Finance Bill

House of Commons

Session 2004 - 05
Internet Publications
Other Bills before Parliament

Finance Bill

Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 2 — Personal taxation
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Armed forces
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Armed forces pensions and compensation schemes
(1)
ITEPA 2003 is amended as follows.
(2)
In subsection (1) of section 393 as originally enacted (application of Chapter 2
of Part 6) after “non-approved retirement benefits scheme” insert “other than a
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scheme established by an order under section 1(2) of the Armed Forces
(Pensions and Compensation) Act 2004 (armed and reserve forces
compensation schemes)”.
(3)
In paragraph (a) of section 639 (exemption from income tax for pensions due to
military service etc)—
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(a)
for “the Department of Work and Pensions” substitute “the Ministry of
Defence”;
(b)
for “any Order in Council, Royal Warrant, order or scheme” substitute
“instrument specified in subsection (2),”.
(4)
At the end of section 639 (which becomes subsection (1)) insert—
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“(2)
The instruments referred to in subsection (1)(a) are—
Defence (Local Defence Volunteers) Regulations 1940
(S.R. & O. 1940/748),
War Pensions (Coastguards) Scheme 1944 (S.R. & O. 1944/500),
War Pensions (Naval Auxiliary Personnel) Scheme 1964
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(S.I. 1964/1985),
Pensions (Polish Forces) Scheme 1964 (S.I. 1964/2007),
War Pensions (Mercantile Marine) Scheme 1964 (S.I. 1964/2058),
Order by Her Majesty concerning pensions and other grants in
respect of disablement or death due to service in the Home
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Guard (1964 Cmnd. 2563),
Order by Her Majesty concerning pensions and other grants in
respect of disablement or death due to service in the Home
Guard after 27th April 1952 (1964 Cmnd. 2564),
Order by Her Majesty concerning pensions and other grants in
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respect of disablement or death due to service in the Ulster
Defence Regiment (1971 Cmnd. 4567),
Personal Injuries (Civilians) Scheme 1983 (S.I. 1983/686),
Naval, Military and Air Forces etc. (Disablement and Death)
Service Pensions Order 1983 (S.I. 1983/883).
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(3)
The Treasury may by order amend subsection (2).”.
(5)
After section 640 insert—
“640A
Lump sums provided under armed forces early departure scheme
No liability to income tax arises on a lump sum provided under a
scheme established by the Armed Forces Early Departure Payments
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Scheme Order 2005 (S.I. 2005/437).”.
(6)
In section 641 (exemption from income tax for armed forces disability pensions

Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 2 — Personal taxation
25

etc), after paragraph (g) of subsection (1) insert—
“(h)
a benefit under a scheme established by an order under section
1(2) of the Armed Forces (Pensions and Compensation) Act
2004 payable to a person by reason of his illness or injury—
(i)
by way of a lump sum, or
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(ii)
following the termination of the person’s service in the
armed forces or reserve forces.”.
(7)
The amendment made by subsection (2) has effect for the year 2005-06.
(8)
The amendments made by subsections (3) and (4) are deemed always to have
had effect.
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(9)
The amendments made by subsections (5) and (6) have effect for the year 2005-
06 and subsequent years of assessment.
Gift aid
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Donations to charity by individuals
(1)
For section 25(5E) to (5G) of FA 1990 (donation to charity by individuals:
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benefits: disregard of certain rights of admission) substitute—
“(5E)
In determining whether a gift to a charity is a qualifying donation the
benefit of any right of admission received in consequence of the gift
shall be disregarded if subsections (5F) to (5H) are satisfied in relation
to the right.
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(5F)
This subsection is satisfied if the opportunity to make a gift and to
receive the right of admission in consequence is available to the public.
(5G)
This subsection is satisfied if the right of admission is a right granted by
the charity for the purpose of viewing property preserved, maintained,
kept or created by a charity in pursuance of its charitable purposes,
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including, in particular—
(a)
buildings,
(b)
grounds or other land,
(c)
plants,
(d)
animals,
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(e)
works of art (but not performances),
(f)
artefacts, and
(g)
property of a scientific nature.
(5H)
This subsection is satisfied if—
(a)
the right of admission applies, during a period of at least one
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year, at all times at which the public can obtain admission, or
(b)
a member of the public could purchase the same right of
admission and the amount of the gift is greater by at least 10%
than the amount which he would have to pay.
(5I)
In subsection (5E) “right of admission” means a right of admission—
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(a)
of the person who makes the gift or of that person and one or
more members of his family (whether or not the right must be
exercised by all those persons at the same time),

Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 3 — Employment-related securities and options
26

(b)
to premises or property to which the public are admitted on
payment of an admission fee, and
(c)
without payment of the admission fee or on payment of a
reduced fee;

and in the application of subsection (5H)(b) “the same right of
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admission” means a right relating to the same property, classes of
person and periods of time as the right received in consequence of the
gift.
(5J)
For the purposes of subsection (5H)(a) a right of admission shall be
treated as applying at all times at which the public can obtain
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admission despite the fact that the right does not apply on days
specified by the charity, being days on each of which an event is to take
place on the premises to which the right relates; provided that no more
than 5 days are specified for that purpose in relation to—
(a)
the period during which the right applies, in the case of a period
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of one year, or
(b)
each calendar year during all or part of which the right applies,
in the case of a right applying for a period of more than one
year.”
(2)
This section shall have effect in relation to gifts made on or after 6th April 2006.
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Chapter 3
Employment-related securities and options
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Employee securities: anti-avoidance
Schedule 2 contains amendments relating to employee securities.
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Research institution spin-out companies
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(1)
In Part 7 of ITEPA 2003 (employment income: income and exemptions relating
to securities), after Chapter 4 insert—
“Chapter 4A
Shares in research institution spin-out companies
Introduction
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451
Application of this Chapter
(1)
This Chapter applies where—
(a)
an agreement is made for one or more transfers of intellectual
property (an “intellectual property agreement”) from one or
more research institutions to a company (a “spin-out
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company”),
(b)
a person acquires shares (or an interest in shares) in the spin-out
company before the intellectual property agreement is made or
within the period of 183 days beginning with the date on which
it is made,
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Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 3 — Employment-related securities and options
27

(c)
the right or opportunity to acquire the shares (or interest in
shares) was available by reason of employment by the research
institution (or any of them) or by the spin-out company, and
(d)
the person is involved in research in relation to any of the
intellectual property that is the subject of the intellectual
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property agreement.
(2)
But this Chapter does not apply if the avoidance of tax or national
insurance is the main purpose (or one of the main purposes) of the
arrangements under which the right or opportunity to acquire the
shares (or interest in shares) is made available.
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Tax relief on acquisition
452
Market value on acquisition
(1)
For the relevant tax purposes the market value of the shares (or interest
in shares) at the time of the acquisition is to be calculated disregarding
the effect on that market value of the intellectual property agreement
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and any transfer of intellectual property pursuant to it.
(2)
For the purposes of subsection (1) “the relevant tax purposes” are—
(a)
determining any amount that is to constitute earnings from the
employment under Chapter 1 of Part 3 (earnings),
(b)
determining the amount of any gain realised on the occurrence
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of an event that is a chargeable event by virtue of section
439(3)(a) (conversion),
(c)
operating Chapter 3C of this Part (acquisition of securities for
less than market value), and
(d)
determining any amount that counts as employment income of
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the employee under Chapter 5 of this Part (securities acquired
pursuant to securities option).
Tax relief following acquisition
453
Taxable amount under Chapter 4
(1)
If the shares are (or interest in shares is) acquired before the intellectual
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property agreement is made, or before any transfer of intellectual
property pursuant to it, and any benefit deriving from the intellectual
property agreement or any such transfer is received by the employee in
connection with the shares (or interest in shares), the taxable amount
determined under section 448 (post-acquisition benefits from
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securities: amount of charge) is to be treated as nil.
(2)
But this section does not apply if something which affects the shares (or
interest in shares) has been done (at or before the time when the
intellectual property agreement is made or intellectual property is
transferred) as part of a scheme or arrangement the main purpose (or
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one of the main purposes) of which is the avoidance of tax or national
insurance contributions.