Finance Bill

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New Clause 19

Approved plans and schemes

    '(1) The Income Tax (Earnings and Pensions) Act 2003 (c.1) is amended as follows.

    (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 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—

    (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 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,

Column Number: 768

    (c) shares acquired by the exercise of a share option granted under an approved CSOP scheme (within the meaning of Chapter 8 of 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 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 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 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 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

    (c) the avoidance of tax or national insurance contributions is not the main purpose (or one of the main purposes) of any arrangements under which the option was granted or is exercised.''

    (8) Section 701 (PAYE: meaning of ''asset'') is amended as follows.

    (9) In subsection (2)(c)—

    (a) in sub-paragraph (ia), for the words after ''employee'' substitute ''under a scheme approved under Schedule 4 (approved CSOP schemes) in circumstances in which Condition A or B as set out in section 524(2) or (2A) is met;'',

    (b) omit sub-paragraph (ii), and

    (c) in sub-paragraph (iii), after ''1996'' insert ''where the avoidance of tax or national insurance contributions is not the main purpose (or one of the main purposes) of any arrangements under which the right was obtained or is exercised''.

    (10) After subsection (3) insert—

    ''(3A) Paragraph (c) of subsection (2) does not apply to shares after their acquisition as mentioned in that paragraph.''

    (11) This section has effect on and after 18th June 2004 and (so far as it does not relate to the award or acquisition of shares) applies in relation to shares awarded or acquired before that date as well as in relation to those awarded or acquired on or after that date.

    (12) Where section 431A(1) of the Income Tax (Earnings and Pensions) Act 2003 (c.1) (as inserted by subsection (3)) has effect (by virtue of subsection (11)) in relation to shares acquired before 18th June 2004, it applies in relation to them so as to treat an election under section 431(1) of that Act as made in relation to them on that date.

    (13) For the purposes of the application of Chapter 3B of Part 7 of that Act (securities with artificially enhanced market value) by reason of subsections (2) and (11) in relation to shares acquired before 18th June 2004, section 446O of that Act (meaning of ''relevant period'') has effect as if they were acquired on that date.'.

    —[Dawn Primarolo.]

    Brought up, read the First and Second time, and added to the Bill.

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    New Clause 20

    Shares acquired on public offer

    '(1) Section 421F of the Income Tax (Earnings and Pensions) Act 2003 (c.1) (exclusion from Chapters 2 to 4 of Part 7 of shares acquired under terms of offer to the public) is amended as follows.

    (2) In subsection (1), for ''Chapters 2 to 4'' substitute ''Chapters 2, 3 and 3C''.

    (3) After that subsection insert—

    ''(1A) But subsection (1) does not disapply those Chapters if the main purpose (or one of the main purposes)—

    (a) of the arrangements under which the right or opportunity under which the shares were acquired, or

    (b) for which the shares are held,

    is the avoidance of tax or national insurance contributions.''

    (4) This section has effect on and after 18th June 2004 and applies in relation to shares acquired before that date as well as in relation to those acquired on or after that date.

    (5) For the purposes of the application of Chapter 3B of Part 7 of the Income Tax (Earnings and Pensions) Act 2003 (c.1) (securities with artificially enhanced market value) by reason of subsections (2) and (4) in relation to shares acquired before that date, section 446O of that Act (meaning of ''relevant period'') has effect as if they were acquired on that date.'.—[Dawn Primarolo.]

    Brought up, read the First and Second time, and added to the Bill.

    New Clause 21

    Associated persons etc.

    '(1) Part 7 of the Income Tax (Earnings and Pensions) Act 2003 (c.1) (employment income: securities) is amended as follows.

    (2) In section 421C(2) (meaning of ''relevant linked person'' for purposes of Chapters 1 to 4), for ''are connected or, although not connected, are'' substitute ''are or have been connected or (without being or having been connected) are or have been''.

    (3) In section 472(2) (meaning of ''relevant linked person'' for purposes of Chapter 5), for ''are connected or, although not connected, are'' substitute ''are or have been connected or (without being or having been connected) are or have been''.

    (4) In section 477(3)(c) (chargeable events in relation to employment-related securities options), for the words after ''benefit'' substitute ''in connection with the employment-related securities option (other than one within paragraph (a) or (b)).''

    (5) This section has effect on and after 18th June 2004 and applies in relation to securities, interests and options that were employment-related securities or employment-related securities options on that date (as well as those acquired on or after that date).'.—[Dawn Primarolo.]

    Brought up, read the First and Second time, and added to the Bill.

    New Clause 22

    Power of Board to specify form and manner in which information is provided under Part 7

    'The information required by section 292(1) or (3), 293(1), 294, 296(1) or 297(1) must be provided in a form and manner specified by the Board.'.—[Dawn Primarolo.]

    Brought up, read the First and Second time, and added to the Bill.

    <<770>>New Clause 4

    Expenditure incurred on assets leased by small or medium-sized enterprise

    '(1) The Capital Allowances Act 2001 is amended as follows.

    (2) For subsection 44(1), substitute—

    ''(1) Expenditure is first-year qualifying expenditure if—

    (a) it is incurred by a small or medium-sized enterprise, or

    (b) it is incurred by a lessor on equipment leased to a small or medium-sized enterprise, and

    (c) it is not excluded by subsection (2) or section 46 (general exclusions).''

    (3) In the table in subsection 52(3) insert in the second and third lines after ''small or medium-sized enterprises''—

    ''or incurred by a lessor on equipment leased to a small or medium-sized enterprise''.'.—[Mr. Flight.]

    Brought up, and read the First time.

11 am

Mr. Flight: I beg to move, That the clause be read a Second time.

We have tabled new clauses 4 and 5 at the request of the CBI. New clause 4 provides for the first year allowances available under the Capital Allowances Act 2001 for assets purchased by small or medium-sized companies to be available also for assets that such companies lease. The Government's increases under the Companies Act 1985 in the small and medium-sized enterprises thresholds have been welcomed throughout and should substantially increase the number of companies able to qualify for first year allowances for plant and machinery, but SMEs that lease plant and machinery do not currently benefit from first year allowances.

The evidence from the surveys undertaken by the CBI shows that the performance of the SME sector is lagging behind the trend of economic recovery. In manufacturing, the level of investment would arguably benefit from further encouragement. Enhanced first year allowances might therefore be extended to SMEs leasing plant and machinery, which would also help to address the productivity performance issue.

Asset finance, including leasing, is a crucial source of investment finance for SMEs. The Finance and Leasing Association estimates that over half its members' business finance goes to businesses with a turnover below £5 million. Over time, the revenue effect of such an extension should be neutral. In the case of assets leased by SMEs, it should be over a relatively short period.

I would welcome the Government's response to the new clause. I look forward to hearing their overall position on SMEs and on whether the arrangement should be extended to leasing.

 
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