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Finance Bill


Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 3 — Construction industry scheme

63

 

(b)   

any public office or department of the Crown (including any Northern

Ireland department and any part of the Scottish Administration);

(c)   

the Corporate Officer of the House of Lords, the Corporate Officer of

the House of Commons and the Scottish Parliamentary Corporate

Body;

5

(d)   

any local authority;

(e)   

any development corporation or new town commission;

(f)   

the Commission for the New Towns;

(g)   

the Secretary of State if the contract is made by him under section 89 of

the Housing Associations Act 1985 (c. 69);

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(h)   

the Housing Corporation, a housing association, a housing trust,

Scottish Homes, and the Northern Ireland Housing Executive;

(i)   

any NHS trust;

(j)   

any HSS trust;

(k)   

any such body or person, being a body or person (in addition to those

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falling within paragraphs (b) to (j)) which has been established for the

purpose of carrying out functions conferred on it by or under any

enactment, as may be designated as a body or person to which this

section applies in regulations made by the Board of Inland Revenue;

(l)   

a person carrying on a business at any time if—

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(i)   

his average annual expenditure on construction operations in

the period of three years ending with the end of the last period

of account before that time exceeds £1,000,000, or

(ii)   

where he was not carrying on the business at the beginning of

that period of three years, one-third of his total expenditure on

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construction operations for the part of that period during which

he has been carrying on the business exceeds £1,000,000.

(2)   

But this section only applies to a body or person falling within subsection

(1)(b), (c), (d), (e), (f), (h), (i), (j) or (k) if—

(a)   

in any period of three years, that body or person has had an average

30

annual expenditure on construction operations of more than

£1,000,000, and

(b)   

since the condition in paragraph (a) was last satisfied, there have not

been three successive years in each of which the body or person has had

expenditure on construction operations of less than £1,000,000.

35

   

In this subsection “year” means a year ending with 31st March.

(3)   

Where section 57(2)(b) begins to apply to a person in any period of account by

virtue of his falling within subsection (1)(l), it shall continue to apply to him

until he satisfies the Board of Inland Revenue that his expenditure on

construction operations has been less than £1,000,000 in each of three

40

successive years beginning in or after that period of account.

(4)   

Where the whole or part of a trade is transferred by a company (“the

transferor”) to another company (“the transferee”) and section 343 of the Taxes

Act 1988 has effect in relation to the transfer, then in determining for the

purposes of this section the amount of expenditure incurred by the

45

transferee—

(a)   

the whole or, as the case may be, a proportionate part of any

expenditure incurred by the transferor at a time before the transfer is to

be treated as if it had been incurred at that time by the transferee; and

 

 

Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 3 — Construction industry scheme

64

 

(b)   

where only a part of the trade is transferred, the expenditure is to be

apportioned in such manner as appears to the Board of Inland Revenue,

or on appeal to the Commissioners, to be just and reasonable.

(5)   

In this section—

   

“development corporation” has the same meaning as in—

5

(a)   

the New Towns Act 1981 (c. 64), or

(b)   

the New Towns (Scotland) Act 1968 (c. 16);

   

“enactment” includes an enactment comprised in an Act of the Scottish

Parliament and a provision comprised in Northern Ireland legislation;

   

“housing association” has the same meaning as in—

10

(a)   

the Housing Associations Act 1985 (c. 69), or

(b)   

Part 2 of the Housing (Northern Ireland) Order 1992 (S.I. 1992/

1725 (N.I. 15));

   

“housing trust” has the same meaning as in the Housing Associations Act

1985;

15

   

“HSS trust” means a Health and Social Services trust established under

the Health and Personal Social Services (Northern Ireland) Order 1991

(S.I. 1991/194 (N.I. 1));

   

“new town commission” has the same meaning as in the New Towns Act

(Northern Ireland) 1965 (c. 13 (N.I.));

20

   

“NHS trust” means a National Health Service trust—

(a)   

established under Part 1 of the National Health Service and

Community Care Act 1990 (c. 19), or

(b)   

constituted under section 12A of the National Health Service

(Scotland) Act 1978 (c. 29).

25

(6)   

In this section references to a body or person include references to an office or

department.

(7)   

The Board of Inland Revenue may make regulations amending this section for

the purpose of removing references to bodies which have ceased to exist.

Deductions on account of tax from contract payments to sub-contractors

30

60      

Contract payments

(1)   

In this Chapter “contract payment” means any payment which is made under

a construction contract and is so made by the contractor (see section 57(3)) to—

(a)   

the sub-contractor,

(b)   

a person nominated by the sub-contractor or the contractor, or

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(c)   

a person nominated by a person who is a sub-contractor under another

such contract relating to all or any of the construction operations.

(2)   

But a payment made under a construction contract is not a contract payment if

any of the following exceptions applies in relation to it.

(3)   

This exception applies if the payment is treated as earnings from an

40

employment by virtue of Chapter 7 of Part 2 of the Income Tax (Earnings and

Pensions) Act 2003 (c. 1) (agency workers).

