House of Commons portcullis
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—equation: cross[over[char[D],plus[num[1.0000000000000000,"1"],minus[char[X]]]],char[X]]

   

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—

 
 

 
previous section contents continue
 
House of Commons home page Houses of Parliament home page House of Lords home page search page enquiries

© Parliamentary copyright 2005
Revised 6 April 2005