House of Commons - Explanatory Note
Income Tax (Earnings And Pensions) Bill - continued          House of Commons

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Paragraph 83

3737.     This paragraph ensures that the new sub-paragraph 41(6) of Schedule 5 applies to replacement options whenever granted.

Paragraph 84

3738.     This paragraph provides for continuity in the definition of "employee" for the purposes of Chapter 11 of Part 7 of this Bill (employee benefits trusts).

Part 8: Approved profit sharing schemes

Paragraph 85

3739.     This paragraph ensures that the requirement for trustees to notify a participant of the facts relating to his tax liability still applies in respect of amounts chargeable after 5 April 2003.

Share incentive plans

Paragraph 86

3740.     This paragraph preserves the capital gains tax advantages that are available where the trustees of an approved share incentive plan acquire shares from the trustees of an approved profit sharing scheme.

Paragraph 87

3741.     An individual who participates in any of the share schemes etc dealt with in Schedules 2 to 5 of this Bill must not have a material interest in the company in question. This paragraph provides that, in calculating whether or not such an individual has such a material interest, the interest of the trustees of any approved profit sharing scheme in any shares in the company which have not been appropriated to an individual are to be disregarded, as are any rights exercisable by the trustees as a result of that interest. The provision made by this paragraph has been placed in this Schedule because approved profit sharing schemes are being phased out (see section 49 FA 2000) and are accordingly obsolescent.

Part 9: Social security income

Paragraph 88

3742.     This paragraph has effect if, in relation to certain provisions (listed in sub-paragraph (3)), the repeals made by the Tax Credits Act 2002 have not come fully into force.

Part 10: PAYE

Paragraph 89

3743.     This paragraph derives from part of section 203(10) of ICTA which provides part of the powers for PAYE regulations to deal with electronic filing. Sections 132 and 133 of FA 1999 introduced new powers to provide for use of electronic communications. As a consequence part of section 203(10) will be repealed by Schedule 20 to FA 1999 when a Treasury order is made under section 133(4) of that Act. Clause 684(2), item 5, anticipates this repeal. This paragraph preserves the position until the order is made.

Part 11: Consequences for corporation tax

Paragraphs 90 and 91

3744.     These paragraphs explain when this Bill should have effect for the purposes of corporation tax. A company's accounting period affected by the provisions of this Bill may straddle 6 April 2003. In such a case, the company may elect for the law as it stood before 6 April 2003 to apply for the duration of that straddling accounting period.


3745.     This Schedule contains repeals and revocations. Part 1 of the Schedule lists the enactments repealed, and Part 2 the subordinate legislation revoked.


3746.     The Bill will not require any additions to previously planned expenditure. Revision of guidance for users and for staff will be undertaken as part and parcel of the process of improving such material and keeping it up to date in response to new legislation and other changes. The minor changes in the law in the Bill are expected to have negligible effect on tax revenues.


3747.     The Bill will not require any increase in the number of staff in the Inland Revenue or other departments.


3748.     A regulatory impact assessment of the effects of the Bill is available at or from Simon Williams, Tax Law Rewrite Project, Inland Revenue, Room 831, Bush House, South West Wing, London WC2B 4RD (telephone +44 (20) 7438 7921).

3749.     In summary the Bill is expected to benefit four groups of people: tax practitioners, taxpayers, employers and the Inland Revenue. The benefits can broadly be summarised as follows:

  • less time should have be expended deciding what the law is, and fewer errors caused by misunderstanding of the law;

  • there should be fewer issues on which time and money has to be spent getting specialist advice;

  • there should be fewer queries from clients to their advisers and from advisers or taxpayers to the Inland Revenue. In consequence there should be fewer discussions and disagreements with the Inland Revenue about the meaning of legislation and this should lead to less litigation.

3750.     In addition:

  • practitioners and employers coming new to the legislation will find it easier to understand and learn; and

  • greater ease of use for practitioners and employers could result in lower costs both in the context of compliance and advice.

3751.     There will be some one-off costs to business: there will be retraining costs for practitioners and commercial publishers, and software suppliers will need to update their products.


3752.     Section 19 of the Human Rights Act 1998 requires the Minister in charge of a Bill in either House of Parliament to make a statement, before second reading, about the compatibility of the provisions of the Bill with the Convention rights (as defined in section 1 of that Act). The Chancellor of the Exchequer has made the following statement:

    "In my view the provisions of the Income Tax (Earnings and Pensions) Bill are compatible with the Convention rights."


3753.     The Bill will come into force on Royal Assent. Clause 724 provides for it to have effect

  • for the purposes of income tax, for the year 2003-04 and subsequent tax years; and

  • for the purposes of corporation tax (where the provisions of this Bill are used to compute profits for corporation tax purposes of corporate office-holders), for accounting periods ending after 5 April 2003.

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Prepared: 5 December 2002