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
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(4)
Condition B is that—
(a)
at a time when the policy or contract was the taxable person’s,
the taxable person’s policies and contracts exceeded the
relevant threshold as respects a relevant period, and
(b)
premiums under the policy or contract were paid in that
5
relevant period.
(5)
In subsection (4)(a) “taxable person” means the person whose policy or
contract the policy or contract is, immediately before the chargeable
event.
(6)
For the purposes of subsection (4)(a) a person’s policies and contracts
10
“exceed the relevant threshold” as respects a relevant period if the total
amount of premiums under them paid in that relevant period exceeds
the sum specified in subsection (3).
(7)
In this section “relevant period” means—
(a)
the period beginning with the beginning of the tax year in
15
which the chargeable event occurs and ending with the
chargeable event, or
(b)
any of the 3 preceding tax years.
(8)
The Treasury may by order—
(a)
substitute another sum for the sum for the time being specified
20
in subsection (3);
(b)
amend the definition of “relevant period”.
541B
Section 541A: further definitions
(1)
This section supplements section 541A.
(2)
“Commission”, in relation to a policy or contract, includes any passing
25
of value to or for the benefit of an intermediary, or a person connected
with an intermediary, that can reasonably be taken to represent a
reward in respect of the policy or contract.
(3)
Commission in respect of a policy or contract is “reinvested” if, as a
result of a waiver of an entitlement to it, there is an increase in the total
30
value of a relevant person’s policies and contracts.
(4)
The amount of commission reinvested is the amount of the increase.
(5)
Commission in respect of a policy or contract is “rebated” if—
(a)
value passes (directly or indirectly) from an intermediary, or a
person connected with an intermediary, to or for the benefit of
35
a relevant person (and the passing of value does not amount to
the reinvestment of the commission), and
(b)
the passing of value can reasonably be taken to be in respect of
the commission.
(6)
The amount of commission rebated is the amount of value passed.
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(7)
A policy or contract is a person’s policy or contract if a gain arising in
connection with it would be—
(a)
a gain for which the person, or (if the person is an individual)
the person’s spouse or civil partner, would be liable to tax
under this Chapter, or
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(b)
treated by virtue of section 547(1) of ICTA as forming part of the
person’s income.
(8)
Any necessary apportionment is to be made (on a just and reasonable
basis) as regards—
(a)
commission which is attributable to two or more premiums,
5
and
(b)
any part of such commission that has been rebated or
reinvested.
(9)
Commission which is in respect of one or more policies or contracts
(but is not attributable to particular premiums) is to be attributed to
10
such premiums as is just and reasonable.
(10)
In subsections (3) and (5), “relevant person” means—
(a)
any of the policyholders (including any of the persons who hold
the contract),
(b)
a person who beneficially owns the rights under the policy or
15
contract,
(c)
if those rights are held on trust, any of the trustees, or
(d)
a person connected with a person within any of paragraphs (a)
to (c).”
(4)
The amendments made by this section have effect in relation to a policy or
20
contract if—
(a)
it is made on or after 21st March 2007, or
(b)
on or after that date, any of its terms are varied, or a right under it is
exercised, so as to increase the benefits under it.
29
Avoidance involving financial arrangements
25
Schedule 5 contains provision in relation to tax avoidance involving financial
arrangements.
30
Companies carrying on business of leasing plant or machinery
Schedule 6 contains provision in relation to companies carrying on a business
of leasing plant or machinery.
30
31
Restrictions on companies buying losses or gains: tax avoidance schemes
(1)
TCGA 1992 is amended as follows.
(2)
In section 184A(2) (losses accruing on disposals of pre-change assets not
deductible from gains unless gains accrue on disposals of pre-change assets),
omit “unless the gains accrue to the company on a disposal of a pre-change
35
asset”.
(3)
In section 184B(2) (losses not deductible from gains accruing on disposals of
pre-change assets unless losses accrue on disposals of pre-change assets), omit
“unless the loss accrues to the company on a disposal of a pre-change asset”.
(4)
Section 70 of FA 2006 (which inserted sections 184A to 184F of TCGA 1992) is
40
amended as follows.

