Finance Bill

House of Commons

Session 2004 - 05
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Finance Bill

Finance Bill
Schedule 2 — Employee securities: anti-avoidance
143

giving any consideration for the conversion or incurring any
expenses in connection with it.”
      (4)
This paragraph has effect in relation to acquisitions on or after 2nd
December 2004.
10    (1)
In section 440 (amount of charge under section 438), after subsection (3)
5
insert—
“(3A)
If (because of subsection (2) of section 437) subsection (1) of that
section did not apply in relation to the employment-related
securities, the taxable amount is to be reduced by the amount by
which—
10
(a)
the market value of the employment-related securities for the
purposes specified in that subsection, exceeded
(b)
what it would have been had that subsection applied,

(less the aggregate of any amount by which the taxable amount on
any previous chargeable event relating to the employment-related
15
securities has been reduced under this subsection).”
      (2)
This paragraph has effect on and after 2nd December 2004.
11    (1)
In section 443 (exception from charge under section 438 for certain company
shares), for subsection (1A) substitute—
“(1A)
This subsection is satisfied unless something which affects the
20
employment-related securities has been done (at or before the time
when section 438 would apply) as part of a scheme or arrangement
the main purpose (or one of the main purposes) of which is the
avoidance of tax or national insurance contributions.”
      (2)
This paragraph has effect where something such as is mentioned in section
25
443(1A) of ITEPA 2003 has been done on or after 2nd December 2004.
Securities acquired for less than market value
12
Chapter 3C of Part 7 (securities acquired for less than market value) is
amended as follows.
13    (1)
In section 446R (exception from Chapter for certain company shares), for
30
subsection (1A) substitute—
“(1A)
This subsection is satisfied unless something which affects the
employment-related securities has been done (at or before the time
of the acquisition) as part of a scheme or arrangement the main
purpose (or one of the main purposes) of which is the avoidance of
35
tax or national insurance contributions.”
      (2)
This paragraph has effect where something such as is mentioned in section
446R(1A) of ITEPA 2003 has been done on or after 2nd December 2004.
14    (1)
In section 446U(1) (discharge of notional loan), insert at the end “or
(c)
something which affects the employment-related securities is
40
done as part of a scheme or arrangement the main purpose
(or one of the main purposes) of which is the avoidance of tax
or national insurance contributions.”

Finance Bill
Schedule 2 — Employee securities: anti-avoidance
144

      (2)
This paragraph has effect where something such as is mentioned in section
443U(1)(c) of ITEPA 2003 has been done on or after 2nd December 2004.
15    (1)
After section 446U insert—
“446UA
Pre-acquisition avoidance cases
(1)
Sections 446S to 446U do not apply if the main purpose (or one of the
5
main purposes) of the arrangements under which the right or
opportunity to acquire the employment-related securities is made
available is the avoidance of tax or national insurance contributions.
(2)
But instead an amount equal to what would (apart from this section)
be the amount of the notional loan initially outstanding by virtue of
10
sections 446S and 446T counts as employment income of the
employee for the tax year in which the acquisition takes place.”
      (2)
This paragraph has effect in relation to acquisitions on or after 2nd
December 2004.
16    (1)
Section 698 (PAYE: special charges on employment-related securities) is
15
amended as follows.
      (2)
In subsection (1), after paragraph (e) insert—
“(ea)
section 446UA (securities or interest acquired for less than
market value: charge in avoidance cases),”.
      (3)
In subsection (6), after paragraph (d) insert—
20
“(da)
in relation to an amount counting as employment income
under section 446UA, the date of the acquisition of the
securities or interest in securities in question,”.
      (4)
This paragraph has effect on and after the day on which this Act is passed.
Post-acquisition benefits from securities
25
17
Chapter 4 of Part 7 (post-acquisition benefits from securities) is amended as
follows.
18    (1)
Section 447 (charge on other chargeable benefits from securities) is amended
as follows.
      (2)
In subsection (1), for “by virtue of the ownership of employment-related
30
securities by that person or another associated person” substitute “in
connection with employment-related securities”.
      (3)
For subsection (4) substitute—
“(4)
If the benefit is otherwise chargeable to income tax this section does
not apply unless something has been done which affects the
35
employment-related securities as part of a scheme or arrangement
the main purpose (or one of the main purposes) of which is the
avoidance of tax or national insurance contributions.”
      (4)
Sub-paragraph (2) has effect on and after 2nd December 2004 and sub-
paragraph (3) has effect where something such as is mentioned in section
40
447(4) of ITEPA 2003 has been done on or after that date.
19    (1)
In section 449 (exception from charge under section 447 for certain company

