Subsection (4) provides that such income is disregarded in estimating the amount of income for any income tax purpose.

1240.     Subsection (5) defines "official agent".

1241.     Subsection (6) provides a condition to the definition of "official agent" in subsection (5).

Clause 302: Consular employees

1242.     This clause provides that employment income from an employment in the United Kingdom as a consular employee (defined at subsection (4)) of a foreign state is not liable to tax where the appropriate Order in Council has been made and certain conditions are met.

1243.     It derives from section 322 of ICTA.

1244.     Subsection (1) provides that no liability arises on the employment income when an Order in Council gives effect to a reciprocal arrangement (defined at subsection (4)) and one of two conditions is met.

1245.     Subsection (2) gives the first condition.

1246.     Subsection (3) gives the second condition. Following the enactment of the British Overseas Territories Act 2002, references to "British Dependent Territories citizen" in earlier enactments are to be read as "British overseas territories citizen". This has been incorporated here.

1247.     Subsection (4) defines "consular employee" and "reciprocal arrangement".

1248.     Subsection (5) allows an Order in Council to limit the operation of the clause in such a way as is considered necessary or expedient.

1249.     Subsection (6) allows the Order in Council to have effect from an earlier date than the date on which it is made and to contain transitional provisions.

1250.     Subsection (7) provides that the statutory instrument containing the Order is subject to a negative resolution.

1251.     Subsection (8) provides that this clause operates without prejudice to clause 301.

Clause 303: Visiting forces and staff of designated allied headquarters

1252.     This clause confers income tax benefits upon visiting forces and NATO staff.

1253.     The clause derives from section 323 of ICTA, which confers two income tax benefits:

• earnings paid by the government of a designated country or by a designated allied headquarters are exempt from income tax; and

• an individual to whom the section applies is not treated as resident in the United Kingdom by reason solely of being a member of a visiting force or of being attached to, or an employee of, a designated allied headquarters.

1254.     This clause deals with the first income tax benefit. It is proposed to deal with the second benefit in a future Bill.

1255.     The exemption from income tax applies for several different descriptions of individuals:

• members of a visiting force of a designated country;

• members of a civilian component of a visiting force of a designated country;

• members of the armed forces of a designated country attached to a designated allied headquarters;

• members of a civilian component of the armed forces of a designated country attached to a designated allied headquarters; and

• employees of a designated allied headquarters who come within a description agreed between the government and the other members of the NATO Council.

1256.     Section 323 of ICTA is entitled "Visiting forces". This clause has a longer and more informative title.

1257.     Two definitions needed for this clause are contained in Part 1 of the Visiting Forces Act 1952. These are the definitions of a visiting force, in section 12(1) of that Act, and of a member of a civilian component of a visiting force, in section 10 of that Act. No attempt has been made to set out those definitions in this clause - partly for reasons of length and partly because there is no wish to lose the explicit link between this clause and the 1952 Act.

1258.     Following the enactment of the British Overseas Territories Act 2002, references to "British Dependent Territories citizen" in earlier enactments are to be read as "British overseas territories citizen". This has been incorporated in this clause.

1259.     This clause includes slightly different cross-references to the Visiting Forces Act 1952 from those in section 232 of ICTA. Subsection (5) contains a reference to "Part 1 of the Visiting Forces Act 1952" as opposed to the reference to "the Visiting Forces Act 1952" in section 323(4). The additional words "Part 1 of" were in section 367(3) of ICTA 1970 (the predecessor of section 323(4) of ICTA 1988). These words have been reinstated, because the two most important interpretative provisions, for present purposes, are in Part 1 of the 1952 Act and apply for the purposes of that Part. Those provisions are the definitions of a member of a civilian component of a visiting force and of a visiting force.

1260.     Subsection (5) also corrects another minor drafting error in section 323(4). That subsection refers to subsections (1) and (2) of section 323, and it is then stated that "those subsections shall be construed as one with the Visiting Forces Act 1952". However, the reference to a "civilian component" of a visiting force depends entirely upon subsection (4) itself; and no requirement is imposed to construe subsection (4) as one with the 1952 Act. There can be little doubt that the provisions of section 10 of the Visiting Forces Act 1952 must be applicable; and the provision has been rewritten on this basis.

