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140 Corporation tax relief for employee share acquisitions | |
Schedule 23 to this Act has effect with respect to deductions allowable for | |
corporation tax purposes in respect of employee share acquisitions. | |
141 Ending of relief for contributions to QUESTS | |
(1) Section 67 of the Finance Act 1989 (c. 26) (tax relief for contributions to trustees | 5 |
of qualifying share ownership trust) does not apply in relation to sums | |
expended by a company in an accounting period of the company beginning on | |
or after 1st January 2003. | |
(2) In section 69 of that Act (chargeable events)— | |
(a) the definitions in subsections (3AC) and (3AD) (by virtue of which | 10 |
certain transfers of shares by trustees of an employee share ownership | |
trust to a SIP trust are not chargeable events) have effect in relation to | |
26th November 2002 as they had effect in relation to 20th March 2000; | |
(b) in relation to shares that are relevant shares by virtue of paragraph (a) | |
above, subsection (3AB) (deemed order of disposal of shares) has effect | 15 |
as if the reference there to 21st March 2000 were to 27th November | |
2002; and | |
(c) the other provisions of that section have effect accordingly. | |
(3) In consequence of subsection (2), in paragraph 78(2)(b) of Schedule 2 to the | |
Income Tax (Earnings and Pensions) Act 2003 (c. 1) (reference to section | 20 |
69(3AA) of the Finance Act 1989) after “21st March 2000” insert “or, by virtue | |
of section 141(2) of the Finance Act 2003, 27th November 2002”. | |
142 Restriction of deductions for employee benefit contributions | |
Schedule 24 to this Act (which makes provision restricting deductions for | |
contributions by employers to third parties for the benefit of employees) has | 25 |
effect. | |
143 PAYE on notional payments: reimbursement period | |
(1) In section 222(1)(c) of the Income Tax (Earnings and Pensions) Act 2003 (period | |
within which employee must reimburse employer for amount to be accounted | |
for to Inland Revenue in respect of income tax on notional payment), for “30 | 30 |
days” substitute “90 days”. | |
(2) This section has effect in relation to payments of income treated as made on or | |
after 9th April 2003. | |
144 PAYE: regulations and notional payments | |
(1) In the list in subsection (2) of section 684 of the Income Tax (Earnings and | 35 |
Pensions) Act 2003 (PAYE regulations)— | |
(a) for item 2 substitute— | |
“1A. Provision— | |
(a) for deductions to be made, if and to the extent that the | |
payee does not object, with a view to securing that | 40 |
income tax payable in respect of any income of a | |
payee for a tax year which is not PAYE income is | |
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deducted from PAYE income of the payee paid | |
during that year; and | |
(b) as to the circumstances and manner in which a payee | |
may object to the making of deductions. | |
2. Provision— | 5 |
(a) for repayments or deductions to be made, if and to the | |
extent that the payee does not object, in respect of any | |
amounts overpaid or remaining unpaid (or treated as | |
overpaid or remaining unpaid) on account of— | |
(i) income tax in respect of income for a previous | 10 |
tax year, or | |
(ii) capital gains tax in respect of chargeable gains | |
for such a year; and | |
(b) as to the circumstances in which repayments or | |
deductions may be made, and the circumstances and | 15 |
manner in which a payee may object to the making of | |
repayments or deductions.”; | |
(b) after item 4 insert — | |
“4A. Provision authorising the recovery from the payee rather | |
than the payer of any amount that the Inland Revenue | 20 |
considers should have been deducted by the payer.”; | |
(c) for item 8 substitute as items 7A and 8— | |
“7A. Provision for excluding payments of such description as may | |
be specified from the operation of the regulations in such | |
circumstances as may be specified. | 25 |
8. Provision for the making of decisions by the Board or the | |
Inland Revenue as to any matter required to be decided for | |
the purposes of the regulations and for appeals against such | |
decisions.”. | |
(2) After subsection (7) of that section insert— | 30 |
“(7A) Nothing in PAYE regulations may be read— | |
(a) as preventing the making of arrangements for the collection of | |
tax in such manner as may be agreed by, or on behalf of, the | |
payer and the Inland Revenue, or | |
(b) as requiring the payer to comply with the regulations in | 35 |
circumstances in which the Inland Revenue is satisfied that it is | |
unnecessary or not appropriate for the payer to do so. | |
(7B) References in this section and 685 to income tax in respect of PAYE | |
income are references to income tax in respect of that income if | |
reasonable assumptions are (when necessary) made about other | 40 |
