Finance (No. 2) Bill

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Session 2004 - 05
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Finance (No. 2) Bill

Finance (No. 2) Bill
Schedule 7 — Tonnage tax
Part 1 — Amendments of Schedule 22 to FA 2000
150

The ring fence: capital allowances: exit: plant and machinery
13    (1)
Paragraph 85 is amended as follows.
      (2)
After sub-paragraph (1) insert—
   “(1A)
Sub-paragraph (1C) applies where the company leaves tonnage
tax—
5
(a)
on the expiry of a tonnage tax election, or
(b)
on a tonnage tax election ceasing to be in force under
paragraph 13(2A) (taking effect of withdrawal notice
under paragraph 15A).
     (1B)
In any other case, sub-paragraph (2) applies.
10
     (1C)
Where this sub-paragraph applies, the amount of qualifying
expenditure in respect of each asset used by the company for the
purposes of its tonnage tax activities and held by the company
when it leaves tonnage tax shall be taken to be—
(a)
the market value of the asset at the time the company
15
leaves tonnage tax, or
(b)
if less, the amount of expenditure incurred on the
provision of the asset that would have been qualifying
expenditure if the company had not been subject to
tonnage tax.”.
20
      (3)
In sub-paragraph (2) (amount of qualifying expenditure to be determined by
reference to tax written down value of assets) at the beginning insert “Where
this sub-paragraph applies,”.
The ring fence: capital allowances: ship leasing: sale and lease-back arrangements
14    (1)
Paragraph 92 is amended as follows.
25
      (2)
In sub-paragraph (2) (meaning of “sale and lease-back arrangements”) for
“subject to sub-paragraph (3)” substitute “subject to sub-paragraphs (3) and
(3A)”.
      (3)
After sub-paragraph (3) insert—
   “(3A)
This paragraph does not apply if—
30
(a)
expenditure is incurred on enhancing the ship or on
converting it to another use,
(b)
the amount of that expenditure—
(i)
is greater than 33% of the market value of the ship
immediately after completion of the enhancement
35
or conversion, and
(ii)
is equal to or greater than the market value of the
interest in the ship which is the subject of the
transaction mentioned in Step Two in sub-
paragraph (2), and
40
(c)
that transaction is effected not more than four months after
the first occasion following completion of the
enhancement or conversion on which the ship is brought
into use by any person for any purpose.”.

Finance (No. 2) Bill
Schedule 7 — Tonnage tax
Part 2 — Commencement and transitional provision
151

Meaning of “offshore activities”
15    (1)
Paragraph 104 is amended as follows.
      (2)
After sub-paragraph (1) (meaning of “offshore activities”) insert—
   “(1A)
But none of the following activities is to be regarded as an offshore
activity—
5
(a)
offshore supply services;
(b)
towage, salvage or other marine assistance;
(c)
anchor handling;
(d)
carriage of liquids or gases;
(e)
safety or rescue services;
10
(f)
the carriage of cargo in connection with dredging.
     (1B)
The Treasury may make provision by order amending sub-
paragraph (1A) by—
(a)
adding, or
(b)
varying,
15

any description of activity.”.
Vessels to which the special rules for offshore activities do not apply
16
Omit paragraph 105.
Index of defined expressions
17    (1)
Paragraph 147 is amended as follows.
20
      (2)
Insert each of the following at the appropriate place—

“qualifying dredger
paragraph 20(7)”;

“Member States’ registers
paragraph 22B(7)”.

Part 2
Commencement and transitional provision
25
Commencement
18    (1)
Subject to paragraphs 19 to 21, paragraphs 4 to 6, 8 to 10 and 15 to 17 (and
paragraph 1 so far as relating to those paragraphs) shall be deemed to have
come into force on 1st July 2005.
      (2)
This Part of this Schedule, and the other provisions of Part 1 of this Schedule,
30
shall come into force on the day on which this Act is passed.
Transitional provision: qualifying activities
19    (1)
If a withdrawal notice is given on or before 31st March 2006 under
paragraph 15A of Schedule 22 to FA 2000 in respect of a single company or
a group, the amendments made by—
35
(a)
paragraph 4, and
(b)
so far as relating to tugs, paragraph 6,

Finance (No. 2) Bill
Schedule 8 — Stamp duty land tax: alternative property finance
152


shall not have effect in relation to that company or group until the day on
which the relevant accounting period begins.
      (2)
In sub-paragraph (1) “the relevant accounting period” means the first
accounting period of the company to begin after 1st July 2005.
      (3)
In the case of a withdrawal notice given in respect of a group, this paragraph
5
has effect in relation to each qualifying company in the group by reference
to that company’s accounting periods.
Transitional provision: flagging: order designating financial year 2005
20
In relation to the financial year 2005, Schedule 22 to FA 2000 shall have effect
with the omission of paragraph 22C(1).
10
Transitional provision: flagging
21
Where a company (whether or not a member of a group) has operated a
qualifying dredger or a tug at any time before 1st July 2005, the company is
to be treated, for the purposes of paragraph 22D of Schedule 22 to FA 2000,
as not having operated the qualifying dredger or tug before that date.
15
Schedule 8
Section 94

