Finance Bill

House of Commons

Session 2002 - 03
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Other Bills before Parliament

Finance Bill

Finance Bill
Schedule 27 — Meaning of “offshore installation”
Part 1 — The new definition
437

(b)
use for the purposes of exploration with a view to exploiting
mineral resources by means of a well;
(c)
use for the storage of gas in or under the shore or the bed of
any waters;
(d)
use for the recovery of gas so stored;
5
(e)
use for the conveyance of things by means of a pipe;
(f)
use mainly for the provision of accommodation for persons
who work on or from a structure which is, is to be, or has
been, put to a use specified in any of paragraphs (a) to (e)
while—
10
(i)
standing in any waters,
(ii)
stationed (by whatever means) in any waters, or
(iii)
standing on the foreshore or other land intermittently
covered with water.
(3)
But a structure is not an offshore installation if—
15
(a)
it has ceased permanently to be put to a use specified in
subsection (2),
(b)
it is not, and is not to be, put to any other use specified in
subsection (2), and
(c)
since ceasing permanently to be put to a use specified in
20
subsection (2) it has been put to a use which is not so
specified.
(4)
In this section “structure” includes a ship or other vessel.
(5)
The Treasury may make provision by regulations as to the meaning
of “offshore installation” for the purposes of the Tax Acts.
25
(6)
The regulations may—
(a)
add to, amend or repeal subsections (1) to (4) or any
provision of those subsections;
(b)
make different provision for different purposes;
(c)
include incidental, consequential, supplemental, saving or
30
transitional provisions.”
2
In section 832(1) of the Taxes Act 1988 (interpretation of the Tax Acts) at the
appropriate place insert—

““offshore installation” has the meaning given by section 837C;”.
3
Subject to the following provisions of this Schedule, paragraphs 1 and 2 have
35
effect—
(a)
for the purposes of income tax and capital gains tax, for the year
2004-05 and subsequent years of assessment;
(b)
for the purposes of corporation tax, for accounting periods ending on
or after 1st April 2004.
40

Finance Bill
Schedule 27 — Meaning of “offshore installation”
Part 2 — Minor and consequential amendments
438

Part 2
Minor and consequential amendments
The Taxes Act 1988
4     (1)
Chapter 3 of Part 7 of the Taxes Act 1988 (enterprise investment scheme) is
amended as set out in sub-paragraphs (2) to (4).
5
      (2)
In section 293 (qualifying companies), in subsection (3C)(b) for “oil rigs”
substitute “offshore installations”.
      (3)
In section 297 (qualifying trades), in subsection (6) for “oil rigs” substitute
“offshore installations”.
      (4)
In section 298 (provisions supplementary to sections 293 and 297), in
10
subsection (5) omit the definition of “oil rig”.
      (5)
This paragraph has effect in relation to shares issued on or after 6th April
2004.
      (6)
Nothing in this paragraph affects the operation of any of the following
provisions in relation to shares issued before that date—
15
(a)
Chapter 3 of Part 7 of the Taxes Act 1988 (enterprise investment
scheme);
(b)
sections 573 and 574 of that Act (relief for losses on unlisted shares in
trading companies);
(c)
Schedule 5B to the Taxation of Chargeable Gains Act 1992 (c. 12)
20
(enterprise investment scheme: re-investment).
5     (1)
Schedule 28B to the Taxes Act 1988 (venture capital trusts) is amended as set
out in sub-paragraphs (2) to (4).
      (2)
In paragraph 3 (requirements as to company’s business), in sub-paragraph
(8)(b) for “oil rigs” substitute “offshore installations”.
25
      (3)
In paragraph 4 (qualifying trades), in sub-paragraph (7) for “oil rigs”
substitute “offshore installations”.
      (4)
In paragraph 5 (provisions supplemental to paragraph 4), in sub-paragraph
(1) omit the definition of “oil rig”.
      (5)
This paragraph has effect for the purpose of determining whether shares or
30
securities issued on or after 6th April 2004 are, for the purposes of section
842AA of the Taxes Act 1988, to be regarded as comprised in a company’s
qualifying holdings.
      (6)
Nothing in this paragraph affects the operation of Schedule 28B to the Taxes
Act 1988 as it has effect for the purpose of determining whether shares or
35
securities issued before that date are, for the purposes of section 842AA of
the Taxes Act 1988, to be regarded as comprised in a company’s qualifying
holdings.
Finance Act 2000 (c. 17)
6     (1)
Schedule 15 to the Finance Act 2000 (the corporate venturing scheme) is
40
amended as set out in sub-paragraphs (2) to (4).
      (2)
In paragraph 23 (the trading activities requirement), in sub-paragraph
(8)(a)(i) for “oil rigs” substitute “offshore installations”.

