Finance (No.2) Bill

House of Commons

Session 2005 - 06
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Other Bills before Parliament

Finance (No.2) Bill

Finance (No.2) Bill
Part 5 — Oil
131

(a)
in sub-paragraph (1), in the definition of “post-commencement period”,
after “2004” insert “but before 1st January 2006”,
(b)
in sub-paragraph (1), in the definition of “pre-commencement period”,
after “2004” insert “but before 1st January 2006”,
(c)
at the end insert—
5
    “(3)
In the case of an accounting period (a “straddling period”) of
any qualifying company beginning before 1st January 2006
and ending on or after that date—
(a)
so much of the straddling period as falls before 1st
January 2006, and
10
(b)
so much of the straddling period as falls on or after
that date,

are treated as separate accounting periods for the purposes of
this Schedule.
      (4)
Special provision is made elsewhere in this Schedule in
15
relation to straddling periods (see paragraphs 16, 18A and
22).”.
(6)
In paragraph 6 (qualifying E&A expenditure), in sub-paragraph (2) (condition
that expenditure incurred on or after 1st January 2004), after “2004” insert “but
before 1st January 2006”.
20
(7)
In paragraph 15 (supplement in respect of a post-commencement period), in
sub-paragraph (2) (supplement to be treated as a loss for the purposes of
Corporation Tax Acts), for “this Schedule)” substitute “this Schedule or Part 4
of Schedule 19C)”.
(8)
In paragraph 16 (amount of post-commencement supplement for a post-
25
commencement period), after sub-paragraph (2) (proportionate reduction of
supplement if post-commencement period less than 12 months) insert—
   “(2A)
But, if the post-commencement period is the deemed accounting
period under paragraph 3(3) ending before 1st January 2006, sub-
paragraph (2) has no effect in relation to the amount of the
30
supplement for that period.”.
(9)
After paragraph 18 (ring fence losses and non-qualifying losses) insert—
“Special rule for straddling periods
18A   (1)
This paragraph applies in any case where the period of the loss in
which a ring fence loss is incurred is the deemed accounting period
35
under paragraph 3(3) ending before 1st January 2006.
      (2)
The following assumption shall be made for the purpose of
calculating the amount of the qualifying E&A loss and the amount of
the non-qualifying loss.
      (3)
The assumption is that the loss made in the trade is taken to be the
40
loss incurred in the accounting period beginning before 1st January
2006 and ending on or after that date (disregarding paragraph 3(3)).
      (4)
The amount of the non-qualifying loss (found in accordance with
that assumption) is then reduced (but not below) by the following
amount.
45

Finance (No.2) Bill
Part 6 — Inheritance tax
132

      (5)
The amount is the amount of the ring fence loss in the deemed
accounting period beginning on 1st January 2006 determined under
paragraph 18 of Schedule 19C for the purposes of Part 4 of that
Schedule.”.
(10)
In paragraph 22 (reductions in respect of utilised ring fence profits), at the end
5
insert—
    “(4)
If the post-commencement period is the deemed accounting period
under paragraph 3(3) ending before 1st January 2006 (“the deemed
accounting period”), the amount of the profits of the deemed
accounting period is determined as follows.
10
      (5)
The amount of the profits of the straddling period is apportioned to
the deemed accounting period in proportion to the number of days
in the deemed accounting period that fall in the straddling period.
      (6)
The apportioned amount is taken for the purposes of this paragraph
to be the amount of the profits of the deemed accounting period.
15
      (7)
In this paragraph “the straddling period”, in relation to a qualifying
company, means an accounting period of the company beginning
before 1st January 2006 and ending on or after that date
(disregarding paragraph 3(3)).”.
(11)
After Schedule 19B insert the Schedule 19C set out in Schedule 19 to this Act.
20
Part 6
Inheritance tax
Future rates and bands
156
Rates and rate bands for 2008-09 and 2009-10
(1)
For the Table in Schedule 1 to IHTA 1984 (rates and rate bands), as it has effect
25
in relation to chargeable transfers made on or after 6th April 2008, there shall
be successively substituted—
(a)
the 2008-09 Table, which shall apply to any chargeable transfer made
on or after 6th April 2008 (but before 6th April 2009), and
(b)
the 2009-10 Table, which shall apply to any chargeable transfer made
30
on or after 6th April 2009.
(2)
Subsection (1)(b) 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 2008 or any later year and that for the month of
September in the following year.
35
(3)
The 2008-09 Table is—