(4)   

This exception applies if the person to whom the payment is made or, in the

case of a payment made to a nominee, each of the following persons—

(a)   

the nominee,

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Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 3 — Construction industry scheme

65

 

(b)   

the person who nominated him, and

(c)   

the person for whose labour (or, where that person is a company, for

whose employees’ or officers’ labour) the payment is made,

   

is registered for gross payment when the payment is made.

   

But this is subject to subsections (5) and (6).

5

(5)   

Where a person is registered for gross payment as a partner in a firm (see

section 64), subsection (4) applies only in relation to payments made under

contracts under which—

(a)   

the firm is a sub-contractor, or

(b)   

where a person has nominated the firm to receive payments, the person

10

who has nominated the firm is a sub-contractor.

(6)   

Where a person is registered for gross payment otherwise than as a partner in

a firm but he is or becomes a partner in a firm, subsection (4) does not apply in

relation to payments made under contracts under which—

(a)   

the firm is a sub-contractor, or

15

(b)   

where a person has nominated the firm to receive payments, the person

who has nominated the firm is a sub-contractor.

(7)   

This exception applies if such conditions as may be prescribed in regulations

made by the Board of Inland Revenue for the purposes of this subsection are

satisfied; and those conditions may relate to any one or more of the following—

20

(a)   

the payment,

(b)   

the person making it, and

(c)   

the person receiving it.

(8)   

For the purposes of this Chapter a payment (including a payment by way of

loan) that has the effect of discharging an obligation under a contract relating

25

to construction operations is to be taken to be made under the contract; and if—

(a)   

the obligation is to make a payment to a person (“A”) within paragraph

(a) to (c) of subsection (1), but

(b)   

the payment discharging that obligation is made to a person (“B”) not

within those paragraphs,

30

   

the payment is for those purposes to be taken to be made to A.

61      

Deductions on account of tax from contract payments

(1)   

On making a contract payment the contractor (see section 57(3)) must deduct

from it a sum equal to the relevant percentage of so much of the payment as is

not shown to represent the direct cost to any other person of materials used or

35

to be used in carrying out the construction operations to which the contract

under which the payment is to be made relates.

(2)   

In subsection (1) “the relevant percentage” means such percentage as the

Treasury may by order determine.

(3)   

That percentage must not exceed—

40

(a)   

if the person for whose labour (or for whose employees’ or officers’

labour) the payment in question is made is registered for payment

under deduction, the percentage which is the basic rate for the year of

assessment in which the payment is made, or

(b)   

if that person is not so registered, the percentage which is the higher

45

rate for that year of assessment.

 

 

Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 3 — Construction industry scheme

66

 

62      

Treatment of sums deducted

(1)   

A sum deducted under section 61 from a payment made by a contractor—

(a)   

must be paid to the Board of Inland Revenue, and

(b)   

is to be treated for the purposes of income tax or, as the case may be,

corporation tax as not diminishing the amount of the payment.

5

(2)   

If the sub-contractor is not a company a sum deducted under section 61 and

paid to the Board is to be treated as being income tax paid in respect of the sub-

contractor’s relevant profits.

   

If the sum is more than sufficient to discharge his liability to income tax in

respect of those profits, so much of the excess as is required to discharge any

10

liability of his for Class 4 contributions is to be treated as being Class 4

contributions paid in respect of those profits.

(3)   

If the sub-contractor is a company—

(a)   

a sum deducted under section 61 and paid to the Board is to be treated,

in accordance with regulations, as paid on account of any relevant

15

liabilities of the sub-contractor;

(b)   

regulations must provide for the sum to be applied in discharging

relevant liabilities of the year of assessment in which the deduction is

made;

(c)   

if the amount is more than sufficient to discharge the sub-contractor’s

20

relevant liabilities, the excess may be treated, in accordance with the

regulations, as being corporation tax paid in respect of the sub-

contractor’s relevant profits; and

(d)   

regulations must provide for the repayment to the sub-contractor of

any amount not required for the purposes mentioned in paragraphs (b)

25

and (c).

(4)   

For the purposes of subsection (3) the “relevant liabilities” of a sub-contractor

are any liabilities of the sub-contractor, whether arising before or after the

deduction is made, to make a payment to the Inland Revenue in pursuance of

an obligation as an employer or contractor.

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(5)   

In this section—

(a)   

“the sub-contractor” means the person for whose labour (or for whose

employees’ or officers’ labour) the payment is made;

(b)   

references to the sub-contractor’s “relevant profits” are to the profits

from the trade, profession or vocation carried on by him in the course

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of which the payment was received;

(c)   

“Class 4 contributions” means Class 4 contributions within the meaning

of the Social Security Contributions and Benefits Act 1992 (c. 4) or the

Social Security Contributions and Benefits (Northern Ireland) Act 1992

(c. 7).

40

(6)   

References in this section to regulations are to regulations made by the Board

of Inland Revenue.

(7)   

Regulations under this section may contain such supplementary, incidental or

consequential provision as appears to the Board to be appropriate.

 

 

 
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