Finance Bill

House of Commons

Session 2002 - 03
Internet Publications
Other Bills before Parliament

Finance Bill

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

80
Vans
(1)
Schedule 14 to this Act contains amendments of the Income Tax (Earnings and
Pensions) Act 2003 (c. 1) relating to vans.
(2)
The amendments have effect for the year 2005-06 and subsequent years of
assessment.
5
81
Emergency vehicles
(1)
In the Income Tax (Earnings and Pensions) Act 2003, after section 248 insert—
“248A
Emergency vehicles
(1)
This section applies where—
(a)
an emergency vehicle is made available to a person employed
10
in an emergency service for the person’s private use,
(b)
the terms on which it is made available prohibit its private use
otherwise than when the person is on call or engaged in on-call
commuting, and
(c)
the person does not make private use of it otherwise than in
15
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.
(3)
“Emergency vehicle” means a vehicle which is used to respond to
20
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)
a special threat to the personal physical security of those using
25
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,
(b)
persons employed for the purposes of a fire, or fire and rescue,
30
service, and
(c)
persons employed in the provision of ambulance or paramedic
services.
(5)
The Treasury may by order amend subsection (4).
(6)
“Private use”, in relation to a person, means any use other than for the
35
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
emergency vehicle to respond to emergencies.
40
(8)
A person to whom an emergency vehicle is made available is engaged
in on-call commuting when the person—

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

(a)
is using it for ordinary commuting or for travel between two
places that is for practical purposes substantially ordinary
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
5
emergencies.”.
(2)
In section 236(2)(c) of that Act (mileage allowance and passenger payments:
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.
10
82
European travel expenses of MPs and other representatives
(1)
The Income Tax (Earnings and Pensions) Act 2003 (c. 1) is amended as follows.
(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
15
expenses) for “EU” (in both places) substitute “European”.
(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.
20
(3)
“Relevant European location” means—
(a)
a European Union institution or agency, or
(b)
the national parliament of—
(i)
another member State,
(ii)
a candidate or applicant country, or
25
(iii)
a member State of the European Free Trade Association.
(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.”.
30
(4)
In the heading of that section, “EU” accordingly becomes “European”.
(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
35
(1)
This section applies where—
(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
40
the return, requiring—

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

(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
5
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.
10
(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
15
receipt of the gift (see section 25(10) of the Finance Act 1990).
(5)
In this section—

“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
20
charity) in a list maintained for the purposes of this section by the
Board;

“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
25
against the individual’s liabilities) of either or both of—
(a)
income tax or amounts paid on account of income tax;
(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
30
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—
“(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);
35
(b)
section 83 of the Finance Act 2004 (gift aid: giving through the
self-assessment return).”.
(7)
This section has effect in relation to personal returns for the year 2003‑04 and
subsequent years of assessment.
Gifts with a reservation
40
84
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
reference to benefits received in certain circumstances by a former owner of
property) has effect.

Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 4 — Personal taxation
79

(2)
That Schedule has effect for the year 2005-06 and subsequent years of
assessment.
Employment-related securities and options
85
Relief where national insurance contributions met by employee
(1)
Schedule 16 to this Act provides—
5
(a)
for income tax relief in certain cases where national insurance
contributions are met by an employee, and
(b)
for consequential amendments.
(2)
This section (and that Schedule) come into force in accordance with provision
made by the Treasury by order made by statutory instrument.
10
86
Shares in employee-controlled companies and unconnected companies
(1)
Each of the provisions of Part 7 of the Income Tax (Earnings and Pensions) Act
2003 (c. 1) (employment income: securities) specified in subsection (2)
(exception from charges for certain company shares) is amended in accordance
with subsections (3) to (5).
15
(2)
The provisions are—
(a)
section 429 (restricted securities),
(b)
section 443 (convertible securities),
(c)
section 446R (securities acquired for less than market value), and
(d)
section 449 (post-acquisition benefits from securities).
20
(3)
In subsection (1) of each of those sections, after paragraph (b) (but before the
word “and” where that word features at the end) insert—
“(ba)
subsection (1A) is satisfied,”.
(4)
After subsection (1) of each of those sections insert—
“(1A)
This subsection is satisfied if the avoidance of tax or national insurance
25
contributions was not the main purpose, or one of the main purposes,
of the arrangements under which the right or opportunity to acquire
the employment-related securities was made available.”.
(5)
In subsection (4) of sections 429, 443 and 446R, and in subsection (3) of section
449, for the words after “are not” substitute “employment-related securities.”;
30
and accordingly omit sections 429(5), 443(5), 446R(5) and 449(4).
(6)
In Chapter 3A of that Part of that Act (securities with artificially depressed
market value), after section 446I insert—
“446IA
Disapplication of exceptions from charges
(1)
Section 429 (exception from charge under section 426 for certain
35
company shares) does not prevent section 426 (restricted securities:
chargeable events) applying in relation to an event if section 446E or
446I(1)(a) would have effect in relation to the event.
(2)
Section 443 (exception from charge under section 438 for certain
company shares) does not prevent section 438 (convertible securities:
40

Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 4 — Personal taxation
80

chargeable events) applying in relation to an event if section 446G,
446H or 446I(1)(b) would have effect in relation to the event.
(3)
Section 446R (exception from charge under Chapter 3C for certain
company shares) does not prevent that Chapter (securities acquired for
less than market value) applying in relation to employment-related
5
securities if section 446B would have effect in relation to them.
(4)
Section 449 (exception from charge under Chapter 4 for certain
company shares) does not prevent that Chapter (benefits from
securities) applying in relation to a benefit if section 446I(1)(e) would
have effect in relation to the benefit.”.
10
(7)
In Chapter 3B of that Part of that Act (securities with artificially enhanced
market value), after section 446N insert—
“446NA
Disapplication of exceptions from charges
(1)
None of the provisions specified in subsection (2) (exceptions from
charges for certain company shares) apply in relation to employment-
15
related securities if the market value of the employment-related
securities at the time of the acquisition has been increased by at least
10% by non-commercial increases within the period of 7 years ending
with the acquisition.
(2)
The provisions are—
20
(a)
section 429 (restricted securities),
(b)
section 443 (convertible securities),
(c)
section 446R (securities acquired for less than market value),
and
(d)
section 449 (post-acquisition benefits from securities).
25
(3)
If section 446L (market value on valuation date increased by more than
10% by non-commercial increases during relevant period) applies in
relation to employment-related securities, section 429 does not
subsequently apply in relation to the employment-related securities.”.
(8)
This section applies on and after 7th May 2004.
30
87
Restricted securities with artificially depressed value
(1)
Section 446E of the Income Tax (Earnings and Pensions) Act 2003 (c. 1)
(employee securities with artificially depressed market value: charge on
restricted securities) is amended as follows.
(2)
In subsection (1), after “on restricted securities),” insert—
35
“(aa)
immediately before the employment-related securities are
disposed of (in circumstances which do not constitute such an
event) or are cancelled without being disposed of,”.
(3)
For subsections (3) to (6) substitute—
“(3)
“The relevant period” is the period beginning—
40
(a)
if section 425(2) (no charge on acquisition of certain restricted
securities or restricted interests in securities) applied in relation
to the employment-related securities, 7 years before the
acquisition, and

Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 4 — Personal taxation
81

(b)
in any other case, 7 years before the relevant date,

and ending with the relevant date.
(4)
“The relevant date” is—
(a)
in a case within subsection (1)(a), the date on which the
chargeable event concerned occurs,
5
(b)
in a case within subsection (1)(aa), the date on which the
disposal or cancellation concerned occurs, and
(c)
in a case within subsection (1)(b), the 5th April concerned.
(5)
Where this section applies in a case within subsection (1)(aa) or (b), a
chargeable event within section 427(3)(a) (lifting of restrictions) is to be
10
treated as occurring in relation to the employment-related securities on
the relevant date.
(6)
In every case where this section applies, subsection (1) of section 428
(amount of charge on restricted securities) applies as if the reference in
subsection (2) of that section to what would be the market value of the
15
employment-related securities immediately after the chargeable event
but for any restrictions were to what would be their market value at the
appropriate time but for the matters to be disregarded.
(7)
“The appropriate time” is—
(a)
in a case within subsection (1)(a) or (b), the time immediately
20
after the chargeable event concerned, and
(b)
in a case within subsection (1)(aa), the time immediately before
the chargeable event concerned.
(8)
“The matters to be disregarded” are—
(a)
any restrictions,
25
(b)
the things done as mentioned in subsection (2), and
(c)
if the employment-related securities are about to be disposed of
or cancelled, that fact.
(9)
Where this section applies in a case within subsection (1)(aa), section
428(1) applies with the omission of the reference to OP.
30
(10)
Where this section applies in a case within subsection (1)(a) and the
chargeable event concerned is within section 427(3)(c) (disposal for
consideration), section 428 applies with the omission of subsection (9)
(case where consideration is less than actual market value).”.
(4)
This section applies on and after 7th May 2004.
35
(5)
But if the employment-related securities were acquired before that date,
section 446E of the Income Tax (Earnings and Pensions) Act 2003 (c. 1) does not
apply by virtue of the amendment made by subsection (2) of this section unless
their market value would be artificially low immediately before the disposal or
cancellation if the date on which the relevant period began were the later of—
40
(a)
that on which it did begin, and
(b)
7th May 2004.
88
Shares under approved plans and schemes
(1)
The Income Tax (Earnings and Pensions) Act 2003 is amended as follows.

Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 4 — Personal taxation
82

(2)
Omit section 421G (exclusion from Chapters 2 to 4 of Part 7 of shares awarded
or acquired under approved plan or scheme).
(3)
In Chapter 2 of Part 7 (restricted securities), after section 431 insert—
“431A
Shares under approved plan or scheme
(1)
Where employment-related securities are restricted securities or a
5
restricted interest in securities, the employer and the employee are to
be treated as making an election under section 431(1) in relation to the
employment-related securities if they are shares, or an interest in
shares, to which this subsection applies.
(2)
Subsection (1) applies to—
10
(a)
shares awarded or acquired under an approved share incentive
plan (within the meaning of Chapter 6 of this Part) in
circumstances in which (in accordance with section 490) no
liability to income tax arises,
(b)
shares acquired by the exercise of a share option granted under
15
an approved SAYE option scheme (within the meaning of
Chapter 7 of this Part) in circumstances in which (in accordance
with section 519) no liability to income tax arises,
(c)
shares acquired by the exercise of a share option granted under
an approved CSOP scheme (within the meaning of Chapter 8 of
20
this Part) in circumstances in which (in accordance with section
524) no liability to income tax arises, and
(d)
shares acquired by the exercise of a qualifying option within the
meaning of section 527(4) (enterprise management incentives)
in circumstances in which (in accordance with section 530) no
25
liability to income tax arises.”.
(4)
In section 489 (operation of tax advantages in connection with approved share
incentive plans), after subsection (3) insert—
“(4)
And those sections do not apply if the main purpose (or one of the main
purposes) of the arrangements under which the shares in question are
30
awarded or acquired is the avoidance of tax or national insurance
contributions.”.
(5)
In sections 505 and 506 (charge on shares ceasing to be subject to approved
share incentive plan), after subsection (4) insert—
“(4A)
Any tax due under subsection (2) or (3) is reduced by the amount or
35
aggregate amount of any tax paid by virtue of Chapter 3B of this Part
in relation to the shares.”.
(6)
In section 519(1) (approved SAYE option schemes: no charge in respect of
exercise of option) insert at the end “and
(c)
the avoidance of tax or national insurance contributions is not
40
the main purpose (or one of the main purposes) of any
arrangements under which the option was granted or is
exercised.”.
(7)
In section 524(1) (approved CSOP schemes: no charge in respect of exercise of
option) insert at the end “and
45
(c)
the avoidance of tax or national insurance contributions is not
the main purpose (or one of the main purposes) of any