Table of Rates of Tax

Portion of value
Rate of tax

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

Finance (No.2) Bill
Part 6 — Inheritance tax
133

Table of Rates of Tax

Portion of value
Rate of tax

              0
           312,000
        Nil

           312,000
                —
         40

(4)
The 2009-10 Table is—
5

Table of Rates of Tax

Portion of value
Rate of tax

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

              0
           325,000
        Nil

           325,000
                —
         40

10
(5)
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 2006 and that for the month of September
2007, or
(b)
for the month of September 2007 and that for the month of September
15
2008.
Trusts
157
Rules for trusts etc
(1)
Schedule 20 contains—
(a)
amendments of provisions of IHTA 1984 relating to settled property,
20
(b)
amendments of provisions relating to property that, for purposes of
that Act, is property subject to a reservation, and
(c)
related amendments of provisions relating to chargeable gains.
(2)
Those amendments have effect as mentioned in that Schedule.
158
Purchase of interests in foreign trusts
25
(1)
Section 48 of IHTA 1984 (settled property: excluded property) is amended as
follows.
(2)
In subsection (3) (circumstances in which settled property situated outside the
United Kingdom is excluded property), after paragraph (b) insert—

“; but this subsection is subject to subsection (3B) below.”.
30
(3)
In subsection (3A) (circumstances in which a holding in an authorised unit
trust or a share in an open-ended investment company comprised in settled

Finance (No.2) Bill
Part 7 — Pensions
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property is excluded property), after paragraph (b) insert—

“; but this subsection is subject to subsection (3B) below.”.
(4)
After subsection (3A) insert—
“(3B)
Property is not excluded property by virtue of subsection (3) or (3A)
above if—
5
(a)
a person is, or has been, beneficially entitled to an interest in
possession in the property at any time,
(b)
the person is, or was, at that time an individual domiciled in the
United Kingdom, and
(c)
the entitlement arose directly or indirectly as a result of a
10
disposition made on or after 5th December 2005 for a
consideration in money or money’s worth.
(3C)
For the purposes of subsection (3B) above—
(a)
it is immaterial whether the consideration was given by the
person or by anyone else, and
15
(b)
the cases in which an entitlement arose indirectly as a result of
a disposition include any case where the entitlement arose
under a will or the law relating to intestacy.”.
(5)
If, in consequence of the amendments made by this section, an amount of
inheritance tax would (but for this subsection) fall due before the day on which
20
this Act is passed, that amount is to be treated instead as falling due at the end
of the period of 14 days beginning with that day.
(6)
This section is deemed to have come into force on 5th December 2005.
Part 7
Pensions
25
159
Taxable property held by investment-regulated pension schemes
(1)
Schedule 21 (taxable property held by investment-regulated pension schemes)
has effect.
(2)
This section and that Schedule are deemed to have come into force on 6th April
2006.
30
160
Recycling of lump sums
(1)
In Schedule 29 to FA 2004 (authorised lump sums), after paragraph 3 insert—
“3A   (1)
Where this paragraph applies in relation to a pension
commencement lump sum paid to the member, the pension scheme
is to be treated as making to the member an unauthorised payment
35
of the appropriate amount.
      (2)
Subject to sub-paragraphs (3) and (4), this paragraph applies in
relation to a pension commencement lump sum if—
(a)
because of the lump sum, the amount of the contributions
paid by or on behalf of, or in respect of, the member to the
40
pension scheme, or to any other registered pension scheme,
is significantly greater than it otherwise would be, and

Finance (No.2) Bill
Part 8 — Stamp taxes
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(b)
the member envisaged at the relevant time that that would be
so.
      (3)
This paragraph does not apply in relation to any lump sum paid to
the member on any day if the amount of the lump sum, when added
to any other pension commencement lump sum paid to the member
5
within the period of 12 months ending with that day, does not exceed
1 per cent. of the standard lifetime allowance on that day.
      (4)
This paragraph does not apply if the amount by which the
contributions paid as mentioned in sub-paragraph (2)(a) is greater
than it otherwise would be because of the lump sum does not exceed
10
30% of the amount of the lump sum.
      (5)
“The appropriate amount” is so much of—
(a)
the amount crystallised by the benefit crystallisation event
constituted by the payment of the lump sum, as does not
exceed
15
(b)
the amount of the member’s lifetime allowance which is
available on it.
      (6)
“The relevant time” is—
(a)
if paragraph (a) of sub-paragraph (2) is satisfied before the
lump sum is paid, the time when that paragraph is first
20
satisfied, and
(b)
otherwise, the time when the lump sum is paid.”
(2)
This section is deemed to have come into force on 6th April 2006.
161
Inheritance tax
(1)
Schedule 22 (provisions about inheritance tax in relation to registered pension
25
schemes) has effect.
(2)
This section and that Schedule are deemed to have come into force on 6th April
2006.
162
Miscellaneous
(1)
Schedule 23 (miscellaneous amendments relating to pension schemes etc) has
30
effect.
(2)
This section and that Schedule are deemed to have come into force on 6th April
2006.
Part 8
Stamp taxes
35
Stamp duty and stamp duty land tax: thresholds
163
Raising of thresholds
(1)
In section 55 of FA 2003 (amount of stamp duty land tax chargeable: general)
in subsection (2) (calculation of percentage of chargeable consideration), in

