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Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 10 — Avoidance: miscellaneous

119

 

(b)   

with the substitution for references to the Stock Exchange of

references to the foreign stock exchange to which that list

relates, and

(c)   

with any modifications which are necessary by reason of the

form of quotation adopted in the foreign stock exchange list

5

(including, in a case where a single figure only is published,

taking that figure as the market value).

      (6)  

Where a strip or security is quoted in more than one foreign stock

exchange list—

(a)   

any such list published for a foreign stock exchange in the

10

territory of the issuing government shall be used for the

purposes of sub-paragraph (5) above in preference to any

other such list, and

(b)   

any such list published for a foreign stock exchange which is

regarded as the major exchange in that territory for strips or

15

securities shall be used for those purposes in preference to

any other such list.

      (7)  

In this paragraph—

“the Daily List” means the The Stock Exchange Daily Official

List;

20

“foreign stock exchange” means a recognised stock exchange

in a territory outside the United Kingdom on which strips

are traded;

“foreign stock exchange list” means any publication which

performs in the case of a foreign stock exchange a function

25

equivalent, or broadly similar, to that performed by the

Daily List in relation to strips;

“issuing government” means the government which issued

the security mentioned in sub-paragraph (4)(a) above.

      (8)  

The Treasury may by regulations make provision as to the manner of

30

determining, for any of the purposes mentioned in sub-paragraph (1)

above, the market value at any time of—

(a)   

any strip, or

(b)   

any security exchanged for strips of that security.

      (9)  

Regulations under sub-paragraph (8) above may—

35

(a)   

amend or modify any provision of this paragraph other than

that sub-paragraph, sub-paragraph (1) above or this sub-

paragraph;

(b)   

make different provision for different cases; and

(c)   

contain such incidental, supplemental, consequential and

40

transitional provision and savings as the Treasury may think

fit.”.

(9)   

In paragraph 15(1) (general interpretation) in the definition of “market value”

(which applies except in paragraph 14) for “(except in paragraph 14 above)”

substitute “(except as provided in relation to paragraph 8, 9, 14 or 14B above

45

by paragraph 14E above)”.

(10)   

The amendments made by—

(a)   

subsections (2) and (3), and

(b)   

subsections (8) and (9), so far as relating to paragraph 8 or 9 of Schedule

13 to the Finance Act 1996 (c. 8),

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Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 10 — Avoidance: miscellaneous

120

 

   

have effect in relation to any transfer of a strip on or after 17th March 2004.

(11)   

The amendments made by—

(a)   

subsection (4), and

(b)   

subsections (8) and (9), so far as relating to paragraph 14 of Schedule 13

to the Finance Act 1996,

5

   

have effect in relation to exchanges on or after 17th March 2004 and deemed

transfers and re-acquisitions under sub-paragraph (4) of that paragraph on or

after that date.

(12)   

The amendments made by—

(a)   

subsection (5), and

10

(b)   

subsections (8) and (9), so far as relating to paragraph 14B of Schedule

13 to the Finance Act 1996,

   

have effect in relation to any strip held on 15th January 2004 or acquired after

that date (and see subsection (15)).

(13)   

The amendment made by subsection (6) has effect in relation to losses accruing

15

on or after 17th March 2004.

(14)   

The amendment made by subsection (7) has effect in relation to any strip

acquired on or after 15th January 2004 (and see subsection (15)).

(15)   

In determining when a strip is acquired for the purposes of subsection (12) or

(14), any deemed transfers or re-acquisitions under paragraph 14(4) of

20

Schedule 13 to the Finance Act 1996 (c. 8) shall be disregarded.

130     

Life policies etc.: restriction of corresponding deficiency relief

(1)   

In Chapter 2 of Part 13 of the Taxes Act 1988 (life policies, life annuities and

capital redemption policies), section 549 (certain deficiencies allowable as

deductions) is amended as follows.

25

(2)   

In subsection (1) for the words from “the total amount” to the end substitute

“the allowable amount”.

