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Finance Bill
Part 7 — Income tax, corporation tax and capital gains tax: general

    103

 

                  (b)                 section 2(5)(aa)(ii) (taper relief),

                  (c)                 section 2(5)(b) (addition of certain amounts treated as amounts

of chargeable gains), and

                  (d)                 section 2A (taper relief),

                         except that paragraphs (b) and (d) above are not to affect the operation

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of section 2(7) for the purposes of subsection (6) above.

           (9)           All such adjustments shall be made, whether by discharge or

repayment of tax, the making of assessments or otherwise, as are

required to give effect to the election under section 279A made by the

taxpayer for the relevant loss to be treated as accruing in an earlier year

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in accordance with this section.

           (10)          Any reference in this section or section 279D to deduction in accordance

with section 2(2)(a), section 2(2)(b) or section 2(2) includes a reference

to such deduction by virtue of section 2(5)(a)(i) or (aa)(i).

       279D            Elections under section 279A

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           (1)           An election under section 279A is irrevocable.

           (2)           Any election under that section must be made by giving a notice in

accordance with this section.

           (3)           The notice must be given to an officer of the Board.

           (4)           Subsections (5) to (8) below have effect in relation to the notice given by

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the taxpayer in respect of the relevant loss.

           (5)           The notice must specify each of the following—

                  (a)                 the amount of the relevant loss;

                  (b)                 the right disposed of;

                  (c)                 the year of the right’s disposal;

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                  (d)                 the year of the loss (if different from the year of the right’s

disposal);

                  (e)                 the year in which the right was acquired;

                  (f)                 the original asset or assets.

           (6)           The notice must also specify each of the following—

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                  (a)                 the eligible year in which the relevant loss is to be treated in

accordance with section 279C(2) as accruing to the taxpayer;

                  (b)                 the first year limit (see section 279C(3) and (4));

                  (c)                 how much of the relevant loss falls to be deducted in accordance

with section 2(2)(a) from chargeable gains accruing to the

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taxpayer in that year.

           (7)           If, in accordance with section 279C, any part of the relevant loss falls to

be deducted in accordance with section 2(2)(b) from chargeable gains

accruing to the taxpayer in any later eligible year, the notice must also

specify—

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                  (a)                 each such year;

                  (b)                 in the case of each such year, the later year limit (see section

279C(6));

                  (c)                 how much of the relevant loss falls to be deducted in accordance

with section 2(2)(b) in each such year from chargeable gains

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accruing to the taxpayer in that year.

 

 

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           (8)           The notice must be given on or before the first anniversary of the 31st

January next following the year of the loss.

           (9)           An election under section 279A is made on the date on which the notice

of the election is given.

           (10)          Different notices must be given in respect of different losses.

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           (11)          Where a person makes two or more elections under section 279A on the

same day, the notices must specify the order in which the elections are

made.

           (12)          For the purposes of any provisions of sections 279A to 279C whose

operation is affected by the order in which any elections under section

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279A are made, elections made by a person on the same day shall be

treated as made at different times and in the order specified in

accordance with subsection (11) above.”.

     (2)    Where—

           (a)           on the disposal of a right to which section 279A of the Taxation of

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Chargeable Gains Act 1992 (c. 12) applies, an allowable loss would,

apart from section 279C of that Act, accrue to a person in any year of

assessment,

           (b)           an election is made under section 279A of that Act for the loss to be

treated as accruing in an earlier year in accordance with section 279C,

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and

           (c)           the right is an earn-out right, within the meaning of section 138A of that

Act, which was conferred before 10th April 2003,

            no election may be made under section 138A of that Act (election for earn-out

right to be treated as security etc) in respect of the right, whether at the same

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time as the election under section 279A or subsequently.

     (3)    The amendment made by subsection (1) has effect in relation to allowable

losses that would, apart from that amendment, accrue on or after 10th April

2003.

            For this purpose, losses that would, apart from that amendment, be treated by

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virtue of section 10A of the Taxation of Chargeable Gains Act 1992 as accruing

in the year 2003-04 shall be treated as so accruing on or after 10th April 2003.

     (4)    Subsection (2) shall be deemed to have come into force on 10th April 2003.

 162   Transfers of value: attribution of gains to beneficiaries

     (1)    For section 85A of the Taxation of Chargeable Gains Act 1992 substitute—

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       “85A    Transfers of value: attribution of gains to beneficiaries and treatment

of losses

           (1)           Schedule 4C to this Act has effect with respect to the attribution of gains

to beneficiaries where there has been a transfer of value to which

Schedule 4B applies.

