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Finance Bill
Schedule 31 — Tax relief for expenditure on research and development
Part 6 — Expenditure on vaccine research etc: Schedule 13 to Finance Act 2002

    370

 

paragraph insert “, and

                    (c)                      in the case of relief under Part 2A, qualifying additional SME

expenditure (see paragraph 10B).”.

Refunds of contributions to independent research and development

  18       In paragraph 15(1) (refunds of certain payments) omit the word “or”

5

immediately preceding paragraph (c) and at the end of that paragraph insert

“, or

                    (d)                      any expenditure which is qualifying additional SME

expenditure,”.

Meaning of “qualifying expenditure on externally provided workers”

10

  19      (1)      Paragraph 17 (which applies certain definitions from Schedule 20 to the

Finance Act 2000 (c. 17)) is amended as follows.

          (2)      Omit the word “and” immediately preceding paragraph (c).

          (3)      At the end of paragraph (c) add “; and

                    (d)                      paragraphs 8A to 8E (qualifying expenditure on externally

15

provided workers).”.

          (4)      The heading to the paragraph accordingly becomes—

“Meaning of “relevant research and development”, “staffing costs”, “consumable

stores” and “qualifying expenditure on externally provided workers””.

Part 6

20

Expenditure on vaccine research etc: Schedule 13 to Finance Act 2002

Introductory

  20       Schedule 13 to the Finance Act 2002 (c. 23) (tax relief for expenditure on

vaccine research etc) is amended in accordance with the following

provisions of this Part of this Schedule.

25

Reduction of required  qualifying expenditure from £25,000 to £10,000

  21      (1)      Paragraph 1 (entitlement to relief under the Schedule) is amended as

follows.

          (2)      In sub-paragraph (1) (requirement for minimum qualifying expenditure of

£25,000 or time apportioned part of that amount) in paragraphs (a) and (b)

30

for “£25,000” substitute “£10,000”.

Direct research and development: qualifying expenditure on externally provided workers

  22       In paragraph 3 (qualifying expenditure on direct research and development)

for sub-paragraph (5) (the fourth condition, that the expenditure is incurred

on staffing costs or consumable stores) substitute—

35

                           “(5)                  The fourth condition is that the expenditure—

                      (a)                     is incurred on staffing costs,

                      (b)                     is incurred on consumable stores, or

 

 

Finance Bill
Schedule 32 — Tonnage tax: restrictions on capital allowances for lessors of ships

    371

 

                      (c)                     is qualifying expenditure on externally provided

workers.”.

Meaning of “qualifying expenditure on externally provided workers”

  23      (1)      Paragraph 5(3) (which applies certain definitions in Schedule 20 to the

Finance Act 2000) is amended as follows.

5

          (2)      Omit the word “and” immediately preceding paragraph (d).

          (3)      In paragraph (d), for “(subsidised expenditure),” substitute “(subsidised

expenditure); and”.

          (4)      After paragraph (d) insert the following paragraph—

                    “(e)                      paragraphs 8A to 8E (qualifying expenditure on externally

10

provided workers),”.

          (5)      The heading to paragraph 5 accordingly becomes—

“Meaning of “relevant R&D”, “small or medium-sized enterprise”, “staffing

costs”, “consumable stores”, “subsidised” and “qualifying expenditure on

externally provided workers””.

15

Relevant expenditure of sub-contractor: qualifying expenditure on externally provided workers

  24       In paragraph 9 (relevant expenditure of sub-contractor) for sub-paragraph

(3) (the second condition, that the expenditure must be incurred on staffing

costs or consumable stores) substitute—

                           “(3)                  The second condition is that the expenditure—

20

                      (a)                     is incurred on staffing costs,

                      (b)                     is incurred on consumable stores, or

                      (c)                     is qualifying expenditure on externally provided workers.

                                             In applying for the purposes of this sub-paragraph (by virtue of

paragraph 5 above)—

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                       paragraph 5 of Schedule 20 to the Finance Act 2000

(meaning of “staffing costs”), or

                       paragraphs 8A to 8E of that Schedule (qualifying

expenditure on externally provided workers),

                                             the references to the company shall be read as references to the

30

sub-contractor.”.

