Finance Bill

House of Commons

Session 2003 - 04
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Finance Bill

Finance Bill
Schedule 16 — Relief where national insurance contributions met by employee
351

(5)
Relief under this section does not affect the amount to be taken into
account—
(a)
as employment income in determining contributions payable
under the Contributions and Benefits Act, or
(b)
as relevant employment income for the purposes of
5
paragraph 3A or 3B of Schedule 1 to that Act.
(6)
In this section—

“approval”, in relation to an election, means approval by the
Inland Revenue under paragraph 3B of Schedule 1 to the
Contributions and Benefits Act, and
10

“secondary contributor” has the same meaning as in that Act
(see section 7).”.
Income tax relief: securities options
3     (1)
Chapter 5 of Part 7 of the Income Tax (Earnings and Pensions) Act 2003 (c. 1)
(employment income: securities options) is amended as follows.
15
      (2)
In section 476 (charge on occurrence of chargeable event), for subsections (1)
to (4) substitute—
“(1)
If a chargeable event occurs in relation to an employment-related
securities option, the taxable amount counts as employment income
of the employee for the relevant tax year.
20
(2)
For this purpose—
(a)
“chargeable event” has the meaning given by section 477,
(b)
“the taxable amount” is the amount determined under
section 478, and
(c)
“the relevant tax year” is the tax year in which the chargeable
25
event occurs.
(3)
Relief under section 481 or 482 (relief for secondary Class 1
contributions or special contribution met by employee) may be
available against an amount counting as employment income under
this section.”.
30
      (3)
In section 480 (deductible amounts), omit subsection (7).
      (4)
In section 481 (deductible amount in respect of secondary Class 1
contributions met by employee)—
(a)
in the heading for “Deductible amount in respect of” substitute
“Relief for”;
35
(b)
in subsection (1) for the opening words down to “if” substitute
“Relief is available under this section against an amount counting as
employment income under section 476 if“;
(c)
in subsection (2) for the opening words down to “of” substitute “The
amount of the relief is the total of“;
40
(d)
after subsection (4) insert—
“(4A)
Relief under this section is given by way of deduction from
the amount otherwise counting as employment income.
(4B)
Relief under this section does not affect the amount to be
taken into account—
45

Finance Bill
Schedule 16 — Relief where national insurance contributions met by employee
352

(a)
as employment income in determining contributions
payable under the Contributions and Benefits Act, or
(b)
as relevant employment income for the purposes of
paragraph 3A or 3B of Schedule 1 to that Act.”.
      (5)
In section 482 (deductible amount in respect of special contribution met by
5
employee)—
(a)
in the heading for “Deductible amount in respect of” substitute
“Relief for”;
(b)
in subsection (1) for the opening words down to “if” substitute
“Relief is available under this section against an amount counting as
10
employment income under section 476 if“;
(c)
after subsection (5) add—
“(6)
The amount of the relief is the amount of the liability referred
to in subsection (4).
“(7)
Relief under this section is given by way of deduction from
15
the amount otherwise counting as employment income.”.
Consequential amendments: PAYE
4     (1)
Part 11 of the Income Tax (Earnings and Pensions) Act 2003 (Pay As You
Earn) is amended as follows.
      (2)
In section 698 (PAYE: special charges on employment-related securities),
20
after subsection (2) insert—
“(2A)
For the purposes of this section the amount likely to count as
employment income under section 426 or 438 means the amount
after deducting the amount of any relief likely to be available under
section 428A or 442A (relief for secondary Class 1 contributions met
25
by employee).”.
      (3)
In section 700 (PAYE: gains from securities options), after subsection (4)
insert—
“(4A)
For the purposes of this section the amount likely to count as
employment income under section 476 means the amount after
30
deducting the amount of any relief likely to be available under
section 481 or 482 (relief for secondary Class 1 contributions or
special contribution met by employee).”.
Consequential amendments: corporation tax relief
5     (1)
Schedule 23 of the Finance Act 2003 (c. 14) (corporation tax relief for
35
employee share acquisition) is amended as follows.
      (2)
In paragraph 21(4) (amount of relief on acquisition of restricted shares)—
(a)
omit the words “increased by any amounts deducted under sections
481 and 482 of that Act”, and
(b)
at the end add—
40

