Finance (No. 2) Bill

House of Commons

Session 2004 - 05
Internet Publications
Other Bills before Parliament

Finance (No. 2) Bill

Finance (No. 2) Bill
Part 2 — Income tax, corporation tax and capital gains tax
Chapter 9 — International matters
72

assessment etc), after sub-paragraph (2) insert—
   “(2A)
Those restrictions, other than the restriction in paragraph 45, do not
apply so far as regards any income or chargeable gains of the
company in relation to which the company has been given, after any
enquiries have been completed into the return, a notice under section
5
804ZA of the Taxes Act 1988.”
(5)
The amendments made by this section have effect in accordance with section
87(3).
Controlled foreign companies
89
ADP dividends and double taxation relief
10
(1)
Section 801 of ICTA (dividends paid between related companies: relief for UK
and third country taxes) is amended as follows.
(2)
In subsection (2A) (restriction on cases where section 799(1)(b) applies for the
purposes of section 801(2)) after paragraph (a) insert—
“(aa)
if the overseas company is an ADP controlled foreign company
15
as respects any of its accounting periods and the dividend
mentioned in subsection (1) above is an ADP dividend of that
company (in which case see also subsection (2B)); or”.
(3)
After subsection (2A) insert—
“(2B)
In any case falling within subsection (2A)(aa) above, section 799(1)(b)
20
applies for the purposes of subsection (2) above as if for section 799(1A)
there were substituted—
  “(1A) The formula is—

where—

D is the amount of the dividend; and
25

X is the maximum relievable rate, expressed as a decimal
fraction;

and for the purposes of this subsection the maximum relievable rate is
the rate of corporation tax in force when the dividend was paid.”.”.
(4)
After subsection (5) insert—
30
“(6)
For the purposes of this section—
(a)
a controlled foreign company is an “ADP controlled foreign
company” as respects any of its accounting periods if, by virtue
only of section 748(1)(a), no apportionment under section 747(3)
falls to be made as respects that accounting period;
35
(b)
an “ADP dividend” of a controlled foreign company is a
dividend by virtue of which the controlled foreign company is
an ADP controlled foreign company as respects any of its
accounting periods.
(7)
In this section—
40

Finance (No. 2) Bill
Part 2 — Income tax, corporation tax and capital gains tax
Chapter 9 — International matters
73

“accounting period”, in relation to a controlled foreign company,
has the same meaning as in Chapter 4 of Part 17 (see section
751);
“controlled foreign company” has the same meaning as in Chapter
4 of Part 17 (see section 747(2)).”.
5
(5)
The amendments made by this section have effect where the dividend
mentioned in section 799(1) of ICTA is paid on or after 2nd December 2004 and
is, or represents, in whole or in part an ADP dividend of an ADP controlled
foreign company.
90
Foreign taxation of group as single entity: exclusion of ADP CFCs
10
(1)
Section 803A of ICTA is amended as follows.
(2)
After subsection (1) (company resident in territory outside the UK paying tax
in respect of one or more other companies resident in that territory) insert—
“(1A)
Where—
(a)
a company is (within the meaning of section 801) an ADP
15
controlled foreign company as respects any of its accounting
periods, and
(b)
the whole or any part of the profits or gains of that accounting
period are included in the aggregate profits, or aggregate
profits or gains, mentioned in subsection (1) above,
20

subsection (2) below shall have effect as if the companies mentioned in
subsection (1) above did not include that company.”.
(3)
The amendment made by this section has effect in relation to dividends paid
on or after 16th March 2005.
Annual payments and double taxation relief
25
91
Tax avoidance involving annual payments and double taxation relief
(1)
ICTA is amended as follows.
(2)
In section 125 (annual payments for non-taxable consideration) in subsection
(2) (payments to which the section applies) for paragraph (b) substitute—
“(b)
is made under a liability incurred for consideration in money or
30
money’s worth all or any of which—
(i)
consists of, or of the right to receive, a dividend, or
(ii)
is not required to be brought into account in computing
for the purposes of income tax or corporation tax the
income of the person making the payment.”.
35
(3)
As from 2nd December 2004, the title of that section accordingly becomes
“Annual payments for dividends or non-taxable consideration”.
(4)
Section 801 (dividends paid between related companies: relief for UK and third
country taxes) is amended as follows.
(5)
In subsection (2) (case where overseas company has received a dividend from
40
a third company) for “subject to subsections (4) to (4D)” substitute “subject to
subsection (4)”.