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           (2)           Sections 86A to 95 have effect subject to the provisions of Schedule 4C.

           (3)           No account shall be taken of any chargeable gains or allowable losses

accruing by virtue of Schedule 4B in computing the trust gains for a

year of assessment in accordance with sections 87 to 89, except in

 

 

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Part 7 — Income tax, corporation tax and capital gains tax: general

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computing for the purposes of paragraph 7A(2) of Schedule 4C the

amount on which the trustees would have been chargeable to tax under

section 2(2) if they had been resident or ordinarily resident in the

United Kingdom.

           (4)                         No account shall be taken of any chargeable gains or allowable losses

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to which sections 87 to 89 apply in computing the gains or losses

accruing by virtue of Schedule 4B.”.

     (2)    Schedule 4C to that Act (transfers of value: attribution of gains to beneficiaries)

is amended in accordance with Schedule 29 to this Act.

     (3)    In section 90 of that Act (transfers between settlements), for subsection (5)

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substitute—

           “(5)              This section does not apply—

                  (a)                 to a transfer to which Schedule 4B applies, or

                  (b)                 to gains to which Schedule 4C applies (that is, to “Schedule 4C

gains” within the meaning of that Schedule).”.

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     (4)    The following provisions have effect with respect to the coming into force of

the amendments made by this section and Schedule 29

           (a)           the amendments apply where the trustees of a settlement have made a

transfer to which Schedule 4B applies at any time on or after 21st March

2000;

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           (b)           where there has been a transfer of value to which Schedule 4B applies

before 9th April 2003, the transferor settlement shall be treated as

having a Schedule 4C pool as from that date containing such Schedule

4C gains as would fall to be included in the pool if—

                  (i)                 a year of assessment had ended with 8th April 2003, and

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                  (ii)                the reference in paragraph 1(2)(b) of Schedule 4C as amended to

the end of the year of assessment in which the transfer of value

was made were to that date;

           (c)           where a transferor settlement ceased to exist on or after 21st March 2000

and before 9th April 2003, Schedule 4C as amended applies as if it had

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ceased to exist on 8th April 2003 (so that paragraph (b) above applies);

           (d)           in a case within paragraph (b), including a case to which that paragraph

applies by virtue of paragraph (c), so much of Schedule 4C as amended

as provides that no account is to be taken of capital payments to

beneficiaries who are not chargeable to tax does not apply;

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           (e)           gains included in a settlement’s Schedule 4C pool by virtue of

paragraph 1(2)(b) of that Schedule as amended shall only be attributed

in accordance with the provisions of that Schedule to beneficiaries who

receive capital payments on or after 9th April 2003.

     (5)    Paragraph 8A(3) and (4) of Schedule 4C, inserted by paragraph 4 of Schedule

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29 to this Act, applies only where the transfer referred to in that provision

occurs on or after 9th April 2003.

     (6)    Expressions used in subsection (4) that are defined for the purposes of

Schedule 4C to the Taxation of Chargeable Gains Act 1992 (c. 12) as amended

by Schedule 29 to this Act have the same meaning as in that Schedule.

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Finance Bill
Part 7 — Income tax, corporation tax and capital gains tax: general

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Capital allowances and related matters

 163   Avoidance affecting proceeds of balancing event

     (1)    In Chapter 5 of Part 12 of the Capital Allowances Act 2001 (c. 2) (miscellaneous

supplementary provisions), after section 570 insert—

“Anti-avoidance

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       570A                                                                           Avoidance affecting proceeds of balancing event

           (1)           This section applies where an event occurs in relation to an asset (a

“balancing event”) as a result of which a balancing allowance would

(but for this section) fall to be made to a person (“the taxpayer”) under

Part 3, 4, 4A, 5 or 10.

10

           (2)           The taxpayer is not entitled to any balancing allowance if, as a result of

a tax avoidance scheme, the amount to be brought into account as the

proceeds from the event is less than it would otherwise have been.

           (3)           In subsection (2) a “tax avoidance scheme” means a scheme or

arrangement the main purpose, or one of the main purposes, of which

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is the obtaining of a tax advantage by the taxpayer.

           (4)           Where this section applies to deny a balancing allowance, the residue

of qualifying expenditure immediately after the balancing event is

nevertheless calculated as if the balancing allowance had been made.