“No account shall be taken for this purpose of any relief
under section 481 or 482 of that Act (relief for secondary
Class 1 contributions or special contribution met by
employee).”.
      (3)
In paragraph 21(6) (amount of relief on chargeable event in relation to
45

Finance Bill
Schedule 16 — Relief where national insurance contributions met by employee
353

restricted shares), at the end add—

“No account shall be taken for this purpose of any relief under
section 428A of that Act (relief for secondary Class 1 contributions
met by employee).”.
      (4)
In paragraph 22C(4) (amount of relief on acquisition of convertible shares)—
5
(a)
omit the words “increased by any amounts deducted under sections
481 and 482 of that Act”, and
(b)
at the end add—

“No account shall be taken for this purpose of any relief
under section 481 or 482 of that Act (relief for secondary
10
Class 1 contributions or special contribution met by
employee).”.
      (5)
In paragraph 22C(6) (amount of relief on chargeable event in relation to
convertible shares), at the end add—

“No account shall be taken for this purpose of any relief under
15
section 442A of that Act (relief for secondary Class 1 contributions
met by employee).”.
      (6)
Nothing in this paragraph affects the operation of paragraph 21(4) or 22C(4)
of Schedule 23 to the Finance Act 2003 in relation to amounts deducted
under section 481 or 482 of the Income Tax (Earnings and Pensions) Act 2003
20
before the amendment of those paragraphs by this Schedule.
Consequential amendments: capital gains tax
6     (1)
Section 119A of the Taxation of Chargeable Gains Act 1992 (c. 12) (increase
in expenditure by reference to tax charged in relation to employment-related
securities) is amended as follows.
25
      (2)
For subsection (5) (determination of relevant amount) substitute—
“(5)
In determining for the purposes of subsection (4) the amount
counting as employment income—
(a)
in the case of an amount counting as employment income
under section 476 of ITEPA 2003 any amounts deducted
30
under section 480(5)(a) or (b) of that Act shall be added back,
and
(b)
no account shall be taken of any relief under section 428A,
442A, 481 or 482 of that Act (relief for secondary Class 1
contributions or special contribution met by employee).”.
35
      (3)
Omit subsection (8).
      (4)
Nothing in this paragraph affects the operation of section 119A(5) of the
Taxation of Chargeable Gains Act 1992, as inserted by paragraph 50(1) of
Schedule 22 to the Finance Act 2003, in relation to amounts deducted under
section 481 or 482 of the Income Tax (Earnings and Pensions) Act 2003 before
40
the amendment of those sections by this Schedule.
Other consequential amendments
7     (1)
In section 484(7) (definitions for Chapter 5 of Part 7), omit the definition of
“the Contributions and Benefits Act” and the words “and” preceding it.
      (2)
In section 721(1) of that Act (general definitions), at the appropriate place
45

Finance Bill
Schedule 17 — Minor amendments of or connected with the Income Tax (Earnings and Pensions) Act 2003
354

insert—

““the Contributions and Benefits Act” means SSCBA 1992 or
SSCB(NI)A 1992;”.
      (3)
In Part 2 of Schedule 1 to that Act (index of defined expressions), for the
entry relating to “the Contributions and Benefits Act” substitute—
5

“the Contributions and Benefits Act
section 721(1)”

Schedule 17
Section 87

Minor amendments of or connected with the Income Tax (Earnings and
Pensions) Act 2003
Free or subsidised meals
10
1     (1)
In Chapter 11 of Part 4 of the Income Tax (Earnings and Pensions) Act 2003
(employment income: miscellaneous exemptions), in section 317 (free or
subsidised meals), for subsection (1) substitute—
“(1)
No liability to income tax arises in respect of the provision for an
employee by the employer of free or subsidised meals if they are
15
provided—
(a)
in a canteen, or
(b)
on the employer’s business premises,