Finance (No. 2) Bill
Part 3 — Stamp taxes
74

(6)
Subsections (4A) to (4D) (which relate to cases where the amount given by the
formula in section 799(1) exceeds U in that formula) shall cease to have effect.
(7)
The amendment made by subsection (2) has effect in relation to any annual
payment made on or after 2nd December 2004 (whether the contract or other
arrangement is one made before, on or after that date).
5
(8)
The amendments made by subsections (4) to (6) have effect in relation to
dividends paid on or after 2nd December 2004.
Chapter 10
Miscellaneous
Capital allowances
10
92
Capital allowances: renovation of business premises in disadvantaged areas
Schedule 6 (capital allowances in respect of expenditure on the conversion or
renovation of qualifying business premises in disadvantaged areas) has effect
in relation to expenditure incurred on or after such day as the Treasury may by
order appoint.
15
Tonnage tax
93
Tonnage tax
Schedule 7 (which makes provision amending Schedule 22 to FA 2000) has
effect.
Part 3
20
Stamp taxes
Stamp duty land tax
94
Alternative property finance
Schedule 8 (which makes amendments of Part 4 of FA 2003 relating to
alternative property finance) has effect.
25
Stamp duty land tax and stamp duty
95
Raising of thresholds
(1)
In subsection (2) of section 55 of FA 2003 (amount of stamp duty land tax
chargeable: general), in Table A (bands and percentages for residential
property) for “£60,000” in both places substitute “£120,000”.
30
(2)
In paragraph 2(3) of Schedule 5 to that Act (amount of stamp duty land tax
chargeable: rent), in Table A (bands and percentages for residential property)
for “£60,000” in both places substitute “£120,000”.

Finance (No. 2) Bill
Part 3 — Stamp taxes
75

(3)
In Schedule 13 to FA 1999 (stamp duty: instruments chargeable and rates of
duty), in paragraph 4 (bands and percentages for conveyance or transfer on
sale of property other than stock or marketable securities), for “£60,000” in both
places substitute “£120,000”.
(4)
Subsections (1) and (2) apply in relation to any transaction of which the
5
effective date (within the meaning of Part 4 of FA 2003) is after 16th March
2005.
(5)
Subsection (3) applies in relation to instruments executed after 16th March
2005.
96
Removal of disadvantaged areas relief for non-residential property
10
Schedule 9 (which provides for the removal, in relation to non-residential
property, of relief from stamp duty land tax and stamp duty for land in
disadvantaged areas) has effect.
Stamp duty and stamp duty reserve tax
97
Demutualisation of insurance companies
15
(1)
Section 90 of FA 1986 (other exceptions to the principal charge to stamp duty
reserve tax under section 87 of that Act) is amended as follows.
(2)
In subsection (1A) (section 87 not to apply to agreement to transfer unit under
unit trust scheme if instrument giving effect to agreement would be exempt
from stamp duty by virtue of provision in paragraph (a) or (b)) after paragraph
20
(b) insert “, or
(c)
section 96 of the Finance Act 1997 (demutualisation of
insurance companies).”.
(3)
Schedule 19 to FA 1999 (stamp duty and stamp duty reserve tax: unit trusts) is
amended as follows.
25
(4)
In paragraph 6 (exclusion, in certain cases of change of ownership, of charge to
stamp duty reserve tax on surrender of unit to managers) in sub-paragraph (5)
(provisions under which certain instruments would be exempt from stamp
duty) after paragraph (b) insert “; and
(c)
section 96 of the Finance Act 1997 (demutualisation of
30
insurance companies).”.
(5)
The amendment in subsection (2) applies where the relevant day for the
purposes of section 87 of FA 1986 falls on or after the day on which this Act is
passed.
(6)
The amendment in subsection (4) applies in relation to surrenders (within the
35
meaning of Part 2 of Schedule 19 to FA 1999) occurring on or after the day on
which this Act is passed.

