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
38

55
Trust gains on contracts for life insurance
(1)
Section 498 of ITA 2007 (trustees’ tax pool) is amended as follows.
(2)
In subsection (1)—
(a)
in Type 1, for “2 or 3” substitute “2, 3 or 3A”, and
(b)
after Type 3 insert—
5

“Type 3A

The amount of tax at the nominal rate on any amount in respect of
which—
(a)
the trustees are liable to income tax under section 467 of ITTOIA
2005 (gains from contracts for life insurance etc),
10
(b)
the trustees are liable to income tax at the trust rate by virtue of
section 482 above, and
(c)
tax at the savings rate is treated as having been paid by virtue
of section 530 of ITTOIA 2005 (life insurance).”
(3)
After subsection (2) insert—
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“(2A)
In relation to Type 3A, the reference to the nominal rate is a reference
to a rate equal to the difference between the trust rate and the savings
rate.”
(4)
The amendments made by this section have effect in relation to gains arising to
the trustees of a settlement on or after 6th April 2007.
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Other corporation tax measures
56
Offshore funds
(1)
In section 396 of ICTA (corporation tax: setting off of Case VI losses), in
subsection (2) (losses to which subsection (1) does not apply), insert at the end
“or on a disposal to which Chapter 5 of Part 17 applies.”
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(2)
In section 756A of ICTA (definition of “offshore fund”), for subsection (3)
substitute—
“(3)
In this section “collective investment scheme” means any arrangements
which are a collective investment scheme for the purposes of Part 17 of
the Financial Services and Markets Act 2000 (see section 235 of that Act
30
and orders made under subsection (5) of that section) or would be if the
words “, within a period appearing to him to be reasonable,” were
omitted from 236(3)(a) of that Act.”
(3)
In section 842 of ICTA (investment trusts), after subsection (3) insert—
“(3A)
References in this section to income do not include income treated as
35
arising under section 761(1)(a).”
(4)
In Schedule 27 to ICTA (distributing funds), in sub-paragraph (1)(c) of
paragraph 6 (investments of offshore fund in other offshore funds which could,
apart from that paragraph, be certified as distributing funds not to count
towards limit in section 760(3)(a)), omit “without regard to the provisions of
40
this paragraph,”.
(5)
In section 152 of ITA 2007 (losses from miscellaneous transactions), in
subsection (8), insert at the end “except that income on which income tax is

Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
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charged under section 761(1)(b)(i) of ICTA is not “section 1016 income” for the
purposes of subsection (2)(a)”.
(6)
The amendment made by subsection (1) has effect in relation to disposals on or
after 1st April 2007.
(7)
The amendment made by subsection (2) is deemed to have come into force on
5
1st January 2007.
(8)
The amendment made by subsection (3) has effect in relation to accounting
periods beginning on or after the day on which this Act is passed.
(9)
The amendment made by subsection (4) has effect in relation to account
periods (within the meaning of Chapter 5 of Part 17 of ICTA) beginning on or
10
after 1st January 2007.
(10)
The amendment made by subsection (5) has effect in relation to transactions on
or after 6th April 2007.
57
Election out of special film rules for film production companies
(1)
In section 32 of FA 2006 (meaning of “film production company”), insert at the
15
end—
“(7)
A company may elect to be regarded as a company which does not
meet the description in subsection (3) or (4).
(8)
The election—
(a)
must be made by the company by being included in its
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company tax return for an accounting period (and may be
included in the return originally made or by amendment), and
(b)
may be withdrawn by the company only by amending its
company tax return for that accounting period.
(9)
The election has effect in relation to films which commence principal
25
photography in that or any subsequent accounting period.
(10)
“Company tax return” has the same meaning as in Schedule 18 to FA
1998 (see paragraph 3(1)).”
(2)
In paragraph 10 of Schedule 18 to FA 1998 (other claims and elections to be
included in company tax return), insert at the end—
30
    “(5)
An election under section 32(7) of the Finance Act 2006 (election not
to be a film production company) can only be made by being
included in a company tax return (see section 32(8)(a) of that Act).”
58
Securitisation companies
(1)
Section 83 of FA 2005 (continued application of old UK GAAP to securitisation
35
companies during transitional period) is amended as follows.
(2)
In subsection (1)(b) (old UK GAAP to apply to periods of account ending
before 1st January 2008), insert at the beginning “(subject to subsection
(7A)(a))”.
(3)
After subsection (7) insert—
40
“(7A)
The Treasury may by regulations—

Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
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(a)
make provision for subsection (1) to apply in relation to periods
of account ending on or after 1st January 2008 but before a date
specified by the regulations, and
(b)
make provision modifying any provision of, or made under, the
Corporation Tax Acts in relation to the first period of account of
5
securitisation companies in the case of which subsection (1)
does not apply (whether by virtue of that subsection itself or
regulations under paragraph (a)).
(7B)
Regulations under subsection (7A)(a) may, in particular—
(a)
specify a date only in relation to specified descriptions of
10
company,
(b)
specify different dates in relation to different descriptions of
company, and
(c)
include provision for a company to elect that the regulations are
to apply to it or provision for a company to elect that they are
15
not to apply to it.”
(4)
Section 84 of FA 2005 (power to make provision as to application of
Corporation Tax Acts in relation to securitisation companies) is amended as
follows.
(5)
In subsection (3)(d), for “to that effect is made,” substitute “that they are to
20
apply is made or that the regulations do not apply to a company if an election
that they are not to apply is made,”.
(6)
For subsection (5) substitute—
“(5)
The regulations—
(a)
may make incidental, supplementary, consequential or
25
transitional provision or savings (including provision
amending any provision of, or made under, the Taxes Acts
(within the meaning of section 118(1) of TMA 1970), and
(b)
may include provision having effect (in the case of provision
relating to corporation tax) from the beginning of periods of
30
account current when the regulations are made or (in the case of
provision relating to income tax or capital gains tax) in relation
to times before the regulations are made.”
Other income tax measures
59
Gift aid: limits
35
(1)
In section 418 of ITA 2007 (donations to charity by individuals: limits)—
(a)
in subsection (2)(c), for “2.5%” substitute “5%”, and
(b)
in subsection (3), for “£250” substitute “£500”.
(2)
In section 339 of ICTA (donations to charity)—
(a)
in subsection (3B)(b), for “£250” substitute “£500”, and
40
(b)
in subsection (3DA)(c), for “2.5 per cent” substitute “5 per cent”.
(3)
The amendment made by subsection (1) has effect in relation to gifts made on
or after 6th April 2007.

Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
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(4)
The amendment made by subsection (2) has effect in relation to gifts made in
an accounting period ending on or after 6th April 2007.
60
Enterprise management incentives: excluded activities
(1)
In Part 3 of Schedule 5 to ITEPA 2003 (enterprise management incentives:
qualifying companies), in paragraph 19(4) (excluded activities: receipt of
5
royalties or licence fees), for paragraphs (a) and (b) substitute—
“(a)
by the relevant company, or
(b)
by a company which was a qualifying subsidiary of the
relevant company at all times during which it created the
intangible asset.”
10
(2)
The amendment made by subsection (1) has effect in relation to options
granted on or after 6th April 2007.
(3)
It also has effect in relation to a qualifying option within subsection (4), for the
purpose of determining at any time on or after that date whether an activity is
an excluded activity.
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(4)
An option is within this subsection if it was granted before 6th April 2007 and,
immediately before that date—
(a)
it had not been exercised, and
(b)
no disqualifying event had occurred in relation to it.
(5)
Subsection (6) applies in respect of an option within subsection (4) if—
20
(a)
immediately before 6th April 2007—
(i)
the right to exploit an intangible asset (“the asset”) was vested
in the relevant company or a subsidiary of it (in either case,
alone or jointly with others), and
(ii)
the asset was a relevant intangible asset,
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(b)
at any time on or after that date, an activity carried on by the relevant
company or a subsidiary of it would be an excluded activity by reason
only of the receipt of royalties or licence fees attributable to the
exploitation of the asset, and
(c)
the activity would not be an excluded activity if the amendment made
30
by subsection (1) had not been made.
(6)
The activity is to be treated, in relation to the option, as not being an excluded
activity at that time.
61
Benefits code: whether employment is “lower-paid employment”
(1)
In section 219 of ITEPA 2003 (exclusion of lower-paid employments from parts
35
of benefits code: extra amounts to be added in connection with a car), omit
subsections (5) and (6).
(2)
The repeal made by subsection (1) has effect for the tax year 2007-08 and
subsequent tax years.
62
Armed forces redundancy schemes
40
(1)
In section 411 of ITEPA 2003 (exception for payments and benefits for forces),

Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
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the existing provision becomes subsection (1) and after that subsection insert—
“(2)
This Chapter does not apply to a payment or other benefit provided
under a scheme established by an order under section 1(1) of the Armed
Forces (Pensions and Compensation) Act 2004.”
(2)
The amendments made by subsection (1) have effect for the tax year 2006-07
5
and subsequent tax years.
63
Armed forces: the Operational Allowance
(1)
In ITEPA 2003, after section 297 insert—
“297A
Armed forces: the Operational Allowance
(1)
No liability to income tax arises in respect of payments to members of
10
the armed forces of the Crown of the Operational Allowance.
(2)
The Operational Allowance is an allowance designated as such by the
Secretary of State.”
(2)
The amendment made by subsection (1) has effect in relation to payments
whenever made.
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64
Service charge income
(1)
Section 480 of ITA 2007 (meaning of “accumulated or discretionary income”) is
amended as follows.
(2)
In subsection (3)(c) (income from service charges held on trust by relevant
housing body), for the words after “charges” substitute “which are paid in
20
respect of dwellings in the United Kingdom and are held on trust.”
(3)
For subsections (5) and (6) substitute—
“(5)
In subsection (3)(c) “service charges” has the meaning given by section
18 of the Landlord and Tenant Act 1985 (but as if that section also
applied in relation to dwellings in Scotland and Northern Ireland).”
25
(4)
The amendments made by this section have effect for the tax year 2007-08 and
subsequent tax years.
65
Charge on benefits received by former owner of property: late elections
(1)
In paragraph 23 of Schedule 15 to FA 2004 (charge to income tax on benefits
received by former owner of property), for sub-paragraphs (3) and (4)
30
substitute—
    “(3)
The election must be made on or before—
(a)
the relevant filing date, or
(b)
such later date as an officer of Revenue and Customs may, in
a particular case, allow.”
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(2)
The amendment made by subsection (1) is deemed to have come into force on
21st March 2007.