Stamp duty land tax: alternative property finance
Introduction
1
Part 4 of FA 2003 is amended in accordance with this Schedule.
Alternative property finance: England and Wales and Northern Ireland
20
2
After section 71 insert—
“71A
Alternative property finance: land sold to financial institution and
leased to individual
(1)
This section applies where arrangements are entered into between an
individual and a financial institution under which—
25
(a)
the institution purchases a major interest in land or an
undivided share of a major interest in land (“the first
transaction”),
(b)
where the interest purchased is an undivided share, the
major interest is held on trust for the institution and the
30
individual as beneficial tenants in common,
(c)
the institution (or the person holding the land on trust as
mentioned in paragraph (b)) grants to the individual out of
the major interest a lease (if the major interest is freehold) or
a sub-lease (if the major interest is leasehold) (“the second
35
transaction”), and
(d)
the institution and the individual enter into an agreement
under which the individual has a right to require the
institution or its successor in title to transfer to the individual
(in one transaction or a series of transactions) the whole
40

Finance (No. 2) Bill
Schedule 8 — Stamp duty land tax: alternative property finance
153

interest purchased by the institution under the first
transaction.
(2)
The first transaction is exempt from charge if the vendor is—
(a)
the individual, or
(b)
another financial institution by whom the interest was
5
acquired under arrangements of the kind mentioned in
subsection (1) entered into between it and the individual.
(3)
The second transaction is exempt from charge if the provisions of this
Part relating to the first transaction are complied with (including the
payment of any tax chargeable).
10
(4)
Any transfer to the individual that results from the exercise of the
right mentioned in subsection (1)(d) (“a further transaction”) is
exempt from charge if—
(a)
the provisions of this Part relating to the first and second
transactions are complied with, and
15
(b)
at all times between the second transaction and the further
transaction—
(i)
the interest purchased under the first transaction is
held by a financial institution so far as not transferred
by a previous further transaction, and
20
(ii)
the lease or sub-lease granted under the second
transaction is held by the individual.
(5)
The agreement mentioned in subsection (1)(d) is not to be treated—
(a)
as substantially performed unless and until the whole
interest purchased by the institution under the first
25
transaction has been transferred (and accordingly section
44(5) does not apply), or
(b)
as a distinct land transaction by virtue of section 46 (options
and rights of pre-emption).
(6)
The requirements of subsection (1), or (4)(b)(ii), are not met if—
30
(a)
the individual enters into the arrangement, or holds the lease
or sub-lease, as trustee and any beneficiary of the trust is not
an individual, or
(b)
the individual enters into the arrangements, or holds the
lease or sub-lease, as partner and any of the other partners is
35
not an individual.
(7)
A further transaction that is exempt from charge by virtue of
subsection (4) is not a notifiable transaction unless the transaction
involves the transfer to the individual of the whole interest
purchased by the institution under the first transaction, so far as not
40
transferred by a previous further transaction.
(8)
In this section “financial institution” means—
(a)
a bank within the meaning of section 840A of the Taxes Act
1988,
(b)
a building society within the meaning of the Building
45
Societies Act 1986, or
(c)
a wholly-owned subsidiary of a bank within paragraph (a) or
a building society within paragraph (b).

Finance (No. 2) Bill
Schedule 8 — Stamp duty land tax: alternative property finance
154


For the purposes of paragraph (c) a company is a wholly-owned
subsidiary of a bank or building society if it has no members except
the parent and the parent’s wholly-owned subsidiaries or persons
acting on behalf of the parent or the parent’s wholly-owned
subsidiaries.
5
(9)
References in this section to an individual shall be read, in relation to
times after the death of the individual concerned, as references to his
personal representatives.
(10)
This section does not apply in relation to land in Scotland.”
Alternative property finance: Scotland
10
3     (1)
Section 72 (alternative property finance: land sold to financial institution
and leased to individual) is amended as follows.
      (2)
In subsection (1)—
(a)
in paragraph (b)—
(i)
for “freehold” substitute “the interest of the owner”, and
15
(ii)
for “leasehold” substitute “the tenant’s right over or interest
in a property subject to a lease”, and
(b)
in paragraph (c), omit “or its successor in title”.
      (3)
For subsection (7) substitute—
“(7)
In this section “financial institution” has the same meaning as in
20
section 71A.”
      (4)
Omit subsection (8).
      (5)
After subsection (9) insert—
   “(10)
This section applies only in relation to land in Scotland.”
      (6)
In the heading, after “finance” insert “in Scotland”.
25
4
After section 72 insert—
“72A
Alternative property finance in Scotland: land sold to financial
institution and individual in common
(1)
This section applies where arrangements are entered into between an
individual and a financial institution under which—
30
(a)
the institution and the individual purchase a major interest in
land as owners in common (“the first transaction”),
(b)
the institution and the individual enter into an agreement
under which the individual has a right to occupy the land
exclusively (“the second transaction”), and
35
(c)
the institution and the individual enter into an agreement
under which the individual has a right to require the
institution to transfer to the individual (in one transaction or
a series of transactions) the whole interest purchased under
the first transaction.
40
(2)
The first transaction is exempt from charge if the vendor is—
(a)
the individual, or

