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 3 — Income tax, corporation tax and capital gains tax
Chapter 4 — Charities
43

(3)
Part III of Schedule 20 to ICTA (apportionment of non-qualifying expenditure
to earlier chargeable periods) shall cease to have effect.
(4)
In section 256(1) of TCGA 1992 (charities) for “section 505(3)” substitute
“section 505(4)”.
(5)
This section shall have effect in relation to chargeable periods beginning on or
5
after 22nd March 2006; and—
(a)
section 505(5) and (6) of ICTA as substituted by subsection (1) above
may cause an amount to be treated as non-charitable expenditure of a
chargeable period beginning before that date, but
(b)
the amount of relief or exemption to be disallowed in respect of a
10
chargeable period beginning before that date shall not exceed the
amount which would have been disallowed in respect of that period if
sections 505 and 506 of ICTA (and Part III of Schedule 20) had not been
amended by this section.
56
Trade profits
15
(1)
In section 505 of ICTA (charities: exemptions) after subsection (1A) insert—
“(1B)
For the purpose of subsection (1)(e)—
(a)
where a trade is exercised partly in the course of the actual
carrying out of a primary purpose of the charity and partly
otherwise, each part shall be treated as a separate trade (for
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which purpose reasonable apportionment of expenses and
receipts shall be made), and
(b)
where the work in connection with the trade is carried out
partly but not mainly by beneficiaries, the part in connection
with which work is carried on by beneficiaries and the other
25
part shall be treated as separate trades (for which purpose
reasonable apportionment of expenses and receipts shall be
made).”
(2)
Subsection (1) shall have effect in respect of chargeable periods beginning on
or after 22nd March 2006.
30
57
Gift aid relief for companies wholly owned by one or more charities
(1)
Section 339 of ICTA (charges on income: donations to charity) is amended as
follows.
(2)
In subsection (1)(a) (distributions, other than those within section 209(4), not
qualifying donations)—
35
(a)
omit “except section 209(4)”, and
(b)
after “distribution” insert “(but see subsections (1A) and (1B) below)”.
(3)
After subsection (1) insert—
“(1A)
In determining whether a payment is to be regarded as a distribution
for the purposes of subsection (1)(a) above, the words in section 209(5)
40
from “; and any amount” to the end are to be disregarded.
(1B)
A payment (other than a dividend) made by a company which is
wholly owned by a charity is not to be regarded as a distribution for the
purposes of subsection (1)(a) above.”.

Finance (No.2) Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 5 — Personal taxation
44

(4)
The amendments made by this section have effect in relation to payments
made on or after 1st April 2006.
58
Extension of restrictions on gift aid payments by close companies
(1)
Section 339 of ICTA (charges on income: donations to charity) is amended as
follows.
5
(2)
In subsection (3B) (payment made by a close company not qualifying donation
if subject to repayment etc) for “close company” substitute “company”.
(3)
In subsection (3E) (payment made by a close company not qualifying donation
if it involves acquisition of property by charity, otherwise than by way of gift,
from the company or a connected person) for “close company” substitute
10
“company”.
(4)
The amendments made by this section have effect in relation to payments
made on or after 1st April 2006.
Chapter 5
Personal taxation
15
Cars
59
Cars with a CO2 emissions figure
(1)
Section 139 of ITEPA 2003 (car with a CO2 emissions figure: the appropriate
percentage) is amended as follows.
(2)
In subsection (1) (appropriate percentage dependent on whether emissions
20
figure exceeds lower threshold) for the words from “whether” to the end of the
subsection substitute “whether—
(a)
the car is a qualifying low emissions car for that year, or
(b)
the car’s CO2 emissions figure exceeds the lower threshold for
that year.”
25
(3)
After subsection (1) insert—
“(1A)
A car is a qualifying low emissions car for any year if—
(a)
it has a low CO2 emissions figure for that year, and
(b)
it is not an electrically propelled vehicle, within the meaning of
section 140.
30
(1B)
If the car is a qualifying low emissions car for the year, the appropriate
percentage is 10%.”.
(4)
For subsection (2) (emissions figure does not exceed lower threshold)
substitute—
“(2)
If—
35
(a)
the car is not a qualifying low emissions car for the year, but
(b)
its CO2 emissions figure does not exceed the lower threshold for
the year,

the appropriate percentage for the year is 15% (“the basic
percentage”).”.
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Finance (No.2) Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 5 — Personal taxation
45

(5)
After subsection (3) insert—
“(3A)
A car has a low CO2 emissions figure for a year if its CO2 emissions
figure does not exceed the limit for that year in the following Table—

Tax year
Limit (in g/km)

2008-09 and subsequent tax years
120”.

5
(6)
In the Table in subsection (4) (the lower threshold)—
(a)
in the entry relating to 2005-06 and subsequent tax years, for “and
subsequent tax years” substitute “, 2006-07 or 2007-08”, and
(b)
after that entry insert—

“2008-09 and subsequent tax
135”.