(3)   

After that subsection insert—

“(1A)   

The allowable amount is the total of any amounts that—

(a)   

were treated as a gain by virtue of section 541(d), 543(1)(c) or

30

546C(7) on the previous happenings of chargeable events, and

(b)   

formed part of that individual’s total income for a previous year

of assessment.”.

(4)   

This section applies in relation to a deficiency occurring in connection with a

policy of life insurance if—

35

(a)   

it is issued in respect of an insurance made on or after 3rd March 2004,

or

(b)   

it is issued in respect of an insurance made before that date but on or

after that date—

(i)   

it is varied so as to increase the benefits secured (any exercise of

40

rights conferred by the policy being regarded for this purpose

as a variation),

(ii)   

there is an assignment (whether or not for money or money’s

worth) of the rights, or a share of the rights, conferred by the

policy, or

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Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 11 — Miscellaneous

121

 

(iii)   

all or part of the rights conferred by the policy become held as

security for a debt.

(5)   

This section applies in relation to a deficiency occurring in connection with a

contract for a life annuity if—

(a)   

it is entered into on or after 3rd March 2004, or

5

(b)   

it is entered into before that date but on or after that date—

(i)   

it is varied so as to increase the benefits secured (any exercise of

rights conferred by the contract being regarded for this purpose

as a variation),

(ii)   

there is an assignment (whether or not for money or money’s

10

worth) of the rights, or a share of the rights, conferred by the

contract, or

(iii)   

all or part of the rights conferred by the contract become held as

security for a debt.

(6)   

This section applies in relation to a deficiency occurring in connection with a

15

capital redemption policy if—

(a)   

it is effected on or after 3rd March 2004, or

(b)   

it is effected before that date but on or after that date—

(i)   

it is varied so as to increase the benefits secured (any exercise of

rights conferred by the policy being regarded for this purpose

20

as a variation),

(ii)   

there is an assignment (whether or not for money or money’s

worth) of the rights, or a share of the rights, conferred by the

policy, or

(iii)   

all or part of the rights conferred by the policy become held as

25

security for a debt.

Chapter 11

Miscellaneous

Reliefs for business

131     

Relief for research and development: software and consumable items

30

(1)   

In Schedule 20 to the Finance Act 2000 (c. 17) (tax relief for expenditure on

research and development) for paragraph 6 (expenditure on consumable

stores) substitute—

“Expenditure on software or consumable items

6     (1)  

For the purposes of this Schedule expenditure on software or

35

consumable items means expenditure on—

(a)   

computer software, or

(b)   

consumable or transformable materials,

           

and references to software or consumable items shall be construed

accordingly.

40

      (2)  

For the purposes of this Schedule consumable or transformable

materials include water, fuel and power.

 

 

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Part 3 — Income tax, corporation tax and capital gains tax
Chapter 11 — Miscellaneous

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      (3)  

Expenditure on software or consumable items is attributable to

relevant research and development if the software or consumable

items are employed directly in such research and development.

      (4)  

In the case of software or consumable items partly employed directly

in relevant research and development, an appropriate portion of the

5

expenditure on the software or consumable items is treated as

attributable to relevant research and development.

      (5)  

For the purposes of sub-paragraphs (3) and (4), software or

consumable items employed in the provision of services, such as

secretarial or administrative services, in support of other activities

10

are not, by virtue of their employment in the provision of those

services, to be treated as themselves directly employed in those other

activities.”.

(2)   

In each of the following enactments (which relate to tax relief for expenditure

on research and development)—

15

(a)   

Schedule 20 to the Finance Act 2000 (small or medium-sized

enterprises), other than paragraph 6,

(b)   

Schedule 12 to the Finance Act 2002 (c. 23) (large companies, work sub-

contracted to, and large company relief for, small or medium-sized

enterprises),

20

(c)   

Schedule 13 to that Act (vaccine research etc),

   

for the words “consumable stores”, wherever occurring, substitute “software

or consumable items”.

(3)   

The amendments made by this section to Schedule 12 to the Finance Act 2002

(large companies etc) have effect in relation to expenditure incurred on or after

25

1st April 2004.

