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Finance Bill


Finance Bill
Schedule 34 — Pension schemes etc: transitional provisions and savings
Part 4 — Other provisions

511

 

Continuing operation of section 392 of ITEPA 2003

53         

Section 392 of ITEPA 2003 (non-approved schemes: relief where no benefits

are paid or payable) continues to have effect in relation to a sum charged to

tax by virtue of section 386 of ITEPA 2003 or section 595 of ICTA (charges on

payments to schemes) before 6th April 2006.

5

Benefits taxable under Chapter 2 of Part 6 of ITEPA 2003: contributions taxed pre-

commencement

54    (1)  

Paragraph 55 or 56 has effect where—

(a)   

section 394 of ITEPA 2003 (charge on benefits from non-approved

schemes) operates (or would otherwise operate) by reason of the

10

provision of a lump sum under an employer-financed retirement

benefits scheme on or after 6th April 2006, and

(b)   

before that date an employer has paid any sum or sums, with a view

to the provision of benefits under the scheme, in respect of which an

employee is taxed.

15

      (2)  

For the purposes of sub-paragraph (1)(a) section 394 of ITEPA 2003 operates

if—

(a)   

an amount counts as employment income of an individual under

that section, or

(b)   

the person who is, or persons who are, the responsible person in

20

relation to the scheme is or are chargeable to tax under Case VI of

Schedule D by virtue of that section.

      (3)  

For the purposes of sub-paragraph (1)(b) an employee is taxed in respect of

a sum or sums if—

(a)   

the employee is assessed to tax by virtue of section 595(1) of ICTA

25

(charges on payments) in respect of the sum or sums, or

(b)   

the sum or sums counts or count as employment income of the

employee under section 386(1) of ITEPA 2003 (charges on payments).

      (4)  

It is to be assumed, unless the contrary is shown, that neither paragraph 55

nor paragraph 56 has effect.

30

55    (1)  

This paragraph has effect if—

(a)   

all of the income and gains accruing to the scheme are brought into

charge to tax and the lump sum is provided to the employee, a

relative of the employee, the personal representatives of the

employee, an ex-spouse of the employee or any other individual

35

designated by the employee, or

(b)   

the scheme was entered into before 1st September 1993 and has not

been varied on or after that date with a view to the provision of

benefits under the scheme.

      (2)  

In a case where the employer has not paid any sum or sums with a view to

40

the provision of benefits under the scheme since before 6th April 2006,

section 394 of ITEPA 2003 (charge on benefits from non-approved schemes)

does not apply in relation to the lump sum.

      (3)  

In a case where the employer has paid any sum or sums with a view to the

provision of benefits under the scheme on or after 6th April 2006—

45

(a)   

section 394 of ITEPA 2003 does not apply in relation to so much of

the lump sum as does not exceed the appropriate fraction of the

 

 

Finance Bill
Schedule 34 — Pension schemes etc: transitional provisions and savings
Part 4 — Other provisions

512

 

amount of the market value of the assets of the scheme on 5th April

2006 as increased under sub-paragraph (4), and

(b)   

only any sum or sums paid by the employee after that date with a

view to the provision of benefits under the scheme is or are to be

taken into account under section 395 of ITEPA 2003 (general rules).

5

      (4)  

For the purposes of sub-paragraph (3)(a)—

(a)   

“the appropriate fraction” of the amount of the market value of the

assets of the scheme on 5th April 2006 is the same fraction as the

fraction of the assets of the scheme to which the employee would

have been entitled had the scheme been wound up on that date, and

10

(b)   

the amount of the market value of the assets of the scheme on that

date is to be increased by the percentage by which the retail prices

index for the month in which the lump sum is provided is greater

than that for April 2006.

      (5)  

In this paragraph—

15

         

“ex-spouse”, in relation to an employee, means the other party to a

marriage with the employee that has been dissolved or annulled,

and

“relative”, in relation to an employee, means—

(a)   

the wife or husband of the employee,

20

(b)   

the widow or widower of the employee,

(c)   

a child of the employee, or

(d)   

a dependant of the employee.

56    (1)  

This paragraph has effect if paragraph 55 does not.

      (2)  

Section 394 of ITEPA 2003 (charge on benefits from non-approved schemes)

25

does not apply in relation to so much of the lump sum as does not exceed the

sum, or the aggregate of the sums, referred to in paragraph 54(1)(b).

      (3)  

And the reference in section 395 of that Act (general rules) to the amount of

the lump sum is to the amount of the remainder of the lump sum.