income. | |
(7C) In this section and section 685— | |
“payer” means any person paying PAYE income and “payee” | |
means any person in receipt of such income; | |
“specified” means specified in PAYE regulations.”. | 45 |
(3) In subsection (2) of section 685 of that Act (tax tables), for paragraph (b) | |
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substitute— | |
“(b) subject to an adjustment in respect of amounts required to be | |
deducted or repaid by PAYE regulations made under item 1A | |
or 2 in the list in section 684(2).”. | |
(4) After subsection (3) of that section insert— | 5 |
“(4) PAYE regulations may make provision, where it appears to the Inland | |
Revenue that it is impracticable for a payer to deduct tax by reference | |
to tax tables— | |
(a) for deductions to be made by the payer in accordance with other | |
arrangements agreed as mentioned in section 684(7A)(a), or | 10 |
(b) for the payee to be required to keep records and make payments | |
and returns as if he were the payer.”. | |
(5) In section 707 of that Act (interpretation of Chapter 5 of Part 11), in the | |
definition of “employment”, for “this section” substitute “this Chapter”. | |
(6) In section 710 of that Act (notional payments: accounting for tax)— | 15 |
(a) in subsections (1) and (4), after “must” insert “, subject to and in | |
accordance with PAYE regulations,”; | |
(b) in subsection (5)(b) and (c), for “accounted for” substitute “deducted or | |
accounted for (or required to be deducted or accounted for)”; and | |
(c) in subsection (6), for “an amount which” substitute “an amount of tax | 20 |
which” and for “is paid by the employee” substitute “is deducted”. | |
(7) Substitute “PAYE regulations”— | |
(a) for “the said section 203” in subsection (8) of section 59A of the Taxes | |
Management Act 1970 (payments on account of income tax); and | |
(b) for “that section” in subsection (10) of that section and subsections (2) | 25 |
and (8) of section 59B of that Act (payments of income tax and capital | |
gains tax). | |
145 Payroll giving: extension of 10% supplement to 5th April 2004 | |
In section 38 of the Finance Act 2000 (c. 17) (which provides for a 10% | |
supplement on donations under the payroll deduction scheme), in subsection | 30 |
(6) (which limits the provision by reference to sums withheld by employers | |
before 6th April 2003, and requires claims for reimbursement to be made | |
before 6th April 2004)— | |
(a) for “6th April 2003” substitute “6th April 2004”, and | |
(b) for “6th April 2004” substitute “6th April 2005”. | 35 |
146 Sub-contractor deductions etc: interest on late payment or repayment | |
(1) In section 566 of the Taxes Act 1988 (construction industry scheme: powers to | |
make regulations) after subsection (1) insert— | |
“(1A) Interest required to be paid by regulations under subsection (1) above | |
shall be paid without any deduction of income tax and shall not be | 40 |
taken into account in computing any income, profits or losses for any | |
tax purposes.”. | |
(2) In the Social Security Contributions and Benefits Act 1992 (c. 4) and the Social | |
Security Contributions and Benefits (Northern Ireland) Act 1992 (c. 7), in | |
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paragraph 6 of Schedule 1 (power to combine collection of national insurance | |
contributions with tax) after sub-paragraph (4A) insert— | |
“(4B) Interest required to be paid, by virtue of sub-paragraph (2)(a) or (b) | |
above, by regulations under sub-paragraph (1) above shall be paid | |
without any deduction of income tax and shall not be taken into | 5 |
account in computing any income, profits or losses for any tax | |
purposes.”. | |
(3) In section 22 of the Teaching and Higher Education Act 1998 (c. 30) (student | |
loans), after subsection (9) insert— | |
“(10) Interest required to be paid, by virtue of subsection (5)(d), by | 10 |
regulations under this section shall be paid without any deduction of | |
income tax and shall not be taken into account in computing any | |
income, profits or losses for any tax purposes.”. | |
(4) In Article 3 of the Education (Student Support) (Northern Ireland) Order 1998 | |
(S.I. 1998/1760 (N.I. 14)) (student loans), after paragraph (9) insert— | 15 |
“(10) Interest required to be paid, by virtue of paragraph (5)(d), by | |
regulations under this Article shall be paid without any deduction of | |
income tax and shall not be taken into account in computing any | |
income, profits or losses for any tax purposes.”. | |
(5) In its application to the computation of income, profits or losses for an | 20 |
accounting period (in the case of a company) or a year of assessment (in the | |
case of a person who is not a company), this section has effect in relation to— | |
(a) accounting periods ending on or after 9th April 2003, or | |
(b) 2003-04 and subsequent years of assessment. | |