(4)   

Except as provided by subsection (5), the amendments made by this section

to—

(a)   

Schedule 20 to the Finance Act 2000 (c. 17) (small or medium-sized

enterprises),

30

(b)   

Schedule 13 to the Finance Act 2002 (vaccine research etc),

   

have effect in relation to expenditure incurred on or after the appointed day.

(5)   

The amendment made by subsection (1) (substitution of paragraph 6 of

Schedule 20 to the Finance Act 2000), in its application for the purposes of

Schedule 12 to the Finance Act 2002 by virtue of the amendments made to that

35

Schedule by subsection (2), has effect in relation to expenditure incurred on or

after 1st April 2004.

(6)   

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

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

or different purposes.

40

(7)   

The days that may be appointed by an order under subsection (6) include days

earlier than the day on which this Act is passed, but not days earlier than 1st

April 2004.

132     

Temporary increase in amount of first-year allowances for small enterprises

(1)   

The amount of a first-year allowance under section 44 of the Capital

45

Allowances Act 2001 (c. 2) (expenditure incurred by small or medium-sized

enterprises) shall be determined, in the case of expenditure to which this

 

 

Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 11 — Miscellaneous

123

 

subsection applies, as if the percentage specified in the entry relating to that

section in the Table in section 52(3) of that Act were 50%.

(2)   

Subsection (1) applies to expenditure incurred by a small enterprise (within the

meaning of section 44 of that Act) in the period of 12 months beginning with—

(a)   

1st April 2004, if the small enterprise is within the charge to corporation

5

tax, or

(b)   

6th April 2004, if the small enterprise is within the charge to income tax.

(3)   

Accordingly, in section 52(3) of the Capital Allowances Act 2001, after the

Table insert—

           

“In the case of expenditure qualifying under section 44, see also

10

section 132 of the Finance Act 2004 (substitution of 50% in the case of

expenditure incurred by a small enterprise in 2004-05 or financial

year 2004).”.

133     

Deduction for expenditure by landlords on energy-saving items

(1)   

After section 31 of the Taxes Act 1988 (Schedule A deductions and allowances:

15

provisions supplementary to sections 25 to 30) insert—

“31A    

Deductions for expenditure by landlords on energy-saving items

(1)   

This section applies to a Schedule A business if the land mentioned in

paragraph 1(1) of Schedule A consists of or includes a dwelling-house.

(2)   

In computing for the purposes of income tax the profits of a Schedule A

20

business to which this section applies, a deduction shall be allowed in

respect of any expenditure to which subsection (3) applies.

   

That is subject to any provision of regulations under subsection (13).

(3)   

This subsection applies to expenditure as respects which the numbered

conditions set out in the following provisions of this section (“the

25

qualifying conditions”) are satisfied.

(4)   

Condition 1 is that the expenditure is incurred in the provision of a

qualifying energy-saving item in the dwelling-house.

(5)   

Condition 2 is that the expenditure is incurred on or after 6th April 2004

but before 6th April 2009.

30

(6)   

Condition 3 is that the expenditure is incurred wholly and exclusively

for the purposes of the Schedule A business.

(7)   

Condition 4 is that the expenditure is capital expenditure.

(8)   

Condition 5 is that, apart from this section, the expenditure is not

deductible in computing the profits of the Schedule A business.

35

(9)   

Condition 6 is that no allowance under the Capital Allowances Act may

be claimed in respect of the expenditure.

(10)   

Condition 7 is that the expenditure is not incurred in respect of the

provision of an item in a dwelling-house which, at the time when the

item is installed,—

40

(a)   

is in the course of construction, or

 

 

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Part 3 — Income tax, corporation tax and capital gains tax
Chapter 11 — Miscellaneous

124

 

(b)   

is comprised in land in which the person claiming the

deduction under this section does not have an interest or is in

the course of acquiring an interest or further interest.

(11)   

Condition 8 is that for the purposes of section 503 (letting of furnished

holiday accommodation to be treated as a trade for certain purposes)

5

the Schedule A business either—

(a)   

does not consist to any extent in the commercial letting of

furnished holiday accommodation, or

(b)   

if it does so consist to any extent, the dwelling-house does not

constitute any or all of the furnished holiday accommodation in

10

question.