           (5)           In this section as it applies for the purposes of Part 5 (mineral extraction

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allowances)—

                  (a)                 the references to the proceeds from the balancing event that are

to be brought into account shall be read as references to the

disposal value to be brought into account, and

                  (b)                 the reference to the residue of qualifying expenditure shall be

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read as a reference to the unrelieved qualifying expenditure.”.

     (2)    This section applies in relation to any balancing event (within the meaning of

section 570A, inserted by subsection (1) above) occurring on or after 27th

November 2002, except where the event—

           (a)           occurs in pursuance of a contract entered into before that date, and

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           (b)           does not occur in consequence of the exercise on or after that date of an

option, right of pre-emption or similar right.

 164   Extension of first-year allowances for ICT expenditure by small companies

In section 45(1) of the Capital Allowances Act 2001 (ICT expenditure incurred

by small companies: first-year qualifying expenditure), in paragraph (a) (under

35

which the expenditure must be incurred on or before 31st March 2003) for “31st

March 2003” substitute “31st March 2004”.

 165   Expenditure on software for sub-licensing

     (1)    Section 45 of the Capital Allowances Act 2001 (c. 2) (first-year allowances for

ICT expenditure incurred by small enterprises) is amended as follows.

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Part 7 — Income tax, corporation tax and capital gains tax: general

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     (2)    In subsection (1)(d) (expenditure must not be excluded by general exclusions

in section 46) at the end insert “or subsection (4) below”.

     (3)    After subsection (3) insert—

           “(4)              Expenditure on an item within Class C is not first-year qualifying

expenditure under this section if the person incurring it does so with a

5

view to granting to another person a right to use or otherwise deal with

any of the software in question.”.

     (4)    This section applies in relation to expenditure incurred on or after 26th March

2003.

 166   First-year allowances for expenditure on environmentally beneficial plant or

10

machinery

Schedule 30 to this Act (first-year allowances for expenditure on

environmentally beneficial plant or machinery) has effect in relation to

expenditure incurred on or after 1st April 2003.

 167   Relief for research and development

15

     (1)    Schedule 31 to this Act (which makes amendments relating to relief for

expenditure on research and development) shall have effect.

     (2)    In that Schedule—

                    Part 1 amends Schedule 20 to the Finance Act 2000 (c. 17) (relief for small

and medium-sized enterprises);

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                    Part 2 amends Part 1 of Schedule 12 to the Finance Act 2002 (c. 23) (relief

for large companies);

                    Part 3 amends Part 2 of that Schedule (work sub-contracted to small or

medium-sized enterprise);

                    Part 4 inserts a new Part 2A into that Schedule (entitlement of small or

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medium-sized enterprise to additional relief available to large

companies in respect of subsidised expenditure);

                    Part 5 makes supplementary amendments to Parts 3 to 6 of that Schedule;

and

                    Part 6 amends Schedule 13 to the Finance Act 2002 (expenditure on

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vaccine research etc).

     (3)    Except as provided by subsection (4)—

           (a)           the amendments made by Parts 1 and 6 of Schedule 31 have effect in

relation to expenditure incurred on or after the appointed day, and

           (b)           the amendments made by Parts 2 to 5 of that Schedule have effect in

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relation to expenditure incurred on or after 9th April 2003.

     (4)    The exceptions are that—

           (a)           the amendments made by paragraphs 2 and 3 in Part 1 have effect for

accounting periods beginning on or after the appointed day;

           (b)           in the application of paragraph 5 of Schedule 20 to the Finance Act 2000

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(staffing costs) for any purpose of Schedule 12 to the Finance Act 2002

by virtue of paragraph 17(b) of that Schedule (meaning of “staffing

costs”), the amendments made by paragraph 5 in Part 1 of Schedule 31

to this Act (persons partly engaged directly and actively in R&D) have

effect in relation to expenditure incurred on or after 9th April 2003;

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Finance Bill
Part 7 — Income tax, corporation tax and capital gains tax: general

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           (c)           the amendments made by paragraph 6 in Part 1 (qualifying

expenditure on externally provided workers), in their application by

virtue of paragraph 19 in Part 5 (application for purposes of Schedule

12 to the Finance Act 2002 (c. 23)), have effect in relation to expenditure

incurred on or after 9th April 2003;

5

           (d)           the amendments made by—

                  (i)                 paragraph 9 in Part 2,

                  (ii)                paragraphs 12 and 13 in Part 3, and

                  (iii)               paragraph 15 in Part 4,

                         have effect for accounting periods beginning on or after 9th April 2003;

10

           (e)           the amendments made by paragraph 21 in Part 6 (reduction of

company’s required minimum qualifying expenditure in an

accounting period from £25,000 etc to £10,000 etc) have effect for

accounting periods beginning on or after the appointed day.

