Finance Bill

House of Commons

Session 2006 - 07
Internet Publications
Other Bills before Parliament

Finance Bill

Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
26

34
Schemes etc designed to increase double taxation relief
(1)
Section 804ZA of ICTA (schemes and arrangements designed to increase relief)
is amended as follows.
(2)
In subsection (8)(c), omit “resident in a territory outside the United Kingdom”.
(3)
After subsection (11) insert—
5
“(11A)
In this section “foreign tax” includes any tax which for the purpose of
allowing credit under any arrangements against corporation tax is
treated by section 801 as if it were tax payable under the law of any
territory outside the United Kingdom.”
(4)
The amendments made by this section have effect in relation to a credit for
10
foreign tax which relates to—
(a)
a payment of foreign tax on or after 6th December 2006, or
(b)
income received on or after that date in respect of which foreign tax has
been deducted at source,

but see also subsections (6) and (7).
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(5)
In subsection (4)—
(a)
references to foreign tax are to be construed in accordance with section
804ZA(11A) of ICTA (as inserted by subsection (3) above), and
(b)
the reference to tax deducted at source is to tax deducted (or treated as
deducted) from income or treated as paid in respect of income.
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(6)
The DTR anti-avoidance provisions have effect in relation to any action (or
failure to act) that occurs under any scheme or arrangement on or after 6th
December 2006 (as well as in relation to the cases mentioned in section 87(3) of
FA 2005 or subsection (4) above).
(7)
“The DTR anti-avoidance provisions” means section 804ZA of ICTA (as
25
amended by this section), sections 804ZB and 80ZC of that Act and Schedule
28AB to that Act.
Capital allowances
35
Industrial and agricultural buildings allowances
(1)
No balancing adjustment is to be made under Part 3 of CAA 2001 (industrial
30
buildings allowances) if—
(a)
the qualifying expenditure in question is not qualifying enterprise zone
expenditure for the purposes of that Part, and
(b)
the balancing event in question is a post-commencement balancing
event,
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and in paragraph (b) “post-commencement balancing event” means any
balancing event for the purposes of that Part which occurs on or after 21st
March 2007, but does not include an event which occurs before 1st April 2011
in pursuance of a relevant pre-commencement contract (see subsection (7)).
(2)
For the purposes of section 311 of that Act (calculation of allowance after sale
40
of relevant interest) the amount of the residue of qualifying expenditure
immediately after a post-commencement relevant event is taken to be the
amount of the residue of qualifying expenditure immediately before that
event.

Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
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(3)
In subsection (2)—
“qualifying expenditure” does not include any expenditure which is
qualifying enterprise zone expenditure for the purposes of that Part,
and
“post-commencement relevant event” means any relevant event within
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the meaning of section 311 of that Act which occurs on or after 21st
March 2007, but does not include an event which occurs before 1st
April 2011 in pursuance of a relevant pre-commencement contract.
(4)
No balancing adjustment is to be made under Part 4 of that Act (agricultural
buildings allowances) if the balancing event in question is a post-
10
commencement balancing event.
(5)
For the purposes of section 376 of that Act (calculation of allowance after
acquisition) the amount of the residue of qualifying expenditure immediately
after a post-commencement balancing event is taken to be the amount of the
residue of qualifying expenditure immediately before that event.
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(6)
In subsections (4) and (5) “post-commencement balancing event” means any
balancing event under section 381 of that Act (as a result of an election made in
accordance with section 382 of that Act) which occurs on or after 21st March
2007, but does not include an event which occurs before 1st April 2011 in
pursuance of a relevant pre-commencement contract.
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(7)
For the purposes of this section a contract is “a relevant pre-commencement
contract” if—
(a)
the contract is a contract in writing made before 21st March 2007,
(b)
the contract is unconditional or its conditions have been satisfied before
that date,
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(c)
no terms remain to be agreed on or after that date, and
(d)
the contract is not varied in a significant way on or after that date.
36
Temporary increase in first-year capital allowances for small enterprises
(1)
The amount of a first-year allowance under section 44 of CAA 2001
(expenditure incurred by small or medium-sized enterprises) is to be
30
determined, in the case of expenditure to which this subsection applies, as if
the percentage specified in the entry relating to that section in the Table in
section 52(3) of that Act were 50%.
(2)
Subsection (1) applies to expenditure incurred by a small enterprise (within the
meaning of section 44 of that Act) in the period of 12 months beginning with—
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(a)
1st April 2007, if the small enterprise is within the charge to corporation
tax, or
(b)
6th April 2007, if the small enterprise is within the charge to income tax.
(3)
Accordingly, in section 52(3) of CAA 2001, in the sentence following the Table,
insert at the end—
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“(c)
section 36 of the Finance Act 2007 (substitution of 50% in the
case of expenditure incurred by a small enterprise in 2007-08 or
financial year 2007).”

Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
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Insurance and friendly societies
37
Insurance companies: gross roll-up business etc
(1)
Part 1 of Schedule 7 contains provisions relating to gross roll-up business,
capital redemption business and miscellaneous minor matters relating to
insurance companies.
5
(2)
The amendments made by that Part of that Schedule have effect—
(a)
for the purposes of corporation tax, for periods of account of insurance
companies beginning on or after 1st January 2007, and
(b)
for the purposes of income tax, for the tax year 2007-08 and subsequent
tax years.
10
(3)
Subsection (2) is subject to the transitional provisions in Part 2 of that Schedule.
38
Insurance companies: basis of taxation etc
(1)
Part 1 of Schedule 8 contains provision about the basis of taxation of insurance
companies and related matters.
(2)
The amendments made by that Part of that Schedule have effect for periods of
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account of insurance companies beginning on or after 1st January 2007.
(3)
Subsection (2) is subject to the transitional provisions in Part 2 of that Schedule.
39
Insurance companies: transfers etc
Schedule 9 contains provision about transfers by insurance companies and
related matters.
20
40
Insurance companies: miscellaneous
Schedule 10 contains miscellaneous provisions relating to insurance
companies.
41
Technical provisions made by general insurers
Schedule 11 contains provision in relation to technical provisions made by
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general insurers.
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Lloyd’s: cessation of business by corporate members
(1)
In FA 1994, after section 227A (inserted by section 32) insert—
“227B
Transfer of underwriting business without change of ownership
(1)
This section applies where, in accordance with the rules or practice of
30
Lloyd’s, a corporate member (“the successor”) has taken up the
syndicate capacity of another corporate member (“the predecessor”).
(2)
Section 343 of the Taxes Act 1988 (company reconstructions without a
change of ownership) applies as if—
(a)
the trade mentioned in that section were the underwriting
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business of the predecessor,

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Part 3 — Income tax, corporation tax and capital gains tax
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(b)
the predecessor ceases to carry it on, and the successor begins to
carry it on, at the end of the first underwriting year in which
profits or losses of the predecessor’s last active underwriting
year are declared, and
(c)
subsections (8) to (10) and (12) were omitted.
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(3)
For the purposes of subsection (1) above the successor has taken up the
predecessor’s syndicate capacity if it has taken up the rights to
participate in syndicates which were (or otherwise would be) offered to
the predecessor.
(4)
In subsection (2)(b) above “last active underwriting year” has the same
10
meaning as in section 227A above (see subsections (2) to (4) of that
section).”
(2)
The amendment made by subsection (1) has effect in any case where the first
underwriting year in which profits or losses of the predecessor’s final
underwriting year are declared is 2007 or a later underwriting year.
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43
Transfers of business by friendly societies to insurance companies etc
Schedule 12 contains provisions about transfers of business by friendly
societies to insurance companies etc.
44
Tax exempt business of friendly societies
(1)
Section 462 of ICTA (conditions for tax exempt business) is amended as
20
follows.
(2)
For subsection (1) substitute—
“(1)
Subject to subsections (2) to (4) below, section 460 does not afford any
exemption from corporation tax in relation to so much of the profits
arising to a friendly society or insurance company from any business as
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is attributable to a policy which—
(a)
is not a qualifying policy (by virtue of sub-paragraph (2) of
paragraph 6(2) of Schedule 15) and is not an excluded policy,
and
(b)
would not be a qualifying policy (by virtue of that sub-
30
paragraph) if all excluded policies were left out of account.
(1A)
For the purposes of subsection (1) above a policy is an excluded policy
if—
(a)
it is a policy held otherwise than with the friendly society or
insurance company, or
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(b)
the person who has the contract effecting the policy acquired
the rights under it on an assignment (or, in Scotland,
assignation) otherwise than for money or money’s worth.”
(3)
In subsection (2), for “under section 460(1) for profits arising from any part of
a life or endowment” substitute “in relation to profits arising from any part of
40
a”.
(4)
In subsection (3), for the words after “section” substitute “460 does not afford
any exemption from corporation tax in relation to so much as is attributable to
that policy of the profits of the friendly society or insurance company
concerned.”
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Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
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(5)
In section 462A(8)(b) of ICTA (election to tax exempt business), for
““societies”” substitute ““policies””.
(6)
The amendments made by this section are deemed to have come into force on
1st January 2007.
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Purchased life annuities: self-assessment
5
(1)
In section 437(1C) of ICTA (general annuity business), omit paragraphs (c)(i)
and (d)(i).
(2)
In section 656 of that Act (purchased life annuities other than retirement
annuities), omit subsections (5) and (6).
(3)
In section 658 of that Act (supplementary), omit subsections (1) and (4) to (6).
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(4)
In section 828(4) of that Act (parliamentary procedure for orders and
regulations), omit “658(3)”.
(5)
In section 717 of ITTOIA 2005 (exemption for part of purchased life annuity
payment), omit subsection (3).
(6)
Omit section 723 of that Act (officer of Revenue and Customs to determine
15
certain questions).
(7)
In section 724 of that Act (regulations)—
(a)
in subsection (1)(a), for “723” substitute “722”, and
(b)
omit subsection (2).
(8)
In section 873(3) of that Act (parliamentary procedure for orders and
20
regulations), omit paragraph (b).
(9)
The amendments made by subsections (1) to (3) and (5) to (7) come into force
on such day as the Treasury may by order appoint; and different days may be
appointed for different purposes.
Repos
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Sale and repurchase of securities
(1)
Schedule 13 contains provision for corporation tax purposes about the sale and
repurchase of securities.
(2)
Schedule 14 contains minor and consequential amendments in relation to the
sale and repurchase of securities.
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(3)
The Treasury may by order make such other amendments (including repeals
and revocations) of enactments or instruments as may appear appropriate in
consequence of, or otherwise in connection with, those Schedules.
(4)
Schedule 13, and the amendments made by Schedule 14, have effect in
accordance with provision made by the Treasury by order.
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(5)
Any order under this section—
(a)
may make different provision for different purposes, and
(b)
may contain transitional provision and savings.