Finance Bill
Schedule 27 — Meaning of “offshore installation”
Part 2 — Minor and consequential amendments
439

      (3)
In paragraph 28 (excluded activities: leasing of ships), in sub-paragraph (1)
for “oil rigs” substitute “offshore installations”.
      (4)
In paragraph 28(6) omit the definition of “oil rig”.
      (5)
This paragraph has effect in relation to shares issued on or after 6th April
2004.
5
      (6)
Nothing in this paragraph affects the operation of Schedule 15 to the Finance
Act 2000 in relation to shares issued before that date.
7     (1)
In Schedule 22 to the Finance Act 2000 (tonnage tax), in paragraph 20
(vessels excluded from being qualifying ships) omit sub-paragraph (5).
      (2)
This paragraph has effect for accounting periods ending on or after 1st April
10
2004.
Capital Allowances Act 2001 (c. 2)
8
In section 94 of the Capital Allowances Act 2001 (expenditure on ships that
is not long-life asset expenditure) omit subsections (2)(b) and (3).
9     (1)
Section 153 of the Capital Allowances Act 2001 (ships that are not qualifying
15
ships) is amended as follows.
      (2)
For subsection (2) substitute—
“(2)
A ship is not a qualifying ship at any time when it is an offshore
installation.”
      (3)
Omit subsection (3).
20
10
In Part 2 of Schedule 1 to the Capital Allowances Act 2001 (index of defined
expressions) at the appropriate place insert—

“offshore installation
section 837C of ICTA”

(except in Chapter 13 of

Part 2)

25
11    (1)
Paragraphs 8 to 10 have effect—
(a)
for income tax purposes, as respects allowances and charges falling
to be made for chargeable periods ending on or after 6th April 2004;
(b)
for corporation tax purposes, as respects allowances and charges
falling to be made for chargeable periods ending on or after 1st April
30
2004.
      (2)
In this paragraph “chargeable period” has the meaning given by section 6 of
the Capital Allowances Act 2001.
Income Tax (Earnings and Pensions) Act 2003 (c. 1)
12
In section 40 of the Income Tax (Earnings and Pensions) Act 2003 (duties on
35
board vessel or aircraft), in subsection (5) for paragraph (b) (meaning of
ship) substitute—
“(b)
“ship” does not include an offshore installation;”.
13
In section 305 of the Income Tax (Earnings and Pensions) Act 2003 (offshore
oil and gas workers: mainland transfers), in subsection (6) omit the
40
definition of “offshore installation”.

Finance Bill
Schedule 28 — Registered pension schemes: authorised pensions—supplementary
Part 1 — Pension rules
440

14
For section 385 of the Income Tax (Earnings and Pensions) Act 2003
substitute—
“385 Meaning of “ship”
In this Chapter “ship” does not include an offshore installation.”
15
In Part 2 of Schedule 1 to the Income Tax (Earnings and Pensions) Act 2003
5
(index of defined expressions) at the appropriate place insert—

“offshore installation
section 837C of ICTA”

16
Paragraphs 12 to 15 have effect for the year 2004-05 and subsequent years of
assessment.
17    (1)
Schedule 5 to the Income Tax (Earnings and Pensions) Act 2003 (enterprise
10
management incentives) is amended as follows.
      (2)
In paragraph 18 (excluded activities: leasing of certain ships), in sub-
paragraph (1) for “oil rigs” substitute “offshore installations”.
      (3)
In paragraph 18(2) for “oil rig” substitute “offshore installation”.
      (4)
In paragraph 18(8) omit the definition of “oil rig”.
15
      (5)
In paragraph 59 (index of defined expressions) at the appropriate place
insert—