Finance (No. 2) Bill
Schedule 8 — Stamp duty land tax: alternative property finance
155

(b)
another financial institution by whom the interest was
acquired under arrangements of the kind mentioned in
subsection (1) entered into between it and the individual.
(3)
The second transaction is exempt from charge if the provisions of this
Part relating to the first transaction are complied with (including the
5
payment of any tax chargeable).
(4)
Any transfer to the individual that results from the exercise of the
right mentioned in subsection (1)(c) (“a further transaction”) is
exempt from charge if—
(a)
the provisions of this Part relating to the first transaction are
10
complied with, and
(b)
at all times between the first and the further transaction—
(i)
the interest purchased under the first transaction is
held by a financial institution and the individual as
owners in common, and
15
(ii)
the land is occupied by the individual under the
agreement mentioned in subsection (1)(b).
(5)
The agreement mentioned in subsection (1)(c) is not to be treated—
(a)
as substantially performed unless and until the whole
interest purchased by the institution under the first
20
transaction has been transferred (and accordingly section
44(5) does not apply), or
(b)
as a distinct land transaction by virtue of section 46 (options
and rights of pre-emption).
(6)
The requirements of subsection (1), or (4)(b)(ii), are not met if the
25
individual enters into the arrangements, or occupies the land, as
partner and any of the other partners is not an individual.
(7)
A further transaction that is exempt from charge by virtue of
subsection (4) is not a notifiable transaction unless the transaction
involves the transfer to the individual of the whole interest
30
purchased by the institution under the first transaction, so far as not
transferred by a previous further transaction.
(8)
In this section “financial institution” has the same meaning as in
section 71A.
(9)
References in this section to an individual shall be read, in relation to
35
times after the death of the individual concerned, as references to his
personal representatives.
(10)
This section applies only in relation to land in Scotland.”
Consequential amendments
5     (1)
Section 73 (alternative property finance: land sold to individual and re-sold
40
to individual) is amended as follows.
      (2)
In subsection (2)(b), for “section 72(1)” substitute “section 71A(1), 72(1) or
72A(1)”.
      (3)
In subsection (5)(a), for “section 72” substitute “section 71A”.

Finance (No. 2) Bill
Schedule 9 — Stamp duty land tax and stamp duty: removal of disadvantaged areas relief for non-residential property
156

6
In section 122 (index of defined expressions), in the entry for “notifiable (in
relation to a land transaction)” at the end insert “(see too sections 71A(7) and
72A(7))”.
Commencement
7     (1)
Paragraphs 2 and 3, and paragraphs 5 and 6 so far as relating to section 71A
5
of FA 2003, have effect in any case where the effective date of the first
transaction, within the meaning of section 71A of FA 2003 (as inserted by
paragraph 2), falls on or after the day on which this Act is passed.
      (2)
Paragraph 4, and paragraphs 5 and 6 so far as relating to section 72A of FA
2003, have effect in any case where the effective date of the first transaction,
10
within the meaning of section 72A of FA 2003 (as inserted by paragraph 4),
falls on or after the day on which this Act is passed.
      (3)
In this paragraph “the effective date” has the same meaning as in Part 4 of
FA 2003.
Schedule 9
15
Section 96

Stamp duty land tax and stamp duty: removal of disadvantaged areas relief
for non-residential property
Stamp duty land tax
1     (1)
Schedule 6 to FA 2003 (disadvantaged areas relief) is amended as follows.
      (2)
In paragraph 3 (land wholly situated in a disadvantaged area: introduction),
20
after “if” insert “(a)” and at the end insert “, and
(b)
the land is wholly or partly residential property”.
      (3)
Omit paragraph 4 (land wholly situated in a disadvantaged area: exemption
from charge where land all non-residential).
      (4)
In paragraph 6 (land wholly situated in a disadvantaged area: cases where
25
land partly non-residential and partly residential)—
(a)
for the first sentence of sub-paragraph (1) substitute—

“This paragraph applies, where the land is partly non-
residential property and partly residential property, in
relation to the consideration attributable to land that is
30
residential property.”;
(b)
in the second sentence of that sub-paragraph omit “land that is non-
residential property or”;
(c)
omit sub-paragraphs (2) and (3).
      (5)
In paragraph 7 (land partly situated in a disadvantaged area: introduction),
35
in sub-paragraph (1) after “if” insert “(a)” and at the end of that sub-
paragraph insert “, and
(b)
the land situated in a disadvantaged area is wholly or partly
residential property”.
      (6)
Omit paragraph 8 (land partly situated in a disadvantaged area: exemption
40
from charge for part so situated if all non-residential).