Taxation of non-resident companies and related matters | 25 |
147 Meaning of “permanent establishment” | |
(1) For the purposes of the Tax Acts a company has a permanent establishment in | |
a territory if, and only if— | |
(a) it has a fixed place of business there through which the business of the | |
company is wholly or partly carried on, or | 30 |
(b) an agent acting on behalf of the company has and habitually exercises | |
there authority to do business on behalf of the company. | |
This general definition is subject to the following provisions. | |
(2) For this purpose a “fixed place of business” includes (without prejudice to the | |
generality of that expression)— | 35 |
(a) a place of management; | |
(b) a branch; | |
(c) an office; | |
(d) a factory; | |
(e) a workshop; | 40 |
(f) an installation or structure for the exploration of natural resources; | |
(g) a mine, an oil or gas well, a quarry or any other place of extraction of | |
natural resources; | |
(h) a building site or construction or installation project. | |
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(3) A company is not regarded as having a permanent establishment in a territory | |
by reason of the fact that it carries on business there through an agent of | |
independent status acting in the ordinary course of his business. | |
(4) A company is not regarded as having a permanent establishment in a territory | |
by reason of the fact that— | 5 |
(a) a fixed place of business is maintained there for the purpose of carrying | |
on activities for the company, or | |
(b) an agent carries on activities there for and on behalf of the company, | |
if, in relation to the business of the company as a whole, the activities carried | |
on are only of a preparatory or auxiliary character. | 10 |
(5) For this purpose “activities of a preparatory or auxiliary character” include | |
(without prejudice to the generality of that expression)— | |
(a) the use of facilities for the purpose of storage, display or delivery of | |
goods or merchandise belonging to the company; | |
(b) the maintenance of a stock of goods or merchandise belonging to the | 15 |
company for the purpose of storage, display or delivery; | |
(c) the maintenance of a stock of goods or merchandise belonging to the | |
company for the purpose of processing by another person; | |
(d) purchasing goods or merchandise, or collecting information, for the | |
company. | 20 |
(6) In section 832(1) of the Taxes Act 1988 (interpretation of the Tax Acts), at the | |
appropriate place insert— | |
““permanent establishment”, in relation to a company, has the meaning | |
given by section 147 of the Finance Act 2003;”. | |
(7) In section 288(1) of the Taxation of Chargeable Gains Act 1992 (c. 12) | 25 |
(interpretation), at the appropriate place insert— | |
““permanent establishment”, in relation to a company, has the meaning | |
given by section 147 of the Finance Act 2003;”. | |
148 Non-resident companies: basis of charge to corporation tax | |
(1) In section 11 of the Taxes Act 1988 (corporation tax: companies not resident in | 30 |
the United Kingdom), for subsections (1) and (2) (basis of taxation) substitute— | |
“(1) A company not resident in the United Kingdom is within the charge to | |
corporation tax if, and only if, it carries on a trade in the United | |
Kingdom through a permanent establishment in the United Kingdom. | |
(2) If it does so, it is chargeable to corporation tax, subject to any exceptions | 35 |
provided for by the Corporation Tax Acts, on all profits, wherever | |
arising, that are attributable to its permanent establishment in the | |
United Kingdom. | |
These profits, and these only, are the company’s “chargeable profits” | |
for the purposes of corporation tax. | 40 |
(2A) The profits attributable to a permanent establishment for the purposes | |
of corporation tax are— | |
(a) trading income arising directly or indirectly through or from | |
the establishment, | |
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(b) income from property or rights used by, or held by or for, the | |
establishment, and | |
(c) chargeable gains falling within section 10B of the 1992 Act— | |
(i) by virtue of assets being used in or for the purposes of | |
the trade carried on by the company through the | 5 |
establishment, or | |
(ii) by virtue of assets being used or held for the purposes of | |
the establishment or being acquired for use by or for the | |
purposes of the establishment.”. | |
(2) After that section insert— | 10 |
“11AA Determination of profits attributable to permanent establishment | |
(1) This section provides for determining for the purposes of corporation | |
tax the amount of the profits attributable to a permanent establishment | |
in the United Kingdom of a company that is not resident in the United | |
Kingdom (“the non-resident company”). | 15 |
(2) There shall be attributed to the permanent establishment the profits it | |