“offshore installation
section 837C of ICTA”

      (6)
This paragraph has effect in relation to a right to acquire shares in a company
granted on or after 6th April 2004.
20
      (7)
Nothing in this paragraph affects the operation of Schedule 5 to the Income
Tax (Earnings and Pensions) Act 2003 in relation to a right to acquire shares
in a company granted before that date.
Schedule 28
Sections 162 and 164

Registered pension schemes: authorised pensions—supplementary
25
Part 1
Pension rules
Defined benefits and money purchase arrangements
Ill-health condition
1
For the purposes of this Part the ill-health condition is met if—
30
(a)
the scheme administrator has received evidence from a registered
medical practitioner that the member is (and will continue to be)
incapable of carrying on the member’s occupation because of
physical or mental impairment, and

Finance Bill
Schedule 28 — Registered pension schemes: authorised pensions—supplementary
Part 1 — Pension rules
441

(b)
the member has in fact ceased to carry on the member’s occupation.
Scheme pension
2     (1)
In the case of a pension scheme with fewer than 50 members, a pension
payable to the member is a scheme pension for the purposes of this Part if—
(a)
it is payable by an insurance company selected by the scheme
5
administrator or, where the scheme administrator is an insurance
company, by the scheme administrator, and
(b)
it satisfies the condition in sub-paragraph (3).
      (2)
In the case of a pension scheme with 50 or more members, a pension payable
to the member is a scheme pension for the purposes of this Part if—
10
(a)
it is payable by the scheme administrator or by an insurance
company selected by the scheme administrator, and
(b)
it satisfies the condition in sub-paragraph (3).
      (3)
The condition is that (subject to sub-paragraph (4))—
(a)
the pension is payable (at least annually) until the member’s death or
15
until the later of the member’s death and the end of a term certain not
exceeding ten years, and
(b)
the rate of pension payable in respect of any relevant 12 month
period is not less than the rate payable in respect of the previous 12
month period.
20
      (4)
None of the following prevent the pension satisfying the condition in sub-
paragraph (3)—
(a)
if the ill-health condition is met when the member becomes entitled
to the pension, the pension not being payable for a period during
which the individual’s physical and mental condition is no longer
25
such as would, under the terms of the scheme, give rise to
entitlement to the pension,
(b)
a reduction in the rate of the pension which applies to all the scheme
pensions being paid to or in respect of members of the pension
scheme, or
30
(c)
if the member becomes entitled to state retirement pension, a
reduction in the rate of the pension which does not exceed the rate at
which state retirement pension is payable (or, if the rate at which
state retirement pension is payable is greater than the rate of the
pension, the pension ceasing to be payable).
35
      (5)
For the purposes of sub-paragraph (4)(c) the following constitute “state
retirement pension”—
(a)
retirement pension under SSCBA 1992 or SSCB(NI)A 1992, and
(b)
graduated retirement benefit under NIA 1965 or NIA(NI) 1966.
      (6)
A pension is payable until the end of a term certain even if it may, after the
40
death of the member during the term, end on the pensioner—
(a)
marrying,
(b)
reaching the age of 18, or
(c)
ceasing to be in full-time education.
      (7)
A relevant 12 month period is any 12 month period which—
45
(a)
begins on or after the first anniversary of the day on which the
member becomes entitled to the pension, and
(b)
ends before the day on which the pension ceases to be payable.