Inheritance tax

30

57    (1)  

This paragraph applies in relation to a fund or scheme—

(a)   

which is not a registered pension scheme or a superannuation fund

to which section 615(3) of ICTA applies, but

(b)   

to which section 151 of the Inheritance Tax Act 1984 (c. 51) (treatment

of pension rights) applied immediately before 6th April 2006.

35

      (2)  

If no contributions are made under the fund or scheme on or after that

date—

(a)   

section 151 of the Inheritance Tax Act 1984 continues to apply to the

fund or scheme on and after that date for all purposes of that Act, and

(b)   

property which is part of or held for the purposes of the fund or

40

scheme does not constitute relevant property for the purposes of

Chapter 3 of Part 3 of that Act (settlements without interest in

possession).

      (3)  

In any other case, paragraphs 58 and 59 apply to the fund or scheme on and

after that date.

45

58    (1)  

The proportion of the assets of the fund or scheme which at any time is the

protected proportion of those assets does not at that time constitute relevant

 

 

Finance Bill
Schedule 34 — Pension schemes etc: transitional provisions and savings
Part 4 — Other provisions

513

 

property for the purposes of Chapter 3 of Part 3 of the Inheritance Tax Act

1984 (settlements without interest in possession).

      (2)  

“The protected proportion” of the assets of the fund or scheme at a time is—equation: cross[over[times[char[A],char[C],char[V]],char[V]],num[100.00000000,"100"]]

           

where—

           

V is the market value of the assets of the fund or scheme at that time,

5

and

           

ACV is the adjusted commencement value, that is an amount equal to

the market value of the assets of the fund or scheme on 5th April

2006, but subject to the adjustments provided by sub-paragraph (3).

      (3)  

The adjustments are—

10

(a)   

an increase by the percentage by which the retail prices index for the

month of September immediately preceding the time in question is

greater than that for April 2006, and

(b)   

a reduction by the amount of any relevant payments made under the

fund or scheme on or after 6th April 2006 and before that time.

15

      (4)  

“Relevant payments” are payments other than—

(a)   

payments of costs or expenses, or

(b)   

payments which are (or will be) income of any person for any of the

purposes of income tax.

59    (1)  

Section 151 of the Inheritance Tax Act 1984 (c. 51) (treatment of pension

20

rights) continues to apply to so much of the assets of the fund or scheme at

any time as does not exceed the amount that is the protected amount at that

time.

      (2)  

But sub-paragraph (1) does not affect the operation of subsection (1)(d) of

section 58 of that Act (because paragraph 58 makes provision about the

25

extent to which the assets of the fund or scheme constitute relevant property

within the meaning given by that section).

      (3)  

If inheritance tax has not previously been chargeable (otherwise than only

because of this paragraph) by reference to the value of the assets of the fund

or scheme on or after 6th April 2006, the protected amount is an amount

30

equal to the amount of the market value of the assets of the fund or scheme

on 5th April 2006, but subject to the adjustments provided by sub-paragraph

(4).

      (4)  

The adjustments are—

(a)   

an increase by the percentage by which the retail prices index for the

35

month of September immediately preceding the time in question is

greater than that for April 2006, and

(b)   

a reduction by the amount of any relevant payments made under the

fund or scheme on or after 6th April 2006 and before that time.

      (5)  

If inheritance tax would (apart from this paragraph) have previously been

40

chargeable by reference to the value of the assets of the fund or scheme on

one or more occasions on or after 6th April 2006, the protected amount is

what it was immediately before the occasion, or (where there has been more

than one) the last occasion, on which inheritance tax would have been so

chargeable (“the relevant tax occasion”), but—

45

(a)   

reduced by the value of the property on which inheritance tax would

have been chargeable on the relevant tax occasion, and

 

 

Finance Bill
Schedule 35 — Oil taxation: tax-exempt tariffing receipts and assets producing them
Part 1 — Amendments of the Oil Taxation Act 1983 relating to allowable expenditure and disposal receipts

514

 

(b)   

subject to the adjustments provided by sub-paragraph (6).

      (6)  

The adjustments are —

(a)   

an increase by the percentage by which the retail prices index for the

month of September immediately preceding the time in question is

greater than that for the month in which the relevant tax occasion

5

fell, and

(b)   

a reduction by the amount of any payments made under the fund or

scheme since the relevant tax occasion.