Schedule 32

Section 168

 

Tonnage tax: restrictions on capital allowances for lessors of ships

The ring fence: amendments to the provisions about capital allowances and ship leasing

  1       (1)      In Schedule 22 to the Finance Act 2000 (c. 17) (tonnage tax), Part 10 (the ring

35

fence: capital allowances: ship leasing) is amended as follows.

          (2)      Omit the word “finance” from the expression “finance lease” in paragraphs

89(1), 90(1), 92(1), 93(1), 94(1), 98(1)(a) and 99(1)(a).

          (3)      At the end of sub-paragraph (1) of paragraph 89 (introduction to Part 10)

 

 

Finance Bill
Schedule 32 — Tonnage tax: restrictions on capital allowances for lessors of ships

    372

 

insert—

                                     “This is subject to paragraph 89A (exception for ordinary charters).”.

          (4)      For sub-paragraph (2) of that paragraph substitute—

                           “(2)                  In this Part of this Schedule “lease” means any arrangements that

provide for a ship to be leased or otherwise made available by a

5

person (“the lessor”) to another person (“the lessee”).”.

          (5)      After that paragraph insert—

“Quantitative restrictions not to apply to ordinary charters

          89A                 (1)                  Paragraphs 94 to 102, and paragraph 89(1) so far as relating to

those paragraphs, do not apply in the following cases.

10

                           (2)                  The first case is where the ship is chartered out by a person who is

responsible—

                      (a)                     for the operation of the ship, including the appointment of

the master and those members of the crew engaged in

navigation, throughout the period of the charter, and

15

                      (b)                     for defraying all expenses in connection with the ship

throughout that period, or substantially all such expenses

other than those directly incidental to a particular voyage

or to the employment of the ship during that period.

                                             For the purposes of this sub-paragraph a person is “responsible” if

20

he is responsible as principal or if he appoints another person,

other than the lessee or a person connected with the lessee, to be

responsible in his place.

                           (3)                  The second case is where—

                      (a)                     the ship is chartered out by a person acting in the course of

25

a trade that consists of, or to a significant extent includes,

operating ships, and

                      (b)                     the conditions in sub-paragraph (4) are met.

                           (4)                  Those conditions are—

                      (a)                     that the period of the charter does not exceed seven years,

30

and there is no provision or agreement under which it

could be extended beyond seven years;

                      (b)                     that the period of the charter, together with any other

periods in the same ten years during which the ship is

chartered out to the lessee or a person connected with him,

35

does not exceed seven years in total;

                      (c)                     that there are no arrangements under which the lessee or a

person connected with him may acquire the ship, whether

directly or indirectly, from the lessor.

                            In paragraph (b) “the same ten years” means any period of ten

40

years that includes the period of the charter mentioned in that

paragraph.

                           (5)                  References in this paragraph to the period of a charter are to the

term specified in the lease or, if longer, the actual period during

which the ship is chartered.

45

                           (6)                  Section 839 of the Taxes Act 1988 (connected persons) applies for

the purposes of this paragraph.”.

 

 

Finance Bill
Schedule 32 — Tonnage tax: restrictions on capital allowances for lessors of ships

    373

 

Consequential amendments

  2       (1)      In paragraph 41(4) of that Schedule (the requirement not to enter into tax

avoidance arrangements: exemption for finance leases)—

              (a)             in the first sentence omit “finance”;

              (b)             for the second sentence substitute—

5

                                                                “In this sub-paragraph “lease”, and “lessor” in relation to a

lease, have the meaning given by paragraph 89(2).”.

          (2)      In paragraph 147 (index of defined expressions)—

              (a)             omit the entry for “finance lease (and lessor and lessee) (in Part X)”;

              (b)             insert at the appropriate place—

10

                                  “lease (and lessor and lessee) (in Part X)             paragraph 89(2)”.

Commencement and temporary provision

  3       (1)      Subject to paragraph 4(2), the amendments made by paragraphs 1 and 2

apply in relation to any lease entered into on or after 19th December 2002.

          (2)      In sub-paragraph (4)(b) of the paragraph 89A inserted by paragraph 1(5)

15

above, the reference to any other periods during which the ship is chartered

out does not include any period during which it is chartered out under a

lease entered into before 19th December 2002.

  4       (1)      This paragraph applies in relation to any lease entered into on or after 19th

December 2002 and before 16 April 2003.

