Finance Bill

House of Commons

Session 2002 - 03
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Finance Bill

Finance Bill
Schedule 16 — Relief where national insurance contributions met by employee
367

Schedule 16
Section 85

Relief where national insurance contributions met by employee
Income tax relief: restricted securities
1     (1)
Chapter 2 of Part 7 of the Income Tax (Earnings and Pensions) Act 2003 (c. 1)
(employment income: restricted securities) is amended as follows.
5
      (2)
In section 426 (charge on occurrence of chargeable event), for subsections (1)
to (4) substitute—
“(1)
If a chargeable event occurs in relation to the employment-related
securities, the taxable amount counts as employment income of the
employee for the relevant tax year.
10
(2)
For this purpose—
(a)
“chargeable event” has the meaning given by section 427,
(b)
“the taxable amount” is the amount determined under
section 428, and
(c)
“the relevant tax year” is the tax year in which the chargeable
15
event occurs.
(3)
Relief may be available under section 428A (relief for secondary
Class 1 contributions met by employee) against an amount counting
as employment income under this section.”.
      (3)
After section 428 insert—
20
“428A
  Relief for secondary Class 1 contributions met by employee
(1)
Relief is available under this section against an amount counting as
employment income under section 426 (“the employment income
amount”) if—
(a)
an agreement having effect under paragraph 3A of Schedule
25
1 to the Contributions and Benefits Act has been entered into
allowing the secondary contributor to recover from the
employee the whole or part of any secondary Class 1
contribution in respect of that amount, or
(b)
an election having effect under paragraph 3B of that Schedule
30
is in force which has the effect of transferring to the employee
the whole or part of the liability to pay secondary Class 1
contributions in respect of that amount.
(2)
The amount of the relief is the total of—
(a)
any amount that under the agreement referred to in
35
subsection (1)(a) is recovered in respect of the employment
income amount by the secondary contributor before 5th June
in the tax year following that in which the chargeable event
occurs, and
(b)
the amount of any liability in respect of the employment
40
income amount that, by virtue of the election referred to in
subsection (1)(b), has become the employee’s liability.
(3)
If notice of withdrawal of approval of the election is given, the
amount of the liability referred to in subsection (2)(b) is limited to the

Finance Bill
Schedule 16 — Relief where national insurance contributions met by employee
368

amount met before 5th June in the tax year following that in which
the chargeable event occurs.
(4)
Relief under this section is given by way of deduction from the
amount otherwise counting as employment income.
(5)
Relief under this section does not affect the amount to be taken into
5
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
paragraph 3A or 3B of Schedule 1 to that Act.
10
(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

“secondary contributor” has the same meaning as in that Act
15
(see section 7).”.
Income tax relief: convertible securities
2     (1)
Chapter 3 of Part 7 of the Income Tax (Earnings and Pensions) Act 2003 (c. 1)
(employment income: convertible securities) is amended as follows.
      (2)
In section 438 (charge on occurrence of chargeable event), for subsections (1)
20
to (4) substitute—
“(1)
If a chargeable event occurs in relation to the employment-related
securities, the taxable amount counts as employment income of the
employee for the relevant tax year.
(2)
For this purpose—
25
(a)
“chargeable event” has the meaning given by section 439,
(b)
“the taxable amount” is the amount determined under
section 440, and
(c)
“the relevant tax year” is the tax year in which the chargeable
event occurs.
30
(3)
Relief may be available under section 442A (relief for secondary
Class 1 contributions met by employee) against an amount counting
as employment income under this section.”.
      (3)
After section 442 insert—
“442A
  Relief for secondary Class 1 contributions met by employee
35
(1)
Relief is available under this section against an amount counting as
employment income under section 438 (“the employment income
amount”) if—
(a)
an agreement having effect under paragraph 3A of Schedule
1 to the Contributions and Benefits Act has been entered into
40
allowing the secondary contributor to recover from the
employee the whole or part of any secondary Class 1
contribution in respect of that amount, or
(b)
an election having effect under paragraph 3B of that Schedule
is in force which has the effect of transferring to the employee
45