would have made if it were a distinct and separate enterprise, engaged | |
in the same or similar activities under the same or similar conditions, | |
dealing wholly independently with the non-resident company. | |
(3) In applying subsection (2)— | 20 |
(a) it shall be assumed that the permanent establishment has the | |
same credit rating as the non-resident company, and | |
(b) it shall also be assumed that the permanent establishment has | |
such equity and loan capital as it could reasonably be expected | |
to have in the circumstances specified in that subsection. | 25 |
No deduction may be made in respect of costs in excess of those that | |
would have been incurred on those assumptions. | |
(4) There shall be allowed as deductions any allowable expenses incurred | |
for the purposes of the permanent establishment, including executive | |
and general administrative expenses so incurred, whether in the | 30 |
United Kingdom or elsewhere. | |
“Allowable expenses” means expenses of a kind in respect of which a | |
deduction would be allowed for corporation tax purposes if incurred | |
by a company resident in the United Kingdom. | |
(5) The Board may by regulations make provision as to the application of | 35 |
subsection (2) in relation to insurance companies. | |
The regulations may, in particular, make provision in place of | |
subsection (3)(b) as to the basis on which, in the case of insurance | |
companies, capital is to be attributed to a permanent establishment in | |
the United Kingdom. | 40 |
In this subsection “insurance company” has the meaning given by | |
section 431(2). | |
(6) Schedule A1 to this Act contains provisions supplementing the | |
provisions of this section.”. | |
(3) At the beginning of the Schedules to the Taxes Act 1988 insert as Schedule A1 | 45 |
the Schedule set out in Schedule 25 to this Act. | |
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(4) After section 10A of the Taxation of Chargeable Gains Act 1992 (c. 12) insert— | |
“10B Non-resident company with United Kingdom permanent | |
establishment | |
(1) Subject to any exceptions provided by this Act, the chargeable profits | |
for the purposes of corporation tax of a company not resident in the | 5 |
United Kingdom but carrying on a trade in the United Kingdom | |
through a permanent establishment there include chargeable gains | |
accruing to the company on the disposal of— | |
(a) assets situated in the United Kingdom and used in or for the | |
purposes of the trade at or before the time the gain accrued, or | 10 |
(b) assets situated in the United Kingdom and used or held for the | |
purposes of the permanent establishment at or before the time | |
the gain accrued or acquired for use by or for the purposes of | |
the permanent establishment. | |
(2) Subsection (1) does not apply unless the disposal is made at a time | 15 |
when the company is carrying on a trade in the United Kingdom | |
through a permanent establishment there. | |
(3) This section does not apply to a company that, by virtue of Part 18 of | |
the Taxes Act (double taxation relief arrangements), is exempt from | |
corporation tax for the chargeable period in respect of the profits of the | 20 |
permanent establishment. | |
(4) In this section “trade” has the meaning given by section 6(4)(b) of the | |
Taxes Act.”. | |
(5) In section 834(1) of the Taxes Act 1988 (interpretation of the Corporation Tax | |
Acts), at the appropriate place insert— | 25 |
““chargeable profits”, in relation to a company that is not resident in the | |
United Kingdom— | |
(a) for corporation tax purposes generally, has the meaning given | |
by section 11(2), and | |
(b) for the purposes of Chapter 4 of Part 17 (controlled foreign | 30 |
companies), has the meaning given by section 747(6);”. | |
(6) This section has effect in relation to accounting periods (of the non-resident | |
company) beginning on or after 1st January 2003, and regulations under | |
section 11AA(5) of the Taxes Act 1988 (inserted by subsection (2) above) may | |
be made so as to have effect from that date. | 35 |
149 Non-resident companies: assessment, collection and recovery of corporation | |
tax | |
(1) The enactments relating to corporation tax, so far as they make provision for or | |
in connection with the assessment, collection and recovery of tax, or of interest | |
on tax, have effect, in accordance with this section, as if the obligations and | 40 |
liabilities of a non-resident company were also obligations and liabilities of its | |
UK representative. | |
(2) For this purpose a permanent establishment in the United Kingdom through | |
which a non-resident company carries on a trade— | |
(a) is the UK representative of the company in relation to chargeable | 45 |
profits of the company attributable to that establishment, | |
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