Finance (No. 2) Bill

House of Commons

Session 2004 - 05
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Other Bills before Parliament

Finance (No. 2) Bill

Finance (No. 2) Bill
Part 1 — Excise duties
5

Gaming duty
6
Rates of gaming duty
(1)
For the Table in section 11(2) of FA 1997 (rates of gaming duty) substitute—

Table
5

Part of gross gaming yield
Rate

The first £534,500
2.5 per cent.

The next £1,186,500
12.5 per cent.

The next £1,186,500
20 per cent.

The next £2,078,000
30 per cent.

10

The remainder
40 per cent.

(2)
This section has effect in relation to accounting periods beginning on or after
1st April 2005.
Vehicle excise duty
7
Rates
15
(1)
VERA 1994 is amended as follows.
(2)
In section 4 (vehicle licences: amount of duty), omit—
(a)
subsection (3) (treatment of fractions of five pence in determining rate
of duty on six month licence which is set at 55% of annual rate), and
(b)
in subsection (7) (power to amend or repeal by order), “or (3)”.
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(3)
In section 13(3)(b) (trade licences: annual rate of duty for licences not to be used
only for motorcycles not exceeding 450 kilogrammes in weight unladen) as
currently in force, for “annual rate currently applicable to a vehicle under
paragraph 1(2) of Schedule 1” substitute “basic goods vehicle rate currently
applicable”.
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(4)
In section 13(4)(b) (trade licences: annual rate of duty for licences not to be used
only for motorcycles not exceeding 450 kilogrammes in weight unladen) as set
out in paragraph 8(1) of Schedule 4 to have effect on and after a day appointed
by order, for “annual rate currently applicable to a vehicle under paragraph
1(2) of Schedule 1” substitute “basic goods vehicle rate currently applicable”.
30
(5)
In both versions of section 13, after subsection (6) insert—
“(7)
In this section “the basic goods vehicle rate” means the annual rate
applicable, by virtue of sub-paragraph (1) of paragraph 9 of Schedule 1,
to a rigid goods vehicle which—
(a)
is not a vehicle with respect to which the reduced pollution
35
requirements are satisfied, and

Finance (No. 2) Bill
Part 1 — Excise duties
6

(b)
falls within column (3) of the table in that sub-paragraph and
has a revenue weight exceeding 3,500 kilograms and not
exceeding 7,500 kilograms.”
(6)
In sections 35A(5) and 36(3) (dishonoured cheques: appropriate annual rate of
vehicle excise duty), for the words from “to the annual rate” to “(or”
5
substitute—
“(a)
in the case of a vehicle licence, to the annual rate which at the
beginning of the relevant period was applicable to a vehicle of
the description specified in the application, or
(b)
in the case of a trade licence, to the basic goods vehicle rate
10
(within the meaning of section 13) which was applicable at that
time (or to the annual rate which at that time was applicable”.
(7)
Schedule 1 (annual rates of duty) is amended as follows.
(8)
In paragraph 1(2) (general rate of duty except in case of vehicle with engine
with cylinder capacity not exceeding 1,549 cubic centimetres), for “£165”
15
substitute “£170”.
(9)
For the Table in paragraph 1B (rates of duty applicable to light passenger
vehicles registered on or after 1st March 2001 on basis of certificate specifying
CO2 emissions figure) substitute—

CO2 emissions figure
Rate

20

(1)
(2)
(3)
(4)
(5)

Exceeding
Not
Reduced
Standard
Premium

exceeding
rate
rate
rate

g/km
g/km
£
£
£

—
100
55
65
75

25

100
120
65
75
85

120
150
95
105
115

150
165
115
125
135

165
185
140
150
160

185
—
160
165
170

30
(10)
In paragraph 3(1A) (rate applicable to buses with respect to which reduced
pollution requirements are satisfied), for “the general rate specified in
paragraph 1(2)” substitute “£165”.
(11)
In paragraph 7(3A)(b) (rate applicable to haulage vehicles which are not
showman’s vehicle and with respect to which reduced pollution requirements
35
are satisfied), for “the general rate specified in paragraph 1(2)” substitute
“£165”.
(12)
In paragraph 10 (trailer supplement)—

Finance (No. 2) Bill
Part 2 — Income tax, corporation tax and capital gains tax
Chapter 1 — Income tax and corporation tax charge and rate bands
7