10

years

(7)
After subsection (5) (rounding down of emissions figures to nearest multiple
of 5) insert—
“(5A)
Subsection (5) does not apply for the purpose of determining whether
a car has a low CO2 emissions figure for a year.”.
15
(8)
In section 170 of ITEPA 2003 (orders etc relating to the Chapter) before
subsection (3) (order varying lower threshold) insert—
“(2A)
The Treasury may by order provide for a limit different from that
specified in the Table in section 139(3A) (car with a low CO2 emissions
figure) to apply for tax years beginning on or after 6th April 2009 or
20
such later date as may be specified in the order.”.
(9)
If a qualifying low emissions car is a car which, within the meaning of
regulations under section 170(4) of ITEPA 2003,—
(a)
is capable of being propelled by petrol and road fuel gas,
(b)
is capable of being propelled by electricity and petrol, or
25
(c)
is propelled solely by road fuel gas,

no reduction in the appropriate percentage is to be made by virtue of any such
regulations made before 22nd March 2006.
(10)
Subsections (2) to (5) and (7) to (9) have effect for the tax year 2008-09 and
subsequent tax years.
30
Mobile telephones and computers
60
Mobile telephones
(1)
In section 266(2) of ITEPA 2003 (exemption of non-cash vouchers for exempt
benefits), insert at the end “or
(d)
section 319 (mobile telephones).”
35
(2)
In section 267(2) of that Act (exemption of credit-tokens used for exempt

Finance (No.2) Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 5 — Personal taxation
46

benefits), after paragraph (f) insert—
“(g)
section 319 (mobile telephones).”
(3)
For section 319 of that Act (employment income: exemption for mobile
telephones), substitute—
“319
Mobile telephones
5
(1)
No liability to income tax arises by virtue of section 62 (general
definition of earnings) or Chapter 10 of Part 3 (taxable benefits: residual
liability to charge) in respect of the provision of one mobile telephone
for an employee without any transfer of property in it.
(2)
In this section “mobile telephone” means telephone apparatus which—
10
(a)
is not physically connected to a land-line, and
(b)
is not used only as a wireless extension to a telephone which is
physically connected to a land-line,

or any thing which may be used in such apparatus for the purpose of
gaining access to, or using, a public electronic communications service.
15
(3)
In this section the reference to the provision of a mobile telephone
includes a reference to the provision, together with the mobile
telephone provided, of access to, or the use of, a public electronic
communications service by means of one mobile telephone number.
(4)
For the purposes of subsection (2) “telephone apparatus” means
20
wireless telegraphy apparatus designed or adapted for the primary
purpose of transmitting and receiving spoken messages and used in
connection with a public electronic communications service.”
(4)
This section has effect for the year 2006-07 and subsequent years of assessment.
(5)
But the amendment made by subsection (3) does not cause any liability to
25
income tax to arise in respect of the provision of a mobile telephone for an
employee, or a member of an employee’s family or household, if the mobile
telephone was first provided to him before 6th April 2006.
61
Computer equipment
(1)
Omit section 320 of ITEPA 2003 (employment income: limited exemption for
30
computer equipment).
(2)
This section has effect for the year 2006-07 and subsequent years of assessment.
(3)
But it does not cause any liability to income tax to arise in respect of the
provision of computer equipment by making it available to an employee, or a
member of an employee’s family or household, if the computer equipment was
35
first made available to him before 6th April 2006.
Eye care
62
Exemption for employees’ eye tests and special glasses
(1)
Part 4 of ITEPA 2003 (employment income: exemptions) is amended as follows.
(2)
In Chapter 11 (miscellaneous exemptions), before section 321 (and the cross-
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Finance (No.2) Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 5 — Personal taxation
47

heading “Awards and gifts”) insert—
“Eye tests and special corrective appliances
320A
Eye tests and special corrective appliances
(1)
No liability to income tax arises in respect of the provision for an
employee of—
5
(a)
an eye and eyesight test, or
(b)
special corrective appliances that an eye and eyesight test
shows are necessary,

if conditions A and B are met.
(2)
Condition A is that the provision of the test or appliances is required by
10
regulations made under the Health and Safety at Work etc Act 1974.
(3)
Condition B is that tests and appliances of the kind mentioned in
subsection (1) are made available generally to those employees of the
employer in question for whom they are required to be provided by the
regulations.”
15
(3)
In section 266 (exemption of non-cash vouchers for exempt benefits), at the end
of subsection (3) insert “, or
(f)
section 320A (eye tests and special corrective appliances).”
(4)
In section 267 (exemption of credit-tokens used for exempt benefits), at the end
of subsection (2) insert “, and
20
(h)
section 320A (eye tests and special corrective appliances).”
(5)
This section has effect for the year 2006-07 and subsequent years of assessment.
Vouchers and tokens
63
Power to exempt use of vouchers or tokens to obtain exempt benefits
In Chapter 4 of Part 3 of ITEPA 2003 (taxable benefits: vouchers and credit-
25
tokens), after section 96 insert—
“96A
Power to exempt use of non-cash vouchers or credit-tokens to obtain
exempt benefits
(1)
The Treasury may by regulations provide for exemption from any
liability that would otherwise arise by virtue of this Chapter in respect
30
of—
(a)
non-cash vouchers which are or can be used to obtain specified
exempt benefits, or which evidence an employee’s entitlement
to specified exempt benefits;
(b)
credit-tokens which are used to obtain specified exempt
35
benefits.
(2)
In this section—
“exempt benefit” means a benefit the direct provision of which is
exempted from liability to income tax by a provision of Part 4
(employment income: exemptions), and
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“specified” means specified in the regulations.