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Part 8 — Stamp taxes
136

Table A (bands and percentages for residential property), for “£120,000”, in
both places, substitute “£125,000”.
(2)
In Schedule 5 to FA 2003 (stamp duty land tax: amount of tax chargeable: rent),
in paragraph 2(3) (calculation of tax chargeable in respect of rent), in Table A
(bands and percentages for residential property), for “£120,000”, in both places,
5
substitute “£125,000”.
(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 “£120,000”, in
both places, substitute “£125,000”.
10
(4)
The amendments made by subsections (1) and (2) have effect in relation to any
transaction of which the effective date (within the meaning of Part 4 of FA
2003) is after 22nd March 2006.
(5)
The amendment made by subsection (3) has effect in relation to instruments
executed after 22nd March 2006.
15
Stamp duty land tax
164
Partnerships
Schedule 24 (amendments of Schedule 15 to FA 2003) has effect.
165
Leases
(1)
In section 77 of FA 2003 (notifiable transactions), for subsection (2A)
20
substitute—
“(2A)
The assignment of a lease is notifiable if there is chargeable
consideration for the assignment and either—
(a)
the lease is for a term of seven years or more, or
(b)
the consideration for the assignment is chargeable at a rate of
25
1% or higher, or would be so chargeable but for a relief.”
(2)
In Schedule 5 to FA 2003 (amount of tax chargeable: rent), in paragraph 3 (net
present value of rent payable over term of lease), for “in year i” substitute “in
respect of year i”.
(3)
Subsection (1) has effect in relation to any assignment of which the effective
30
date (within the meaning of Part 4 of FA 2003) is on or after the day on which
this Act is passed.
(4)
Subsection (2) has effect in relation to any lease granted or treated as granted
on or after that day.
(5)
Schedule 25 (amendments of Schedule 17A to FA 2003) has effect.
35
166
Reallocation of trust property as between beneficiaries
(1)
In Schedule 16 to FA 2003 (trusts and powers), after paragraph 7 insert—
“Reallocation of trust property as between beneficiaries
8
Where—

Finance (No.2) Bill
Part 8 — Stamp taxes
137

(a)
the trustees of a settlement reallocate trust property in such a
way that a beneficiary acquires an interest in certain trust
property and ceases to have an interest in other trust
property, and
(b)
the beneficiary consents to ceasing to have an interest in that
5
other property,

the fact that he gives consent does not mean that there is chargeable
consideration for the acquisition.”
(2)
Subsection (1) has effect in relation to any acquisition of which the effective
date (within the meaning of Part 4 of FA 2003) is on or after the day on which
10
this Act is passed.
167
Unit trust schemes
(1)
Part 4 of FA 2003 (stamp duty land tax) is amended as follows.
(2)
Omit section 64A (initial transfer of assets to trustees of unit trust scheme).
(3)
In section 101 (unit trust schemes)—
15
(a)
in subsection (1) (application of Part (except for provisions mentioned
in subsection (7)) to unit trust schemes) for “provisions” substitute
“provision”, and
(b)
in subsection (7) (provisions for the purposes of which unit trust
schemes not to be treated as companies) omit from “section 53” to
20
“companies), or”.
(4)
This section has effect in relation to any land transaction of which the effective
date is, or is after, 22nd March 2006 (but see subsections (5) and (6)).
(5)
This section does not have effect in relation to—
(a)
any land transaction which is effected in pursuance of a contract
25
entered into and substantially performed before 2 p.m. on 22nd March
2006 (“the relevant time”), or
(b)
any other land transaction which is effected in pursuance of a contract
entered into before the relevant time and which is not an excluded
transaction.
30
(6)
For this purpose, a land transaction effected in pursuance of a contract is an
excluded transaction if—
(a)
any provision of the contract has effect by reference to a unit trust
scheme and the scheme is not established before the relevant time,
(b)
at or after the relevant time the contract is varied in a way that
35
significantly affects the land transaction (see subsection (7)),
(c)
the subject-matter of the land transaction is not identified in the
contract in a way that would have enabled its acquisition before the
relevant time,
(d)
rights under the contract are assigned at or after the relevant time,
40
(e)
the land transaction is effected in consequence of the exercise, at or after
the relevant time, of any option, right of pre-emption or similar right, or
(f)
at or after the relevant time there is an assignment, subsale or other
transaction (relating to the whole or part of the contract’s subject-
matter) as a result of which a person other than the purchaser under the
45
contract becomes entitled to call for a conveyance to him.