(a)
in sub-paragraph (2) (rate where plated gross weight of trailer exceeds
4,000 kilograms but does not exceed 12,000 kilograms), for “an amount
equal to the amount of the general rate specified in paragraph 1(2)”
substitute “£165”,
(b)
in sub-paragraph (3) (rate where plated gross weight of trailer exceeds
5
12,000 kilograms), for “an amount equal to 140 per cent of the amount
of the general rate specified in paragraph 1(2)” substitute “£230”, and
(c)
omit sub-paragraphs (3A) and (3B) (rounding of rate set under sub-
paragraph (3) as percentage of general rate specified in paragraph 1(2)).
(13)
Subsection (2), and subsection (1) so far as relating to it, have effect on the day
10
on which this Act is passed.
(14)
Subsection (4), and subsections (1) and (5) so far as relating to it, have effect on
and after that day.
(15)
Subsection (6), and subsection (1) so far as relating to it, have effect on and after
17th March 2005.
15
(16)
Subject to that, this section has effect in relation to licences taken out on or after
17th March 2005 for a period beginning on or after 1st April 2005.
Part 2
Income tax, corporation tax and capital gains tax
Chapter 1
20
Income tax and corporation tax charge and rate bands
Income tax
8
Charge and rates for 2005-06
Income tax shall be charged for the year 2005-06, and for that year—
(a)
the starting rate shall be 10%;
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(b)
the basic rate shall be 22%;
(c)
the higher rate shall be 40%.
9
Personal allowances for those aged 65 or more
(1)
For the year 2005-06—
(a)
the amount specified in section 257(2) of ICTA (claimant aged 65 or
30
more) shall be £7,090; and
(b)
the amount specified in section 257(3) of that Act (claimant aged 75 or
more) shall be £7,220.
(2)
Accordingly, section 257C(1) of that Act (indexation), so far as it relates to the
amounts so specified, does not apply for that year.
35

Finance (No. 2) Bill
Part 2 — Income tax, corporation tax and capital gains tax
Chapter 1 — Income tax and corporation tax charge and rate bands
8

Corporation tax
10
Charge and main rate for financial year 2006
Corporation tax shall be charged for the financial year 2006 at the rate of 30%.
11
Small companies’ rate and fraction for financial year 2005

For the financial year 2005—
5
(a)
the small companies’ rate shall be 19%, and
(b)
the fraction mentioned in section 13(2) of ICTA (marginal relief for
small companies) shall be 11/400ths.
12
Corporation tax starting rate and fraction for financial year 2005

For the financial year 2005—
10
(a)
the corporation tax starting rate shall be 0%, and
(b)
the fraction mentioned in section 13AA of ICTA (marginal relief for
small companies) shall be 19/400ths.
13
Non-corporate distribution rate for financial year 2005

The non-corporate distribution rate for the financial year 2005 shall be 19%.
15
Trusts
14
Special trust rates not to apply to first slice of trust income
(1)
In ICTA, after section 686C insert—
“686D
Special trust rates not to apply to first slice of trust income
(1)
This section applies where income arising (or treated as arising) to the
20
trustees of a trust in a year of assessment consists of or includes income
subject to a special trust tax rate (“the special trust tax rate income”).
(2)
“Income subject to a special trust tax rate” means any income which is
(or apart from this section would be) chargeable to income tax at—
(a)
the dividend trust rate, or
25
(b)
the rate applicable to trusts.
(3)
So much of the special trust tax rate income as does not exceed £500 is
not chargeable to income tax at the dividend trust rate or the rate
applicable to trusts (but is instead chargeable to income tax at the basic
rate, the lower rate or the dividend ordinary rate, depending on the
30
nature of the income).
(4)
In the following provisions “the relevant purposes” means the
purposes of—
(a)
determining (in accordance with section 1A(5)) which of the
special trust tax rate income is not chargeable to income tax at
35
the dividend trust rate, or the rate applicable to trusts, by virtue
of subsection (3), and

Finance (No. 2) Bill
Part 2 — Income tax, corporation tax and capital gains tax
Chapter 1 — Income tax and corporation tax charge and rate bands
9

(b)
determining at which of the basic rate, the lower rate and the
dividend ordinary rate that special trust tax rate income is
chargeable to income tax.
(5)
For the relevant purposes the fact that any amount forming part of the
special trust tax rate income is subject to a special trust tax rate is to be
5
disregarded if, in any circumstances, an amount of that description is
chargeable on trustees at the basic rate, the lower rate or the dividend
ordinary rate.
(6)
For the relevant purposes any of the special trust tax rate income that
consists of—
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(a)
an amount which, by virtue of section 686A, is treated for the
purposes of the Tax Acts as if it were income to which section
686 applies, or
(b)
income treated as arising under Chapter 5 of Part 4 of ITTOIA
2005 (stock dividends from UK resident companies),
15

is to be regarded as income to which section 1A applies and which is
chargeable at the dividend ordinary rate.
(7)
For the relevant purposes any of the special trust tax rate income that
consists of—
(a)
income treated as arising under section 761(1) (offshore income
20
gains),
(b)
income treated as received under section 68 of FA 1989
(employee share ownership trusts), or
(c)
profits or gains which are treated as income under Chapter 12
of Part 4 of ITTOIA 2005 (guaranteed returns on disposals of
25
futures and options) and in relation to which section 568 applies
(profits or gains not meeting conditions of that section),

is or are to be regarded as chargeable at the basic rate.
(8)
For the relevant purposes any of the special trust tax rate income that
consists of—
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(a)
income treated as received under section 714(2) or 716(3)
(transfers of securities),
(b)
profits taken to be income arising under Chapter 8 of Part 4 of
ITTOIA 2005 (profits from deeply discounted securities), or
(c)
gains which are treated as arising under Chapter 9 of that Part
35
and on which tax is charged at the rate applicable to trusts
under section 467(7)(b) of that Act (gains from contracts for life
assurance),

is or are chargeable at the lower rate.”
(2)
In section 686(1) of ICTA (accumulation and discretionary trusts: special rates
40
of tax), after “shall” insert “(subject to section 686D)”.
(3)
In subsection (3) of section 687 of ICTA (payments under discretionary trusts:
amounts to be set against amount assessable on trustees under subsection
(2)(b) of that section), after paragraph (a) insert—
“(aa1)
the amount of any tax on income arising to the trustees which is
45
charged by virtue of section 686D(3) at the basic rate or the
lower rate;”.