      (7)  

“Relevant payments” are payments other than—

(a)   

payments of costs or expenses, or

10

(b)   

payments which are (or will be) income of any person for any of the

purposes of income tax.

Schedule 35

Section 279

 

Oil taxation: tax-exempt tariffing receipts and assets producing them

Part 1

15

Amendments of the Oil Taxation Act 1983 relating to allowable expenditure

and disposal receipts

Introductory

1          

The Oil Taxation Act 1983 (c. 56) is amended in accordance with the

following provisions of this Part.

20

Expenditure incurred on long-term assets other than non-dedicated mobile assets

2     (1)  

Section 3 (expenditure incurred on long-term assets other than non-

dedicated mobile assets) is amended as follows.

      (2)  

In subsection (4) (whole of expenditure to be allowable, except as provided

by the provisions there specified) for “section 4” substitute “sections 3A and

25

4”.

Exclusion from s.3(4) of expenditure on assets giving rise to tax-exempt tariffing receipts

3          

After section 3 insert—

“3A     

Exclusion from section 3(4) of expenditure on assets giving rise to tax-

exempt tariffing receipts

30

(1)   

This section applies where—

(a)   

expenditure incurred on or after 1st January 2004 falls within

section 3(1) above, but

(b)   

some of the use (or expected use) of the asset in relation to

which the expenditure was incurred is use in a way that gives

35

rise to tax-exempt tariffing receipts (see section 6A(2) below).

(2)   

In any such case, such part of the expenditure as it is just and

reasonable to apportion to the use mentioned in subsection (1)(b)

 

 

Finance Bill
Schedule 35 — Oil taxation: tax-exempt tariffing receipts and assets producing them
Part 1 — Amendments of the Oil Taxation Act 1983 relating to allowable expenditure and disposal receipts

515

 

above shall be excluded from the expenditure which is allowable as

mentioned in section 3(4) above.”.

Expenditure related to exempt gas: asset use giving rise to tax-exempt tariffing receipts

4     (1)  

Section 4 (expenditure related to exempt gas and deballasting) is amended

as follows.

5

      (2)  

After subsection (5) insert—

“(6)   

But where—

(a)   

expenditure would (apart from this subsection) fall within

paragraph (a) of subsection (5) above, and

(b)   

the asset has, at any time in the period of 6 years ending with

10

the date on which the expenditure was incurred, been used in

a way that gives rise to tax-exempt tariffing receipts,

   

the expenditure shall not be regarded for the purposes of that

subsection as expenditure incurred in enhancing the value of the

asset with a view to the subsequent disposal of the asset, or of an

15

interest in it, to the extent that the amount of the expenditure falls to

be reduced in accordance with subsection (7) below.

(7)   

The reduction is to be made by applying section 7A below in relation

to the expenditure as it applies in relation to disposal receipts in

respect of a disposal, but with the substitution—

20

(a)   

for references to the disponor, of references to the person

incurring the expenditure (“the relevant participator”),

(b)   

for references to the amount or value (apart from that section)

of any disposal receipts of the disponor in respect of the

disposal, of references to the amount which would, apart

25

from subsection (6) above, be the amount of the expenditure

incurred by the relevant participator with a view to the

subsequent disposal of the asset or of an interest in it,

(c)   

for references to the interest disposed of, of references to the

asset or interest whose subsequent disposal gives or is

30

expected to give rise to disposal receipts,

(d)   

for references to the date of the disposal, of references to the

date on which the expenditure was incurred,

   

and taking the reference in subsection (6)(b) of that section to a

reduction made by virtue of that section as a reference to a reduction

35

made by virtue of that section for the purposes of section 7(9) of this

Act.”.

Disposal receipts from assets used in a way that gives rise to tax-exempt tariffing receipts

5     (1)  

Section 7 (chargeable receipts from disposals) is amended as follows.

      (2)  

In subsection (4) (no account to be taken of disposal more than 2 years after

40

cessation of use in connection with any oil field whatsoever or ceasing to

give rise to tariff receipts)—

(a)   

at the end of paragraph (b) insert “or

(c)   

ceases to give rise to tax-exempt tariffing receipts of

that participator,”; and

45

(b)   

in the closing words, for “later” substitute “latest”.

