Finance Bill

House of Commons

Session 2003 - 04
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Finance Bill

Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 3 — Construction industry scheme
74

(c)
the cancellation under section 66 of a person’s registration for gross
payment.
76
Consequential amendments
Schedule 12 to this Act (which makes consequential amendments) has effect.
77
Commencement and transitional provision
5
(1)
This Chapter has effect in relation to payments made on or after the appointed
day under contracts relating to construction operations.
(2)
Where a certificate issued to a person under section 561 of the Taxes Act 1988
is in force immediately before the appointed day, the person is to be treated as
if, on the appointed day, the Board of Inland Revenue had registered him for
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gross payment.
(3)
Where a registration card issued to a person in accordance with regulations
made under section 566(2A) of the Taxes Act 1988 is in force immediately
before the appointed day, the person is to be treated as if, on the appointed day,
the Board of Inland Revenue had registered him for payment under deduction.
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(4)
Subsection (5) applies in relation to the first payment (“the relevant payment”)
made after the appointed day by a person (“C”) to a sub-contractor (“SC”)
under a contract relating to construction operations if—
(a)
before the appointed day, C had made one or more payments to SC
under the contract or another such contract,
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(b)
the last of those payments (“the last payment”) was made in the year of
assessment in which the relevant payment was made or in either of the
two years of assessment before that,
(c)
at the time of the last payment—
(i)
a certificate issued to SC under section 561 of the Taxes Act 1988
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was in force, or
(ii)
a registration card issued to SC in accordance with regulations
made under section 566(2A) of that Act was in force, and
(d)
on making the relevant payment, C has no reason to believe that SC—
(i)
did not become registered for gross payment or (as the case may
30
be) for payment under deduction by virtue of subsection (2) or
(3), and
(ii)
is not still so registered.
(5)
Where this subsection applies, regulations under section 69(1) shall not require
C, before making the relevant payment, to verify whether SC is registered for
35
gross payment or for payment under deduction.
(6)
Where subsection (5) applies, C shall be entitled to assume, on making any
further payments to SC under a contract relating to construction operations,
that SC has not subsequently ceased to be so registered, unless notified to the
contrary in accordance with regulations made under section 69(3).
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(7)
In this section “the appointed day” means such day as the Treasury may by
order appoint.
(8)
The Treasury may by order make such further supplemental and transitional
provision and savings as they think fit in connection with the coming into
effect of this Chapter.
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Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 4 — Personal taxation
75

Chapter 4
Personal taxation
Taxable benefits
78
Childcare and childcare vouchers
(1)
Schedule 13 to this Act contains amendments of the Income Tax (Earnings and
5
Pensions) Act 2003 (c. 1) relating to childcare and childcare vouchers.
(2)
The amendments have effect for the year 2005-06 and subsequent years of
assessment.
79
Exemption for loaned computer equipment
(1)
In Chapter 11 of Part 4 of the Income Tax (Earnings and Pensions) Act 2003
10
(employment income: miscellaneous exemptions), section 320 (limited
exemption for computer equipment) is amended as follows.
(2)
For subsection (1) substitute—
“(1)
If conditions A and B are met in respect of the provision of computer
equipment—
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(a)
no liability to income tax arises by virtue of section 62 (general
definition of earnings), and
(b)
liability to income tax by virtue of Chapter 10 of Part 3 (taxable
benefits: residual liability to charge) arises only in respect of so
much of the aggregate cash equivalent of the benefit in the tax
20
year as exceeds £500.”.
(3)
Omit subsections (4) and (5).
(4)
This section has effect for the year 2004-05 and subsequent years of assessment.
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Vans
(1)
Schedule 14 to this Act contains amendments of the Income Tax (Earnings and
25
Pensions) Act 2003 (c. 1) relating to vans.
(2)
The amendments have effect for the year 2005-06 and subsequent years of
assessment.
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Emergency vehicles
(1)
In the Income Tax (Earnings and Pensions) Act 2003, after section 248 insert—
30
“248A
Emergency vehicles
(1)
This section applies where—
(a)
an emergency vehicle is made available to a person employed
in an emergency service for the person’s private use,
(b)
the terms on which it is made available prohibit its private use
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otherwise than when the person is on call or engaged in on-call
commuting, and

Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 4 — Personal taxation
76

(c)
the person does not make private use of it otherwise than in
such circumstances.
(2)
No liability to income tax arises by virtue of Chapter 6 or 10 of Part 3
(taxable benefits: cars, vans etc. and residual liability to charge) in
respect of the benefit.
5
(3)
“Emergency vehicle” means a vehicle which is used to respond to
emergencies and which either—
(a)
has fixed to it a lamp designed to emit a flashing light for use in
emergencies, or
(b)
would have such a lamp fixed to it but for the fact that (if it did)
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a special threat to the personal physical security of those using
it would arise by reason of it being apparent that they were
employed in an emergency service.
(4)
The following are “employed in an emergency service”—
(a)
constables and other persons employed for police purposes,
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(b)
persons employed for the purposes of a fire, or fire and rescue,
service, and
(c)
persons employed in the provision of ambulance or paramedic
services.
(5)
The Treasury may by order amend subsection (4).
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(6)
“Private use”, in relation to a person, means any use other than for the
person’s business travel; and “business travel” has the same meaning
as in Chapter 6 of Part 3 (see section 171(1)).
(7)
A person to whom an emergency vehicle is made available is on call
when liable, as part of normal duties, to be called on to use the
25
emergency vehicle to respond to emergencies.
(8)
A person to whom an emergency vehicle is made available is engaged
in on-call commuting when the person—
(a)
is using it for ordinary commuting or for travel between two
places that is for practical purposes substantially ordinary
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commuting, and
(b)
is required to do so in order that it is available for use by the
person, as part of normal duties, for responding to
emergencies.”
(2)
In section 236(2)(c) of that Act (mileage allowance and passenger payments:
35
meaning of “company vehicle”), after “vans)” insert “and section 248A
(emergency vehicles)”.
(3)
This section has effect for the year 2004-05 and subsequent years of assessment.
82
European travel expenses of MPs and other representatives
(1)
The Income Tax (Earnings and Pensions) Act 2003 (c. 1) is amended as follows.
40
(2)
In section 294 (EU travel expenses of MPs and other representatives) in
subsection (1) (exemption from income tax in respect of sums paid to Members
of the House of Commons and other representatives in respect of EU travel
expenses) for “EU” (in both places) substitute “European”.

Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 4 — Personal taxation
77

(3)
In that section, for subsections (2) to (4) substitute—
“(2)
“European travel expenses” means the cost of, and any additional
expenses incurred in, travelling between the United Kingdom and a
relevant European location.
(3)
“Relevant European location” means—
5
(a)
a European Union institution or agency, or
(b)
the national parliament of—
(i)
another member State,
(ii)
a candidate or applicant country, or
(iii)
a member State of the European Free Trade Association.
10
(4)
The Treasury may by order amend subsection (3) by—
(a)
adding a European location,
(b)
removing a European location, or
(c)
varying the description of a European location.”.
(4)
In the heading of that section, “EU” accordingly becomes “European”.
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(5)
This section has effect in relation to sums paid in respect of costs or expenses
incurred on or after 6th April 2004.
Gift aid
83
Giving through the self-assessment return
(1)
This section applies where—
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(a)
as a result of the making by an individual of a personal return for a year
of assessment, a tax repayment in respect of one or more years of
assessment falls to be made to him,
(b)
the personal return contains a single direction, in the form specified in
the return, requiring—
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(i)
the whole of the tax repayment, or
(ii)
so much of the tax repayment as does not exceed a specified
amount,

to be paid on his behalf as a gift to a single specified charity,
(c)
the direction also requires the gift to be treated as a qualifying donation
30
for the purposes of section 25 of the Finance Act 1990 (c. 29) (gift aid),
and
(d)
the gift satisfies the requirements of subsection (2) of that section.
(2)
The gift is to be treated as a qualifying donation for the purposes of that section
made by the individual at the time the payment is received by the charity.
35
(3)
Section 98 of the Finance Act 2002 (c. 23) (gift aid: election to be treated as if gift
made in previous tax year) accordingly does not apply to the gift.
(4)
The charity is to be treated as having made a claim for any exemption which
may be available under section 505(1)(c)(ii) of the Taxes Act 1988 (charities:
exemption from tax under Case III of Schedule D) as a result of the charity’s
40
receipt of the gift (see section 25(10) of the Finance Act 1990).
(5)
In this section—

Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 4 — Personal taxation
78


“charity” means a charity within the meaning of section 25 of the Finance
Act 1990 (see subsection (12)(a) of that section) which, at the time the
personal return in question is made, is included (at the request of the
charity) in a list maintained for the purposes of this section by the
Board;
5

“personal return” means a return under section 8 of the Taxes
Management Act 1970 (c. 9) (personal return);

“tax repayment” means a repayment (after any set-off that falls to be made
against the individual’s liabilities) of either or both of—
(a)
income tax or amounts paid on account of income tax;
10
(b)
capital gains tax;

  and, for the purposes of subsection (1)(b), includes any repayment
supplement (within the meaning of section 824 of the Taxes Act 1988 or
section 283 of the Taxation of Chargeable Gains Act 1992 (c. 12)).
(6)
In section 25 of the Finance Act 1990 (gift aid) after subsection (12) insert—
15
“(13)
This section is to be read with—
(a)
section 98 of the Finance Act 2002 (gift aid: election to be treated
as if gift made in previous tax year);
(b)
section 83 of the Finance Act 2004 (gift aid: giving through the
self-assessment return).”.
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(7)
This section has effect in relation to personal returns for the year 2003‑04 and
subsequent years of assessment.
Gifts with a reservation
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Charge to income tax by reference to enjoyment of property previously owned
(1)
Schedule 15 (which contains provisions imposing a charge to income tax by
25
reference to benefits received in certain circumstances by a former owner of
property) has effect.
(2)
That Schedule has effect for the year 2005-06 and subsequent years of
assessment.
Miscellaneous
30
85
Relief where national insurance contributions met by employee
(1)
Schedule 16 to this Act provides—
(a)
for income tax relief in certain cases where national insurance
contributions are met by an employee, and
(b)
for consequential amendments.
35
(2)
This section (and that Schedule) come into force in accordance with provision
made by the Treasury by order made by statutory instrument.
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Income of spouses: jointly held property
(1)
Section 282A of the Taxes Act 1988 is amended as follows.

Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 5 — Enterprise incentives
79

(2)
After subsection (4) insert—
“(4A)
Subsection (1) above shall not apply to income consisting of a
distribution arising from property consisting of—
(a)
close company shares to which either the husband or the wife is
beneficially entitled to the exclusion of the other, or
5
(b)
close company shares to which they are beneficially entitled in
equal or unequal shares.

In this subsection “close company shares” means shares in or securities
of a close company; and for this purpose “shares” and “securities” have
the same meaning as in Part 6 (see section 254).”.
10
(3)
This section has effect in relation to the year 2004-05 and subsequent years of
assessment.
87
Minor amendments of or connected with ITEPA 2003
Schedule 17 to this Act contains minor amendments of or connected with the
Income Tax (Earnings and Pensions) Act 2003 (c. 1).
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Chapter 5
Enterprise incentives
88
Enterprise investment scheme
Schedule 18 (which makes amendments to the enterprise investment scheme)
has effect.
20
89
Venture capital trusts
(1)
In relation to shares issued on or after 6th April 2004 but before 6th April 2006,
paragraph 1(5)(a) of Schedule 15B to the Taxes Act 1988 (calculation of income
tax relief by reference to lower rate) is to have effect as if the reference to the
lower rate were a reference to the higher rate.
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(2)
Accordingly, paragraph 3(4) of that Schedule (loss of investment relief) is to
have effect in relation to such shares as if the reference to the lower rate were a
reference to the higher rate.
(3)
Schedule 19 (which makes amendments relating to venture capital trusts) has
effect.
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90
Corporate venturing scheme
Schedule 20 (which makes amendments relating to the corporate venturing
scheme) has effect.
91
Enterprise management incentives: subsidiaries
(1)
Schedule 5 to the Income Tax (Earnings and Pensions) Act 2003 (c. 1)
35
(enterprise management incentives) is amended as follows.
(2)
In paragraph 8 (qualifying companies: introduction) after “having only

Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 5 — Enterprise incentives
80

qualifying subsidiaries (see paragraphs 10 and 11),” insert—

“property managing subsidiaries (see paragraphs 11A and 11B),”.
(3)
In paragraph 10 (the qualifying subsidiaries requirement) for sub-paragraph
(2) substitute—
     “(2)
In this paragraph “subsidiary” means any company which the
5
company controls, either on its own or together with any person
connected with it.
      (3)
For the purpose of sub-paragraph (2), the question whether a person
controls a company is to be determined in accordance with section
416(2) to (6) of ICTA (“control” in the context of close companies).”.
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(4)
In paragraph 11 (meaning of “qualifying subsidiary”)—
(a)
in sub-paragraph (2), omit paragraphs (a) to (c),
(b)
before paragraph (d) of that sub-paragraph insert—
“(ca)
that the subsidiary is a 51% subsidiary of the
holding company;”,
15
(c)
in paragraph (d) of that sub-paragraph, after “company” insert “or
another of its subsidiaries”,
(d)
in paragraph (e) of that sub-paragraph, for “the conditions in
paragraphs (a) to” substitute “either of the conditions in paragraphs
(ca) and”,
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(e)
omit sub-paragraph (3),
(f)
after sub-paragraph (7) insert—
     “(8)
Sub-paragraph (9) applies at a time when the subsidiary or
another company is in administration or receivership.
      (9)
The subsidiary is not to be regarded, by reason only of
25
anything done as a consequence of the company concerned
being in administration or receivership, as having ceased to
be a company in relation to which the conditions in sub-
paragraph (2) are met if—
(a)
the entry into administration or receivership, and
30
(b)
everything done as a consequence of the company
concerned being in administration or receivership,

is for commercial reasons and is not part of a scheme or
arrangement the main purpose (or one of the main purposes)
of which is the avoidance of tax.
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     (10)
Section 312(2A) of ICTA (meaning of being in administration
or receivership) applies for the purposes of sub-paragraphs
(8) and (9) as it applies for the purposes of Chapter 3 of Part
7 of ICTA (enterprise investment scheme).”.
(5)
After paragraph 11 insert—
40
“The property managing subsidiaries requirement
11A   (1)
A company is not a qualifying company if it has a property
managing subsidiary which is not a qualifying 90% subsidiary of the
company (see paragraph 11B).