Finance (No. 2) Bill
Part 2 — Income tax, corporation tax and capital gains tax
Chapter 2 — Personal taxation
10

(4)
After that subsection insert—
“(3A)
Paragraphs (a1) to (bc) of subsection (3) above do not apply in relation
to income, distributions or sums chargeable to tax by virtue of section
686D(3) at the basic rate, the lower rate or the dividend ordinary rate.”
(5)
This section applies for the year 2005-06 and subsequent years of assessment.
5
Chapter 2
Personal taxation
Taxable benefits
15
Childcare vouchers: exempt amount
(1)
Section 270A of ITEPA 2003 (limited exemption for qualifying childcare
10
vouchers) is amended as follows.
(2)
In subsection (6) (exempt amount), for “£50 for each qualifying week in that
year” substitute “the sum of—
(a)
£50 for each qualifying week in that year, and
(b)
the voucher administration costs for that year.”
15
(3)
After that subsection insert—
“(6A)
The “voucher administration costs” for any tax year in respect of which
qualifying childcare vouchers are provided for an employee means the
difference between the cost of provision of the vouchers and their face
value.
20

The face value of a voucher is the amount stated on or recorded in the
voucher as the value of the provision of care for a child that may be
obtained by using it.”
(4)
After subsection (10) insert—
“(10A)
In this section “ cost of provision”, in relation to a childcare voucher,
25
has the meaning given in section 87(3) and (3A).”
(5)
This section has effect for the year 2005-06 and subsequent years of assessment.
16
Extension of exemptions for childcare, workplace parking, cycles etc
(1)
ITEPA 2003 is amended as follows.
(2)
In section 237(1) (exemption for provision of workplace parking), for “No
30
liability to income tax arises by virtue of Chapter 10 of Part 3 (taxable benefits:
residual liability to charge)” substitute “No liability to income tax arises”.
(3)
In section 244(1) (exemption for provision of cycles and cyclist’s safety
equipment), for “No liability to income tax arises by virtue of Chapter 10 of Part
3 (taxable benefits: residual liability to charge)” substitute “No liability to
35
income tax arises”.
(4)
In section 270A(1) (limited exemption for qualifying childcare vouchers), for

Finance (No. 2) Bill
Part 2 — Income tax, corporation tax and capital gains tax
Chapter 2 — Personal taxation
11

“employee, liability” substitute “employee—
(a)
no liability to income tax arises by virtue of section 62 (general
definition of earnings), and
(b)
liability”.
(5)
In section 318(1) (childcare: exemption for employer-provided care), for “No
5
liability to income tax arises by virtue of Chapter 10 of Part 3 (taxable benefits:
residual liability to charge)” substitute “No liability to income tax arises”.
(6)
In section 318A(1) (childcare: limited exemption for other care), for “child,
liability” substitute “child—
(a)
no liability to income tax arises by virtue of section 62 (general
10
definition of earnings), and
(b)
liability”.
(7)
This section has effect for the year 2005-06 and subsequent years of assessment.
17
Transfer of previously loaned computer or cycle etc
(1)
Section 206 of ITEPA 2003 (cost of the benefit: transfer of used or depreciated
15
asset) is amended as follows.
(2)
In subsection (3)(a), for “a car (within the meaning of Chapter 6)” substitute “an
excluded asset (see subsection (6))”.
(3)
After subsection (5) insert—
“(6)
An excluded asset is—
20
(a)
a car (within the meaning of Chapter 6),
(b)
computer equipment that has previously been applied as
mentioned in subsection (3)(b) in circumstances in which the
conditions set out in section 320 were met, or
(c)
a cycle or cyclist’s safety equipment that has previously been so
25
applied in circumstances in which the conditions set out in
section 244 were met.”
(4)
This section has effect for the year 2005-06 and subsequent years of assessment.
18
Extension of outplacement services etc exemption: part-time employees
(1)
ITEPA 2003 is amended as follows.
30
(2)
In section 310 (counselling and other outplacement services) in subsection (4)
(person to have been employed full-time in the employment which is ceasing
for a specified period) omit “full-time”.
(3)
In section 311 (retraining courses) in subsection (3) (conditions to be satisfied
in relation to the course)—
35
(a)
at the end of paragraph (b) insert “and”;
(b)
in paragraph (c) (course to last no more than one year) for “one year”
substitute “two years”;
(c)
omit paragraph (d) (employee to attend the course on a full-time or
substantially full-time basis) and the word “and” before it.
40
(4)
In that section, in subsection (4)(c) (person to be employed full-time in the
employment which is ceasing for a specified period) omit “full-time”.