Finance Bill
Schedule 3 — Non-UK resident vulnerable persons: interpretation
145

shares), for subsection (1A) substitute—
“(1A)
This subsection is satisfied unless something which affects the
employment-related securities has been done as part of a scheme or
arrangement the main purpose (or one of the main purposes) of
which is the avoidance of tax or national insurance contributions.”
5
      (2)
This paragraph has effect where something such as is mentioned in section
449(1A) of ITEPA 2003 has been done on or after 2nd December 2004.
Schedule 3
Sections 44 and 49

Non-UK resident vulnerable persons: interpretation
Vulnerable person’s actual income
10
1
The “vulnerable person’s actual income” for the tax year means the income
that would arise (or be treated as arising) under the Income Tax Acts to the
vulnerable person in the tax year on the assumption that the vulnerable
person is resident and domiciled in the United Kingdom throughout the tax
year.
15
Trustees’ specially taxed income
2
The “trustees’ specially taxed income” for the tax year means income arising
(or treated as arising) to the trustees in the tax year from property held on
qualifying trusts for the benefit of the vulnerable person in connection with
which special income tax treatment applies for the tax year in accordance
20
with section 41 by virtue of a claim for special tax treatment under this
Chapter.
Vulnerable person’s deemed CGT taxable amount
3     (1)
The “vulnerable person’s deemed CGT taxable amount” for the tax year
means the sum of—
25
(a)
the vulnerable person’s taxable amount for the tax year for the
purposes of section 3 of TCGA 1992 calculated by reference only to
actual gains and actual losses, and
(b)
the vulnerable person’s taxable amount for the tax year for the
purposes of that section calculated by reference only to assumed
30
gains and assumed losses.
      (2)
But in calculating the taxable amount under sub-paragraph (1)(b)—
(a)
no deduction is to be made under section 2(2)(b) of TCGA 1992, and
(b)
the words “except as provided by section 62” in section 2(3) of that
Act are to be disregarded.
35
      (3)
In determining the vulnerable person’s deemed CGT taxable amount for the
tax year any claims or elections made in relation to any assumed gains of the
vulnerable person are to be disregarded.
      (4)
In this paragraph—
(a)
“actual gains” and “actual losses” have the meanings given in
40
paragraph 5, and

Finance Bill
Schedule 3 — Non-UK resident vulnerable persons: interpretation
146

(b)
“assumed gains” and “assumed losses” have the meanings given in
paragraph 6.
Vulnerable person’s notional section 77 gains
4     (1)
The “vulnerable person’s notional section 77 gains” for the tax year means
the chargeable gains that would be treated as accruing to the vulnerable
5
person in the tax year under section 77 of TCGA 1992 by virtue of section 47
of this Act if the relevant assumptions were made.
      (2)
In this paragraph “relevant assumptions” has the meaning given in
paragraph 7.
Actual gains and actual losses
10
5     (1)
“Actual gains” means any chargeable gains which accrue to the vulnerable
person and in respect of which he is chargeable to capital gains tax for the
tax year.
      (2)
“Actual losses” means—
(a)
any allowable losses accruing to the vulnerable person in the tax
15
year, and
(b)
so far as they have not been allowed as a deduction from chargeable
gains accruing to him in any previous tax year, any allowable losses
accruing to him in any previous tax year (not earlier than that
beginning on 6th April 1965).
20
Assumed gains and assumed losses
6     (1)
“Assumed gains” means any chargeable gains, other than actual gains,
which, on the relevant assumptions, would accrue to the vulnerable person
and in respect of which, on those assumptions, he would be chargeable to
capital gains tax for the tax year.
25
      (2)
“Assumed losses” means any allowable losses, other than actual losses,
which, on the relevant assumptions, would accrue to the vulnerable person
in the tax year.
      (3)
In this paragraph “relevant assumptions” has the meaning given in
paragraph 7.
30
Relevant assumptions
7     (1)
For the purposes of paragraphs 4 and 6 the “relevant assumptions” are—
(a)
that the vulnerable person is resident and domiciled in the United
Kingdom throughout the tax year, and
(b)
that he has given a notice under subsection (2A) of section 16 of
35
TCGA 1992 (computation of losses) in respect of each loss accruing
to him in the tax year which by virtue of subsection (3) of that section
would not be an allowable loss (but for the assumption in paragraph
(a)).
      (2)
But the relevant assumption in sub-paragraph (1)(a) does not apply for the
40
purposes of section 10A of TCGA 1992 (temporary non-residents).