20

          (2)      Part 10 of the Schedule 22 to the Finance Act 2000 (c. 17) has effect as if,

instead of the paragraph inserted after paragraph 89 by paragraph 1(5)

above, the following paragraph were inserted—

“Exception for ordinary charters

          89A                 (1)                  Paragraph 89(1), and the provisions of this Part of this Schedule

25

listed there, do not apply in the following cases.

                           (2)                  The first case is where the ship is chartered out by a person who is

responsible—

                      (a)                     for the operation of the ship, including the appointment of

the master and those members of the crew engaged in

30

navigation, throughout the period of the charter, and

                      (b)                     for defraying all expenses in connection with the ship

throughout that period, or substantially all such expenses

other than those directly incidental to a particular voyage

or to the employment of the ship during that period.

35

                                             For the purposes of this sub-paragraph a person is “responsible” if

he is responsible as principal or if he appoints another person,

other than the lessee or a person connected with the lessee, to be

responsible in his place.

                           (3)                  The second case is where—

40

                      (a)                     the ship is chartered out to another person (“the charterer”)

because of short-term over-capacity,

                      (b)                     the person chartering out the ship does so in the course of

a trade that consists of or includes operating ships, and

                      (c)                     the conditions in sub-paragraph (4) are met.

45

 

 

Finance Bill
Schedule 33 — Insurance companies

    374

 

                           (4)                  Those conditions are—

                      (a)                     that the period of the charter does not exceed three years,

and there is no provision or agreement under which it

could be extended beyond three years;

                      (b)                     that the period of the charter, together with any other

5

periods in the same five years during which the ship is

chartered out to the charterer or a person connected with

him, does not exceed three years in total;

                      (c)                     that neither the charterer nor any person connected with

him has an option to purchase the ship.

10

                           (5)                  In sub-paragraph (4)(b)—

                      (a)                     the reference to any other periods during which the ship is

chartered out does not include any period during which it

is chartered out under a lease entered into before 19th

December 2002;

15

                      (b)                     “the same five years” means any period of five years that

includes the period of the charter mentioned in that sub-

paragraph.

                           (6)                  References in this paragraph to the period of a charter are to the

term specified in the lease or, if longer, the actual period during

20

which the ship is chartered.

                           (7)                  Section 839 of the Taxes Act 1988 (connected persons) applies for

the purposes of this paragraph.”.

          (3)      Paragraph 93(1) of that Schedule (certificates required to support claim by

lessor) has effect as if after paragraph (a) there were inserted—

25

                      “(aa)                        that the lease is such that, by virtue of paragraph 89A

(exception for ordinary charters), paragraph 89(1) does not

apply, or”.

  5        In paragraphs 3 and 4 “lease” means any arrangements that provide for a

ship to be leased or otherwise made available by one person to another.

30

Schedule 33

Section 169

 

Insurance companies

Case I profits

  1       (1)      For section 82 of the Finance Act 1989 (c. 26) (calculation of profits of

insurance company in respect of life assurance business when computed in

35

accordance with provisions applicable to Case I of Schedule D) substitute—

       “82            Calculation of profits: bonuses etc

              (1)             This section and sections 82A and 82B below have effect where the

profits of an insurance company in respect of its life assurance

business are, for the purposes of the Taxes Act 1988, computed in

40

accordance with the provisions of that Act applicable to Case I of

Schedule D.

 

 

Finance Bill
Schedule 33 — Insurance companies

    375

 

              (2)             Any amounts which are allocated to policy holders or annuitants in

respect of a period of account are allowed as a deduction in

calculating the profits for the period of account.

              (3)             For the purposes of subsection (2) above, an amount is allocated to

policy holders or annuitants if (but only if)—

5

                    (a)                   bonus payments are made to them,

                    (b)                   reversionary bonuses are declared in their favour, or

                    (c)                   a reduction is made in the premiums payable by them.

              (4)             Where an amount is allocated to policy holders or annuitants for the

purposes of subsection (2) above, the amount of the allocation is—

10

                    (a)                   in the case of bonus payments, the amount of the payments,

                    (b)                   in the case of declared reversionary bonuses, the amount of

the liabilities assumed by the company in consequence of the

declaration, and

                    (c)                   in the case of a reduction in premiums, the amount of the

15

liabilities assumed by the company in consequence of the

reduction.