1261.     Section 323 is one of a number of provisions that confer revenue benefits to visiting forces and NATO staff. Other provisions are:

• section 11(1) of TCGA 1992 (for capital gains tax);

• section 155 of the Inheritance Tax Act 1984 (for inheritance tax); and

• section 74 of the Finance Act 1960 (for stamp duty).

Clause 304: Experts seconded to European Commission

1262.     This clause provides there is no liability to tax on daily subsistence allowances paid by the European Commission to "detached national experts".

1263.     It derives from ESC A84. See Change 67 in Annex 1.

1264.     Subsection (1) sets out the exemption for allowances paid to persons seconded under the "detached national experts scheme".

1265.     Detached national experts are people seconded to the Commission to advise and assist Commission officials for periods from three months to three years, under a scheme introduced on 26 July 1988.

1266.     Subsection (2) defines "detached national experts scheme" and provides for the exemption from tax to continue in the event that the scheme is replaced by a new scheme having broadly the same effect.

Clause 305: Offshore oil and gas workers: mainland transfers

1267.     This clause provides an exemption from income tax for certain benefits received by a limited number of employees who work on offshore oil or gas installations. It derives from ESC A65. Legislating the concession is a minor change to the law. See Change 68 in Annex 1.

1268.     Those employees whose permanent workplace is the installation would normally be chargeable to tax in respect of any transport, accommodation and subsistence provided. That is because the travel to that workplace would be travel between home and work, so no deduction could be claimed under Part 5 for that or for any associated accommodation and subsistence. Under ESC A65 such benefits are not charged to tax.

1269.     The provision of transport exempted by this clause is confined to that part of the journey between home and work which starts at the mainland departure point from which the oil and gas rig workers are normally transported to the offshore installation. In subsection (3) this is defined as "transfer transport". Apart from travel from the nearby overnight accommodation (defined in subsection (6) as "local transport"), it does not provide exemption for travel between the mainland departure point and a place other than the offshore installation.

1270.     If the employee has a permanent workplace on the mainland, the provision of transport to the installation is not exempt, but a deduction under Part 5 would be available. The same applies to the accommodation and subsistence in connection with such travel. This position is preserved by subsection (5) which makes it clear that the exemption only applies to the provision of transport, accommodation and subsistence for which a deduction would not be due if the employee had met the cost.

Clause 306: Miners etc.: coal and allowances in lieu of coal

1271.     This clause provides an exemption from income tax to free coal, and smokeless fuel, and payments in lieu of free coal given to miners and certain other colliery workers. It derives from ESC A6. Legislating the concession is a minor change to the law. See Change 69 in Annex 1.

1272.     Subsection (1) identifies the scope of the exemption and who qualifies.

1273.     Subsection (2) limits the scope of the exemption to the provision of free coal, or the payment of cash in lieu, of an amount that represents a reasonable level of personal consumption. But subsection (3) assumes that this condition is met unless the Inland Revenue can show that it is not. The purpose of these two subsections is to reproduce the restriction that applies to all ESCs - a concession will not be given where an attempt is made to use it to avoid tax. It is not expected that anyone benefiting from the concession will not continue to benefit from exemption under this clause.

1274.     Subsection (4) gives the definition of "colliery worker". It includes all those persons who were regarded as coming within the scope of the concession.

Chapter 9: Exemptions: Pension provision

Clause 307: Death or retirement benefit provision

1275.     This clause provides an exemption from the charge under the benefits code in respect of the provision by an employer for death or retirement benefits for an employee. It derives from a combination of the exemptions currently available under section 155(4) of ICTA and under ESC A72. That concession widens the scope of section 155(4), which only applies to death etc benefits payable to an employee's spouse, children or dependants. The concession covers death etc benefits payable to other members of the employee's family or household as defined in section 168(4) of ICTA. That definition is now in clause 721(5).

1276.     To the extent that this clause legislates ESC A72 it is a minor change to the law. See Change 70 in Annex 1.

1277.     An employee normally nominates the person to whom any death benefits should be paid. The exemption only applies if that recipient remains a member of the employee's family or household.