and conditions A to C are met.”.
      (2)
This amendment has effect for the year 2004-05 and subsequent tax years.
20
Payments to non-approved pension schemes: exception for employment where earnings not
within main charging provisions
2     (1)
In Chapter 1 of Part 6 of the Income Tax (Earnings and Pensions) Act 2003
(payments to non-approved pension schemes), for section 389 (exception:
employments where earnings charged on remittance) substitute—
25
“389   Exception: employment where earnings not within main charging
provisions
Section 386 does not apply if in the tax year in which the sum is paid
the earnings from the employment are not (or would not have been
if there were any) general earnings to which any of the following
30
provisions applies—
(a)
section 15 (employee resident, ordinarily resident and
domiciled in UK),
(b)
section 21 (employee resident and ordinarily resident,
but not domiciled in UK),
35
(c)
section 25 (employee resident but not ordinarily
resident in UK),
(d)
section 27 (UK-based earnings for year when
employee not resident in UK).”.
      (2)
This amendment has effect for the year 2003-04 and subsequent tax years.
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Finance Bill
Schedule 17 — Minor amendments of or connected with the Income Tax (Earnings and Pensions) Act 2003
355

Time limit for assessment: income received after year for which it is assessable
3     (1)
In Part 4 of the Taxes Management Act 1970 (c. 9) (assessments and claims),
for section 35 (time limit for assessment: emoluments received after year for
which they are assessable) substitute—
“35
Time limit: income received after year for which they are assessable
5
(1)
Where income to which this section applies is received in a year of
assessment subsequent to that for which it is assessable, an
assessment to income tax as respects that income may be made at any
time within six years after the year of assessment in which it was
received.
10
(2)
This section applies to—
(a)
employment income,
(b)
pension income, and
(c)
social security income.”.
      (2)
This amendment has effect in relation to income assessable for the year 2004-
15
05 and subsequent years of assessment.
Computation of profits or gains under Schedule D: delayed payment of remuneration
4     (1)
In section 43 of the Finance Act 1989 (c. 26) (Schedule D: computation)—
(a)
in subsection (1) for “profits or gains of a trade to be charged under
Schedule D” substitute “profits or gains to be charged under
20
Schedule D”, and
(b)
in subsection (5) omit “of the trade”.
      (2)
This amendment (which corrects an error in the amendment made by
paragraph 157 of Schedule 6 to the Income Tax (Pensions and Earnings) Act
2003) has effect—
25
(a)
for the purposes of income tax, for the year 2004-05 and subsequent
years of assessment;
(b)
for the purposes of corporation tax, for accounting periods ending
after 5th April 2004.
Donations to charity by individuals: application to Crown employment
30
5     (1)
In section 25(2) of the Finance Act 1990 (donations to charity by individuals:
qualifying conditions), in paragraph (i)(i) for the words from “or performs
duties” to “performed in the United Kingdom” substitute “or is in Crown
employment as defined in section 28(2) of the Income Tax (Earnings and
Pensions) Act 2003”.
35
      (2)
This amendment (which supersedes the amendment made by paragraph
166(3) of Schedule 6 to the Income Tax (Earnings and Pensions) Act 2003) has
effect for the year 2003-04 and subsequent years of assessment.
Payments on account of income tax
6     (1)
Section 108 of the Finance Act 1995 (c. 4) shall be deemed not to have been
40
repealed by Part 1 of Schedule 8 to the Income Tax (Earnings and Pensions)
Act 2003 (c. 1) and the inclusion of that section among the enactments so
repealed shall be deemed not to have affected the amendments made by that

Finance Bill
Schedule 17 — Minor amendments of or connected with the Income Tax (Earnings and Pensions) Act 2003
356

section in section 59A of the Taxes Management Act 1970 (c. 9) (payments on
account of income tax).
      (2)
Nothing in this paragraph affects anything done—
(a)
on or after 6th April 2003 (when the Income Tax (Earnings and
Pensions) Act 2003 came into force), and
5
(b)
before the passing of this Act,