       82A            Calculation of profits: policy holders’ tax

              (1)             Tax expended on behalf of policy holders or annuitants is allowed as

a deduction in calculating the profits to the extent (but only to the

20

extent) that regulations made by the Treasury so provide.

              (2)             The regulations may include provision for tax so expended to be so

allowed even if it is not brought into account.

              (3)             The regulations—

                    (a)                   may make different provision for different cases, and

25

                    (b)                   may include provision having effect in relation to periods of

account during which they are made.

       82B            Unappropriated surplus on valuation

              (1)             This section applies in relation to a period of account of the insurance

company (“the period of account in question”) where—

30

                    (a)                   at the end of the period of account in question the company

has an unappropriated surplus on valuation as shown in the

return deposited with the Financial Services Authority under

section 9.6 of the Prudential Sourcebook (Insurers) (an

“unappropriated surplus”), and

35

                    (b)                   the company has not made an election in accordance with

Rule 4.1(6) of the Prudential Sourcebook (Insurers) covering

the period of account in question.

              (2)             Where the company did not have an unappropriated surplus at the

end of the period of account immediately preceding the period of

40

account in question, so much of the unappropriated surplus at the

end of the period of account in question as is required to meet the

duty of fairness is allowed as a deduction in calculating the profits

for the period of account in question.

              (3)             Where the company did have an unappropriated surplus at the end

45

of that immediately preceding period of account—

 

 

Finance Bill
Schedule 33 — Insurance companies

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                    (a)                   if so much of the unappropriated surplus at the end of the

period of account in question as is required to meet the duty

of fairness exceeds so much of the unappropriated surplus at

the end of that immediately preceding period of account as

was required to meet that duty, the excess is allowed as a

5

deduction in calculating the profits for the period of account

in question, but

                    (b)                   if so much of the unappropriated surplus at the end of that

immediately preceding period of account as was required to

meet the duty of fairness exceeds so much of the

10

unappropriated surplus at the end of the period of account in

question as is required to meet that duty, the excess is to be

taken into account as a receipt of the period of account in

question.

              (4)             In arriving for the purposes of this section at the amount of the

15

unappropriated surplus which is or was required to meet the duty of

fairness there is to be deducted the aggregate of amounts which—

                    (a)                   for periods of account ending before 14th March 1989 (and

the first notional period of account, within the meaning of

section 82 above as originally enacted) have been excluded,

20

by virtue of section 433 of the Taxes Act 1988, as being

reserved for policy holders or annuitants, and

                    (b)                   have not before that date either been allocated to or expended

on behalf of policy holders or annuitants or been treated as

profits of an accounting period on ceasing to be so reserved.

25

              (5)             References in this section to the company’s duty of fairness are to the

company’s duty to treat its policy holders and annuitants fairly with

regard to terminal bonuses.”.

          (2)      In section 83A(1) of the Finance Act 1989 (c. 26) (meaning of “brought into

account”), for “83” substitute “82A”.

30

          (3)      In section 436(3)(a) of the Taxes Act 1988 (pension business: separate charge

on profits)—

              (a)             for “82 and 83” substitute “82 and 82B to 83AB”, and

              (b)             omit the words after “modifications”.

          (4)      In sections 439B(3)(a) and 441(4)(a) of the Taxes Act 1988 (life reinsurance

35

business and overseas life insurance business: separate charge on profits)—

              (a)             for “82(1), (2) and (4) and 83” substitute “82 and 82B to 83AB”, and

              (b)             omit “and in particular with the omission of the words “and any

amounts of tax which are expended on behalf of” in section 82(1)(a)”.

          (5)      This paragraph has effect for periods of account beginning on or after 1st

40

January 2003.

          (6)      In relation to the first period of account of an insurance company beginning

on or after that date, section 82B of the Finance Act 1989 (inserted by sub-

paragraph (1)) applies as if the references in it to so much of the

unappropriated surplus at the end of the immediately preceding period of

45

account as was required to meet the company’s duty of fairness were to any

amount included in the closing liabilities of the period of account by virtue

of section 82(1)(b) of that Act as originally enacted.

 

 

 
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