Finance Bill
Schedule 28 — Registered pension schemes: authorised pensions—supplementary
Part 1 — Pension rules
442

Money purchase arrangements
Lifetime annuity
3     (1)
For the purposes of this Part an annuity payable to the member is a lifetime
annuity if—
(a)
it is payable by an insurance company,
5
(b)
the member had an opportunity to select the insurance company,
(c)
it is payable until the member’s death or until the later of the
member’s death and the end of a term certain not exceeding ten
years, and
(d)
it is a level annuity, an increasing annuity or a relevant linked
10
annuity.
      (2)
An annuity is payable until the end of a term certain even if it may, after the
death of the member during the term, end on the annuitant—
(a)
marrying,
(b)
reaching the age of 18, or
15
(c)
ceasing to be in full-time education.
      (3)
An annuity is a level annuity if its amount does not vary from year to year.
      (4)
An annuity is an increasing annuity if its amount increases from year to year.
      (5)
An annuity is a relevant linked annuity if its amount varies from year to year
but only in line with changes in (or by an amount which does not exceed the
20
amount by which it would vary if it varied in line with changes in)—
(a)
the retail prices index,
(b)
the market value of freely marketable assets, or
(c)
an index reflecting the market value of freely marketable assets.
      (6)
“Freely marketable assets” means assets which are sold on the open market
25
at a price not determined by the member.
Unsecured pension and alternatively secured pension
4
“Unsecured pension” means—
(a)
a short-term annuity, or
(b)
income withdrawal.
30
5
“Alternatively secured pension” means income withdrawal.
Short-term annuity
6     (1)
An annuity payable to the member is a short-term annuity if—
(a)
it is purchased by the application of sums or assets representing the
whole or any part of the member’s unsecured pension fund in
35
respect of an arrangement,
(b)
it is payable by an insurance company,
(c)
the member had an opportunity to select the insurance company,
(d)
it is payable for a term which does not exceed five years and ends
before the member reaches the age of 75, and
40
(e)
it is either a level annuity, an increasing annuity or a relevant linked
annuity.

Finance Bill
Schedule 28 — Registered pension schemes: authorised pensions—supplementary
Part 1 — Pension rules
443

      (2)
“Level annuity”, “increasing annuity” and “relevant linked annuity” have
the same meaning as in paragraph 3.
Income withdrawal
7
“Income withdrawal” means—
(a)
if the member has not reached the age of 75, an amount (other than a
5
payment of an annuity) which the member is entitled to be paid from
the member’s unsecured pension fund in respect of an arrangement,
and
(b)
if the member has reached the age of 75, an amount which the
member is entitled to be paid from the member’s alternatively
10
secured pension fund in respect of an arrangement.
Member’s unsecured pension fund
8     (1)
For the purposes of this Part the member’s unsecured pension fund in
respect of an arrangement consists of such of the sums or assets held for the
purposes of the arrangement—
15
(a)
as have at any time been designated under the arrangement as
available for the payment of unsecured pension, and
(b)
have not been applied for purchasing a scheme pension, a lifetime
annuity or a short-term annuity or paid as income withdrawal.
      (2)
When the member reaches the age of 75, any relevant uncrystallised funds
20
are to be treated as having been designated under the arrangement as
available for the payment of unsecured pension immediately before the
member reached that age.
      (3)
“Relevant uncrystallised funds” means the sums and assets held for the
purposes of the arrangement which—
25
(a)
have not been applied for purchasing a scheme pension, a lifetime
annuity, a dependants’ scheme pension or a dependants’ annuity,
and
(b)
have not previously been designated under the arrangement as
available for the payment of unsecured pension.
30
Unsecured pension year and basis amount for unsecured pension year
9     (1)
“Unsecured pension year” means—
(a)
the period of 12 months beginning with the day on which the
member first becomes entitled to unsecured pension in respect of the
arrangement, and
35
(b)
each succeeding period of 12 months.
      (2)
But when the member reaches the age of 75 or dies before reaching that age,
the current unsecured pension year is the last unsecured pension year and
ends immediately before the member’s death or 75th birthday.
10    (1)
The period of five unsecured pension years beginning with the first
40
unsecured pension year, and each succeeding period of five unsecured
pension years, is a “reference period”; and the first day of each reference
period is, in relation to that period, “the reference date”.
      (2)
For the first unsecured pension year falling within a reference period, the
basis amount is the annual amount of the relevant annuity which could have
45
been purchased by the application of the sums and assets representing the