     (5)    In this section the “appointed day” means such day as the Treasury may by

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order appoint; and different days may be so appointed for different provisions

or different purposes.

 168   Tonnage tax: extension of capital allowance restrictions on lessors of ships

Schedule 32 to this Act (tonnage tax: restrictions on capital allowances for

lessors of ships) has effect.

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Life insurance and pensions

 169   Insurance companies

Schedule 33 to this Act (which makes provision about the taxation of insurance

companies, including companies which have ceased to be insurance

companies after a transfer of business) has effect.

25

 170   Policies of life insurance etc: miscellaneous amendments

     (1)    Schedule 34 to this Act (which makes provision relating to Chapter 2 of Part 13

of the Taxes Act 1988) has effect.

     (2)    In that Schedule—

                    Part 1 relates to group life policies;

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                    Part 2 relates to charitable and non-charitable trusts;

                    Part 3 restricts the meaning of “life annuity”; and

                    Part 4 makes provision for and in connection with the repeal of section

540(2) of the Taxes Act 1988 (rollover of gain on maturity into new

policy).

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     (3)    This section and that Schedule shall be deemed to have come into force on 9th

April 2003.

 171   Charges under life insurance policies for exceptional risk of disability

     (1)    In Schedule 15 to the Taxes Act 1988 (provisions for determining whether an

insurance policy is a “qualifying policy”)—

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Part 7 — Income tax, corporation tax and capital gains tax: general

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           (a)           in paragraph 12(a) (disregard of so much of premium as is charged on

the grounds of exceptional risk of death), and

           (b)           in paragraph 12(b) (disregard of provision in policy charging, on those

grounds, a sum as a debt against capital sum guaranteed on death),

            after “death” insert “or disability”.

5

     (2)    Accordingly, in the heading before paragraph 12 of that Schedule, for

“mortality risk” substitute “risk of death or disability”.

     (3)    In paragraph 3 of that Schedule (friendly society policies), omit paragraphs

(b)(iii) and (c) of sub-paragraph (8) (which make provision corresponding to

paragraph 12(a) and (b) but are unnecessary).

10

     (4)    In paragraph 18 of that Schedule (rules about substituted policies applied

where policies are varied) insert after sub-paragraph (3)—

                       “(4)                For the purposes of this paragraph there is no variation in the terms

of a policy where—

                    (a)                   an amount of premium chargeable on the grounds that an

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exceptional risk of death or disability is involved becomes or

ceases to be payable, or

                    (b)                   the policy is amended by the insertion, variation or removal

of a provision under which, on those grounds, any sum may

become chargeable as a debt against the capital sum

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guaranteed by the policy on death or disability.”.

     (5)    In section 460 of that Act (registered friendly societies: exemption from tax in

respect of life or endowment business), in subsection (3)(b) (which makes

provision corresponding to paragraph 12(a) of Schedule 15) after “death” insert

“or disability”.

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     (6)    The amendments made by this section shall be deemed always to have had

effect; but this section shall be disregarded to the extent that it would prevent

a policy from being a qualifying policy at any time before 9th April 2003.

 172   Gains on policies of life insurance etc: rate of tax

     (1)    Schedule 35 to this Act (which makes provision for and in connection with

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charging certain gains on policies of life insurance, etc at the lower rate) has

effect.

     (2)    The amendments made by that Schedule have effect in relation to gains treated

as arising under Chapter 2 of Part 13 of the Taxes Act 1988 on the happening of

chargeable events on or after 6th April 2004.

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 173   Personal pension arrangements: limit on contributions

     (1)    In section 640A(1) of the Taxes Act 1988 (personal pension arrangements: the

earnings cap), for “for the purposes of section 640 above” substitute “for the

purposes of section 638 or 640 above”.

     (2)    In determining “the permitted maximum” for the purposes of any provision of

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an existing approved scheme designed to meet the requirements of section

638(3) of that Act (maximum annual amount of contributions), a member’s net

relevant earnings for the year shall be taken to be the amount of his net relevant

earnings after applying section 640A (the earnings cap).

 

 

 
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