Finance (No. 2) Bill
Part 4 — Other taxes
76

Part 4
Other taxes
Inheritance tax
98
Rates and rate bands for the next three years
(1)
For the Table in Schedule 1 to IHTA 1984 (rates and rate bands), as it has effect
5
from time to time, there shall be successively substituted—
(a)
the 2005-06 Table, which shall apply to any chargeable transfer made
on or after 6th April 2005 (but before 6th April 2006),
(b)
the 2006-07 Table, which shall apply to any chargeable transfer made
on or after 6th April 2006 (but before 6th April 2007), and
10
(c)
the 2007-08 Table, which shall apply to any chargeable transfer made
on or after 6th April 2007.
(2)
Subsection (1)(c) is without prejudice to the application of section 8 of IHTA
1984 (indexation) by virtue of the difference between the retail prices index for
the month of September in 2006 or any later year and that for the month of
15
September in the following year.
(3)
The 2005-06 Table is—

Table of Rates of Tax

Portion of value
Rate of tax

    Lower limit (£)
      Upper limit (£)
     Per cent.

20

              0
           275,000
        Nil

           275,000
                —
         40

(4)
The 2006-07 Table is—

Table of Rates of Tax

Portion of value
Rate of tax

25

    Lower limit (£)
      Upper limit (£)
     Per cent.

              0
           285,000
        Nil

           285,000
                —
         40

Finance (No. 2) Bill
Part 4 — Other taxes
77

(5)
The 2007-08 Table is—

Table of Rates of Tax

Portion of value
Rate of tax

    Lower limit (£)
      Upper limit (£)
     Per cent.

              0
           300,000
        Nil

5

           300,000
                —
         40

(6)
Section 8(1) of IHTA 1984 (indexation of rate bands) shall not have effect as
respects any difference between the retail prices index—
(a)
for the month of September 2003 and that for the month of September
2004,
10
(b)
for the month of September 2004 and that for the month of September
2005, or
(c)
for the month of September 2005 and that for the month of September
2006.
Landfill tax
15
99
Rate of landfill tax
(1)
In section 42 of FA 1996 (amount of landfill tax) for the amount specified in
subsection (1)(a), and the corresponding amount specified in subsection (2),
substitute “£18”.
(2)
The amendments made by this section have effect in relation to taxable
20
disposals made, or treated as made, on or after 1st April 2005.
Lorry road-user charge
100
Lorry road-user charge
For section 137(7) of FA 2002 (lorry road-user charge: preparatory expenditure)
substitute—
25
“(7)
A Minister of the Crown or government department may—
(a)
incur expenditure in connection with preparations for lorry
road-user charge (including any fuel credit to be paid in respect
of fuelling of lorries chargeable in respect of lorry road-user
charge);
30
(b)
enter into contracts in respect of the development or provision
of equipment, systems or services to be used in connection with
lorry road-user charge (including any fuel credit).”

Finance (No. 2) Bill
Part 5 — Pensions etc
78

Part 5
Pensions etc
101
Pension schemes etc.
Schedule 10 contains provision about pension schemes and related matters.
102
Pension Protection Fund etc.
5
(1)
The Treasury may by regulations make provision for and in connection with
the application of the relevant taxes in relation to—
(a)
the Pension Protection Fund,
(b)
the Fraud Compensation Fund, and
(c)
the Board of the Pension Protection Fund,
10

and in relation to any person in connection with either of those Funds or that
Board.
(2)
The provision that may be made by the regulations includes provision
imposing any of the relevant taxes (as well as provision for exemptions or
reliefs).
15
(3)
The relevant taxes are—
(a)
income tax,
(b)
capital gains tax,
(c)
corporation tax,
(d)
inheritance tax,
20
(e)
value added tax, and
(f)
stamp duty land tax.
(4)
The regulations may, in particular, include provision for and in connection
with the taxation of payments made in accordance with the pension
compensation provisions (within the meaning of Part 2 of the Pensions Act
25
2004 (c. 35): see section 162(2) of that Act).
(5)
The exemptions and reliefs that may be given by the regulations include, in
particular, exemption from—
(a)
charges to corporation tax in respect of any income arising from any
assets of the Board (or in either Fund) and other receipts of the Board
30
(or either Fund) and any chargeable gains arising from the disposal of
any assets of the Board (or in either Fund),
(b)
charges to income tax and corporation tax in respect of the levies
referred to in sections 117, 174, 175, 189 and 209 of the Pensions Act
2004, and
35
(c)
any charge to capital gains tax, or corporation tax on chargeable gains,
in respect of the receipt of fraud compensation payments (within the
meaning of Part 2 of that Act: see section 182(1) of that Act).
(6)
The regulations may make provision in relation to any time after 5th April
2005.
40
(7)
The provision made by the regulations may be framed as provision applying
with appropriate modifications—