(12)   

Condition 9 is that the income of the person claiming the deduction is

not computed in accordance with paragraph 9 or 11 of Schedule 10 to

the Finance (No. 2) Act 1992 (furnished accommodation) in respect of

any qualifying residence which consists of or includes the dwelling-

15

house.

(13)   

The Treasury may by regulations make provision for any of the

following purposes—

(a)   

restricting or reducing the amount of expenditure in respect of

which deductions may be claimed under this section;

20

(b)   

excluding entitlement to a deduction under this section in such

cases as may be specified in, or determined in accordance with,

the regulations;

(c)   

determining which of two or more persons is (and which is not)

entitled to a deduction under this section in cases where

25

different persons have different interests in land consisting of or

including the whole or part of a building containing one or

more dwelling-houses;

(d)   

making apportionments (including apportioning amounts to

companies which are not entitled to a deduction under this

30

section) in cases where—

(i)   

a Schedule A business is carried on by two or more

persons in partnership, or

(ii)   

an interest in land is beneficially owned by two or more

persons jointly or in common.

35

(14)   

Section 31B supplements this section.

31B     

Provisions supplementary to section 31A

(1)   

This section has effect for the purpose of supplementing section 31A

and shall be construed as one with that section.

(2)   

Section 31A does not have effect for the purposes of corporation tax.

40

(3)   

No deduction may be made under section 31A unless a claim is made.

(4)   

Where, on a just and reasonable apportionment of any expenditure, the

qualifying conditions—

(a)   

would be satisfied as respects some part or parts of the

expenditure, but

45

(b)   

would not be satisfied as respects the remainder of the

expenditure,

 

 

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Part 3 — Income tax, corporation tax and capital gains tax
Chapter 11 — Miscellaneous

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a deduction under section 31A shall be allowed in respect of the part or

parts mentioned in paragraph (a) but not in respect of the remainder.

   

Any such deduction is subject to, and must be in accordance with, the

other provisions of this section and regulations under section 31A(13).

(5)   

Expenditure incurred by a person—

5

(a)   

for the purposes of a Schedule A business, but

(b)   

before the time when he begins to carry on that business,

   

is not deductible under section 31A by virtue of section 401 (relief for

pre-trading expenditure) unless the expenditure is incurred not more

than 6 months before that time (and on or after 6th April 2004).

10

   

The reference to section 401 is a reference to that section as it applies for

the purposes of Schedule A in relation to a Schedule A business by

virtue of section 21B.

(6)   

“Qualifying energy-saving items” are items of any of the following

descriptions—

15

(a)   

cavity wall insulation;

(b)   

loft insulation.

(7)   

The Treasury may by regulations amend subsection (6)—

(a)   

by adding further descriptions of items; or

(b)   

by removing or varying descriptions of items.

20

(8)   

The Treasury may by regulations provide that an item is to be regarded

as an item of any particular description in subsection (6) only if it

satisfies such conditions as may be specified in, or determined in

accordance with, the regulations.

(9)   

The conditions that may be imposed by regulations under subsection

25

(8) include conditions imposed by reference to information or

documents issued by any body, person or organisation.

(10)   

The provision that may be made by regulations under this section or

section 31A which are made on or before 31st December 2004 includes

provision—

30

(a)   

having effect before the date on which the regulations are made,

or

(b)   

having effect in relation to expenditure incurred before that

date.

(11)   

Any reference to the provision of a qualifying energy-saving item is a

35

reference to the acquisition of such an item and its installation in the

dwelling-house.”.

(2)   

The amendment made by this section has effect in relation to expenditure

incurred on or after 6th April 2004 but before 6th April 2009.

134     

Lloyd’s names: conversion to limited liability underwriting

40

Schedule 25 to this Act (which makes provision for certain reliefs to be

available where a member of Lloyd’s converts to limited liability

underwriting) has effect.

 

 

 
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