Finance Bill
Schedule 16 — Relief where national insurance contributions met by employee
369

the whole or part of the liability to pay secondary Class 1
contributions in respect of that amount.
(2)
The amount of the relief is the total of—
(a)
any amount that under the agreement referred to in
subsection (1)(a) is recovered in respect of the employment
5
income amount by the secondary contributor before 5th June
in the tax year following that in which the chargeable event
occurs, and
(b)
the amount of any liability in respect of the employment
income amount that, by virtue of the election referred to in
10
subsection (1)(b), has become the employee’s liability.
(3)
If notice of withdrawal of approval of the election is given, the
amount of the liability referred to in subsection (2)(b) is limited to the
amount met before 5th June in the tax year following that in which
the gain is realised.
15
(4)
Relief under this section is given by way of deduction from the
amount otherwise counting as employment income.
(5)
Relief under this section does not affect the amount to be taken into
account—
(a)
as employment income in determining contributions payable
20
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.
(6)
In this section—

“approval”, in relation to an election, means approval by the
25
Inland Revenue under paragraph 3B of Schedule 1 to the
Contributions and Benefits Act, and

“secondary contributor” has the same meaning as in that Act
(see section 7).”.
Income tax relief: securities options
30
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.
      (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
35
securities option, the taxable amount counts as employment income
of the employee for the relevant tax year.
(2)
For this purpose—
(a)
“chargeable event” has the meaning given by section 477,
(b)
“the taxable amount” is the amount determined under
40
section 478, and
(c)
“the relevant tax year” is the tax year in which the chargeable
event occurs.
(3)
Relief under section 481 or 482 (relief for secondary Class 1
contributions or special contribution met by employee) may be
45

Finance Bill
Schedule 16 — Relief where national insurance contributions met by employee
370

available against an amount counting as employment income under
this section.”.
      (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)—
5
(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
employment income under section 476 if”;
10
(c)
in subsection (2) for the opening words down to “of” substitute “The
amount of the relief is the total of”;
(d)
after subsection (4) insert—
“(4A)
Relief under this section is given by way of deduction from
the amount otherwise counting as employment income.
15
(4B)
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
20
paragraph 3A or 3B of Schedule 1 to that Act.”.
      (5)
In section 482 (deductible amount in respect of special contribution met by
employee)—
(a)
in the heading for “Deductible amount in respect of” substitute
“Relief for”;
25
(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)
after subsection (5) add—
“(6)
The amount of the relief is the amount of the liability referred
30
to in subsection (4).
“(7)
Relief under this section is given by way of deduction from
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
35
Earn) is amended as follows.
      (2)
In section 698 (PAYE: special charges on employment-related securities),
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
40
after deducting the amount of any relief likely to be available under
section 428A or 442A (relief for secondary Class 1 contributions met
by employee).”.
      (3)
In section 700 (PAYE: gains from securities options), after subsection (4)

Finance Bill
Schedule 16 — Relief where national insurance contributions met by employee
371

insert—
“(4A)
For the purposes of this section the amount likely to count as
employment income under section 476 means the amount after
deducting the amount of any relief likely to be available under
section 481 or 482 (relief for secondary Class 1 contributions or
5
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
employee share acquisition) is amended as follows.
      (2)
In paragraph 21(4) (amount of relief on acquisition of restricted shares)—
10
(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
15
Class 1 contributions or special contribution met by
employee).”.
      (3)
In paragraph 21(6) (amount of relief on chargeable event in relation to
restricted shares), at the end add—

“No account shall be taken for this purpose of any relief under
20
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)—
(a)
omit the words “increased by any amounts deducted under sections
481 and 482 of that Act”, and
25
(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
Class 1 contributions or special contribution met by
employee).”.
30
      (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
section 442A of that Act (relief for secondary Class 1 contributions
met by employee).”.
35
      (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
before the amendment of those paragraphs by this Schedule.
Consequential amendments: capital gains tax
40
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.

Finance Bill
Schedule 17 — Minor amendments of or connected with the Income Tax (Earnings and Pensions) Act 2003
372

      (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
5
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).”.
10
      (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
15
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 word “and” preceding it.
      (2)
In section 721(1) of that Act (general definitions), at the appropriate place
20
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—
25

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

Schedule 17
Section 92

Minor amendments of or connected with the Income Tax (Earnings and
Pensions) Act 2003
Free or subsidised meals
30
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
35
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.
40

Finance Bill
Schedule 17 — Minor amendments of or connected with the Income Tax (Earnings and Pensions) Act 2003
373

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—
5
“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
10
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),
15
(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.
20
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 it is assessable
25
(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.
30
(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-
35
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
40
Schedule D”, and
(b)
in subsection (5) omit “of the trade”.