Finance (No.2) Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 5 — Personal taxation
48

(3)
Regulations under this section may operate by amending section 266
(exemption of non-cash vouchers for exempt benefits) or section 267
(exemption of credit-tokens used for exempt benefits).”
Holocaust victims
64
Payments to or in respect of victims of National-Socialist persecution
5
(1)
In section 369 of ITTOIA 2005 (charge to tax on interest), in subsection (3) (non-
exhaustive list of exemptions), in paragraph (e) (exemptions under sections 749
to 756)—
(a)
for “756” substitute “756A”, and
(b)
for “and interest on certain foreign currency securities)” substitute “,
10
certain foreign currency securities and interest on certain deposits of
victims of National-Socialist persecution)”.
(2)
After section 756 of ITTOIA 2005 (which securities and loans are foreign
currency ones for section 755) insert—
“756A
  Interest on certain deposits of victims of National-Socialist
15
persecution
(1)
No liability to income tax arises in respect of interest which is paid—
(a)
to or in respect of a victim of National-Socialist persecution,
(b)
under a qualifying compensation scheme, and
(c)
for a qualifying purpose in respect of a qualifying deposit of the
20
victim.
(2)
A scheme is a qualifying compensation scheme if—
(a)
it is constituted (whether under the law of any part of the
United Kingdom or elsewhere) by an instrument in writing, and
(b)
the purpose of the scheme, or one of its purposes, is to make
25
payments of interest to or in respect of victims of National-
Socialist persecution for qualifying purposes in respect of
qualifying deposits.
(3)
Interest is paid for a qualifying purpose in respect of a deposit if—
(a)
it is paid for meeting a liability in respect of interest on the
30
deposit, or
(b)
it is paid for compensating for the effects of inflation on the
deposit.
(4)
In relation to a victim of National-Socialist persecution, a deposit is a
qualifying deposit if it was made—
35
(a)
by, or on behalf of, the victim, and
(b)
on or before 5th June 1945.
(5)
In this section “deposit” has the meaning given by section 481(3) of
ICTA.”.
(3)
In section 783 of ITTOIA 2005 (general disregard of exempt income for income
40
tax purposes)—
(a)
for subsection (2) (exception to general disregard) substitute—
“(2)
There are exceptions to this in the following cases.

Finance (No.2) Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 5 — Personal taxation
49

(2A)
Interest on deposits in ordinary accounts with the National
Savings Bank which is exempt under this Part from every
charge to income tax is not to be ignored for the purpose of
providing information.
(2B)
Interest paid to or in respect of victims of National-Socialist
5
persecution which is so exempt is not to be ignored for the
purposes of sections 17 and 18 of TMA 1970 (information
provisions relating to interest).”, and
(b)
in subsection (3) (subsection (2) without prejudice to other exceptions)
for “This express exception to subsection (1) is” substitute “These
10
express exceptions to subsection (1) are”.
(4)
After section 268 of TCGA 1992 (decorations for valour or gallant conduct)
insert—
“268A
  Victims of National-Socialist persecution
(1)
A gain accruing on a disposal is not a chargeable gain if it accrues on—
15
(a)
a disposal of the right to receive the whole or any part of a
qualifying payment in respect of National-Socialist persecution,
or
(b)
a disposal of an interest in any such right.
(2)
A payment is a qualifying payment in respect of National-Socialist
20
persecution if it is payable as mentioned in paragraphs (a) to (c) of
section 756A(1) of ITTOIA 2005 (income tax exemption for payments to
or in respect of victims of National-Socialist persecution).
(3)
In this section “interest”, in relation to any right, means an interest as a
co-owner of the right.
25
(4)
It does not matter—
(a)
whether the right is owned jointly or in common, or
(b)
whether or not the interests of the co-owners are equal.”.
(5)
If at any time before claims could have been made under any qualifying
compensation scheme—
30
(a)
a person beneficially entitled to a qualifying deposit has died, and
(b)
no information in respect of that deposit was contained in any account
relating to that deceased person under any provision of IHTA 1984,

that deposit is to be ignored for all purposes of IHTA 1984.
(6)
For this purpose “qualifying compensation scheme” and “qualifying deposit”
35
have the same meaning as in section 756A of ITTOIA 2005.
(7)
Subsection (2) has effect (and is deemed always to have had effect)—
(a)
for the year 1996-97, and
(b)
subsequent years of assessment.
(8)
Subsection (4) has effect (and is deemed always to have had effect) in relation
40
to disposals made on or after 6th April 1996; but no loss accruing on a disposal
made before 6th April 2006 is, as a result of that subsection, to cease to be an
allowable loss.
(9)
In relation to any time before 6th April 2005 (the commencement of ITTOIA
2005)—
45