in reliance on the view that the amendments referred to in sub-paragraph (1)
had ceased to have effect.
Tax relief for expenditure on R&D or remediation of contaminated land: staff costs
7     (1)
In Schedule 20 to the Finance Act 2000 (c. 17) (tax relief for expenditure on
10
research and development), in paragraph 5 (staffing costs)—
(a)
in sub-paragraph (1), for paragraph (a) substitute—
“(a)
the emoluments paid by the company to directors
or employees of the company, including all
salaries, wages, perquisites and profits whatsoever
15
other than benefits in kind;”; and
(b)
omit sub-paragraph (1ZA).
      (2)
In Schedule 22 to the Finance Act 2001 (c. 9) (remediation of contaminated
land), in paragraph 5 (employee costs)—
(a)
in sub-paragraph (1), for paragraph (a) substitute—
20
“(a)
the emoluments paid by the company to directors
or employees of the company, including all
salaries, wages, perquisites and profits whatsoever
other than benefits in kind;”; and
(b)
omit sub-paragraph (1A).
25
      (3)
These amendments have effect in relation to expenditure incurred on or
after 1st April 2004.
Gains and losses of a company from intangible fixed assets: delayed payment of remuneration
8     (1)
In Schedule 29 to the Finance Act 2002 (c. 23) (gains and losses of a company
from intangible fixed assets), paragraph 113 (delayed payments of
30
emolument) is amended as follows.
      (2)
In the heading, for “emoluments” substitute “employees’ remuneration”.
      (3)
In sub-paragraph (1)—
(a)
in paragraph (a), for “emoluments” substitute “employees’
remuneration”,
35
(b)
in paragraph (b), for “emoluments are” substitute “remuneration is”,
and
(c)
for “emoluments shall” substitute “remuneration shall”.
      (4)
For sub-paragraph (2) substitute—
     “(2)
Sub-paragraph (1) applies whether the amount is in respect of
40
particular employments or in respect of employments generally.”.
      (5)
For sub-paragraph (3) substitute—
     “(3)
This paragraph applies to potential employees’ remuneration as it
applies to employees’ remuneration.

For this purpose—
45

Finance Bill
Schedule 17 — Minor amendments of or connected with the Income Tax (Earnings and Pensions) Act 2003
357

(a)
potential employees’ remuneration is an amount reserved
in the accounts of an employer, with a view to it becoming
employees’ remuneration, and
(b)
potential employees’ remuneration is regarded as paid
when it becomes employees’ remuneration that is paid.”.
5
      (6)
In sub-paragraph (5)—
(a)
for “emoluments have not” substitute “employees’ remuneration has
not”,
(b)
in paragraph (a), for “they” substitute “it”, and
(c)
in paragraph (b), for “emoluments are” substitute “remuneration is”.
10
      (7)
After that sub-paragraph insert—
     “(6)
For the purposes of this section remuneration is paid when it—
(a)
is treated as received by an employee for the purposes of
the Income Tax (Earnings and Pensions) Act 2003 by
section 18, 19, 31 or 32 of that Act (receipt of money and
15
non-money earnings), or
(b)
would be so treated if it were not exempt income.
      (7)
In this paragraph—
“employee” includes an office-holder and “employment”
correspondingly includes an office, and
20
“remuneration” means an amount which is or is treated as
earnings for the purposes of the Income Tax (Earnings
and Pensions) Act 2003.”.
      (8)
These amendments have effect for accounting periods ending after 5th April
2003.
25
Minor corrections of the Income Tax (Earnings and Pensions) Act 2003
9     (1)
The Income Tax (Earnings and Pensions) Act 2003 (c. 1) is amended as
follows.
      (2)
In section 286 (power to amend sections 279 to 285), in the heading and in
subsection (1), for “279” substitute “277”.
30
      (3)
In Chapter 11 of Part 7 (supplementary provisions about employee benefit
trusts), in section 554(1)(a) (attribution of further interest in company), for
“employment” substitute “employee”.
      (4)
In section 577 (United Kingdom social security pensions)—
(a)
in subsection (2), in paragraph (b) of the definition of “state pension”,
35
for “48” substitute “48A”, and
(b)
omit subsection (3).
      (5)
In section 677 (UK social security benefits wholly exempt from income tax),
in Part 2 of Table B (benefits payable under regulations), omit the entry
relating to compensation payments where child support reduced because of
40
a change in legislation.
Other minor corrections
10    (1)
In section 59A(8)(b) of the Taxes Management Act 1970 (c. 9) (payments on
account of income tax), for “that Act” substitute “the principal Act”.