 

 

Finance Bill
Schedule 35 — Oil taxation: tax-exempt tariffing receipts and assets producing them
Part 1 — Amendments of the Oil Taxation Act 1983 relating to allowable expenditure and disposal receipts

516

 

      (3)  

After subsection (8) insert—

“(9)   

In determining the amount or value of the disposal receipts of the

participator in question in a case where the qualifying asset has been

used in a way that gives rise to tax-exempt tariffing receipts, the

amount or value (apart from this subsection) of any disposal receipts

5

of his in respect of the disposal shall be reduced in accordance with

section 7A below.”.

      (4)  

After section 7 insert—

“7A     

Reduction of disposal receipts: use giving rise to tax-exempt tariffing

receipts

10

(1)   

Where this section applies, the amount or value (apart from this

section) of any disposal receipts of the participator (“the disponor”)

in respect of the disposal shall be reduced in accordance with the

following provisions of this section.

(2)   

The reduction is to be made by multiplying that amount or value by

15

the fraction that is equal to—equation: plus[num[1.00000000,"1"],minus[over[char[T],char[A]]]]

(3)   

In that formula—

   

T is the aggregate of the tax-exempt tariffing use of the asset in

the reference period by—

(a)   

the disponor, so far as referable to the interest

20

disposed of, and

(b)   

each of the previous owners, so far as referable to that

previous owner’s represented interest, and

   

A is the aggregate of all use of the asset in the reference period

by—

25

(a)   

the disponor, so far as referable to the interest

disposed of, and

(b)   

each of the previous owners, so far as referable to that

previous owner’s represented interest,

   

but only taking into account for this purpose use of the asset by a

30

person at a time when he is or was a participator in a taxable field.

(4)   

For the purposes of this section—

   

“the interest disposed of” means the asset, or the interest in an

asset, the disposal of which gives rise to the disposal receipts

mentioned in subsection (1) above;

35

   

“previous owner” means any person from whom the disponor

directly or indirectly derives his title to the whole or any part

of the interest disposed of;

   

“the reference period” means the shorter of the following

periods ending with the date of the disposal—

40

(a)   

the period of 6 years; or

(b)   

the period beginning with the bringing into existence

of the asset;

 

 

Finance Bill
Schedule 35 — Oil taxation: tax-exempt tariffing receipts and assets producing them
Part 1 — Amendments of the Oil Taxation Act 1983 relating to allowable expenditure and disposal receipts

517

 

   

“represented interest”, in the case of a previous owner, means

so much of the interest which that previous owner had in the

asset as is represented in the interest disposed of;

   

“tax-exempt tariffing use”, in relation to an asset, means use of

the asset in a way that gives rise to tax-exempt tariffing

5

receipts.

(5)   

Any apportionment that falls to be made for the purpose of

determining a previous owner’s represented interest shall be made

using a method which is just and reasonable, having regard to—

(a)   

the proportion of any person’s interest that was acquired

10

from any particular person, and

(b)   

the proportion of any person’s interest that was transferred

to any particular person.

(6)   

Where—

(a)   

the disponor or any previous owner acquired the asset or an

15

interest in the asset from another person, and

(b)   

on that other person’s corresponding disposal of the asset or

interest a reduction was made by virtue of this section,

   

use of the asset shall not be brought into account in determining T or

A in the formula in subsection (2) above to the extent that it was so

20

brought into account in relation to that corresponding disposal.

(7)   

Where paragraph 9 of Schedule 2 to this Act (reduction of disposal

receipts in respect of brought-in assets) applies in relation to an asset,

no account shall be taken for the purposes of this section of any use

of the asset during the initial period.

25

   

In this subsection “the initial period”, in relation to an asset, has the

same meaning as it has in relation to that asset in paragraph 7 of

Schedule 1 to this Act (restriction on allowable expenditure on

brought-in asset).

(8)   

For the purposes of this section, the amount of use of an asset—

30

(a)   

where the use is in relation to oil, is to be determined by

reference to the volume of oil in relation to which the asset is

used, and

(b)   

where the use is otherwise than in relation to oil, is to be

determined on a just and reasonable basis.

35

(9)   

For the purposes of this section, the extent to which use of an asset is

referable to—

(a)   

the interest disposed of, or

(b)   

the represented interest of a previous owner,

   

shall be determined on a just and reasonable basis, having regard to

40

the size of the interest in question and the size from time to time of

the whole interest in the asset of the disponor or, as the case may be,

that previous owner.”.

Assets no longer in use for the principal field

6     (1)  

In Schedule 1 (allowable expenditure) in Part 1 (extensions of allowable

45

expenditure for assets generating receipts) paragraph 3 is amended as

follows.

 

 

 
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