Finance Bill
Part 3 — Income tax, corporation tax and capital gains tax
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(5)
In subsection (9) (special provision for qualifying changes of ownership and
disposals before 5th December 2005)—
(a)
for “The following subsection applies” substitute “Subsections (10) to
(12) apply”,
(b)
in paragraph (a), omit “or 184B”,
5
(c)
in paragraph (c), for “at all subsequent times,” substitute “immediately
afterwards,”,
(d)
after that paragraph insert—
“(ca)
no qualifying change of ownership occurs at any time in
relation to the principal company of that group for the
10
purposes of section 184A of TCGA 1992 directly or
indirectly in consequence of, or otherwise in connection
with, any arrangements the main purpose, or one of the
main purposes, of which is to secure a tax advantage
falling within subsection (1)(d) of that section, and”,
15
(e)
omit paragraph (d) (together with the “and” following it), and
(f)
in paragraph (e), omit “, or a qualifying gain for the purposes of section
184B of that Act,”.
(6)
For subsections (10) and (11) substitute—
“(10)
Subsection (2) of that section has effect in relation to that qualifying loss
20
subject to the following modifications.
(11)
That subsection has effect as if there were inserted at the end of it
“unless the gains accrue to the company on a disposal of a pre-change
asset”.
(12)
That subsection (modified as mentioned above) has effect as if the
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reference to a pre-change asset included an asset held before the
relevant time by any company—
(a)
which, immediately before that time, was a member of the same
group of companies as the relevant company, and
(b)
which, throughout the period beginning with that time and
30
ending immediately after the making of the disposal referred to
in that subsection, has remained under the control of the
company which was the principal company of that group at the
relevant time.
(13)
Expressions which are used in subsections (9) to (12) have the same
35
meaning as in sections 184A and 184C of TCGA 1992.”
(7)
The amendment made by subsection (2) has effect in relation to gains accruing
on disposals made on or after 21st March 2007.
(8)
The amendment made by subsection (3) has effect in relation to losses accruing
on disposals made on or after that date.
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(9)
The amendments made by subsections (5) and (6) have effect in relation to
disposals made on or after that date; but the amendment made by subsection
(5)(d) has no effect in relation to disposals made before 9th May 2007.

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Part 3 — Income tax, corporation tax and capital gains tax
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32
Lloyd’s corporate members: restriction of group relief
(1)
In FA 1994, after section 227 insert—
“227A
Restriction of group relief
(1)
Losses of the last active underwriting year of a corporate member are
not eligible for surrender by the corporate member as group relief to
5
another company unless the group-relief continuity condition is
satisfied.
(2)
In this section “last active underwriting year”, in relation to a corporate
member, means—
(a)
if the corporate member writes insurance business in only one
10
underwriting year, that underwriting year, and
(b)
otherwise, the last underwriting year in which the corporate
member writes insurance business.
(3)
Where in an underwriting year—
(a)
the corporate member writes an amount of insurance business
15
which is insignificant when compared with that written by it in
the preceding underwriting year, or
(b)
the only insurance business written by the corporate member
consists of the acceptance of reinsurance to close premiums,

the underwriting year is not to be regarded for the purposes of
20
subsection (2)(b) above as an underwriting year in which the corporate
member writes insurance business.
(4)
In subsection (3)(b) above “reinsurance to close premium” means a
premium or other consideration under a contract in pursuance of
which, in accordance with the rules or practice of Lloyd’s, one
25
underwriting member agrees with another to meet liabilities arising
from the latter’s underwriting business in an underwriting year so that
the accounts of the business for that year may be closed.
(5)
The group-relief continuity condition is satisfied if the corporate
member (as the surrendering company) and the other company (as the
30
claimant company) meet the conditions in section 402(2) or (3) of the
Taxes Act 1988 throughout the period—
(a)
beginning with the last day of the last active underwriting year
of the corporate member, and
(b)
ending with the first day of the first underwriting year in which
35
losses of the last active underwriting year are declared.”
(2)
The amendment made by subsection (1) has effect in relation to any case where
the corporate member (as the surrendering company) and the other company
(as the claimant company) first meet the conditions in section 402(2) or (3) of
ICTA on or after 21st March 2007.
40
33
Employee benefit contributions
(1)
Schedule 24 to FA 2003 (restriction on deductions for employee benefit
contributions) is amended as follows.
(2)
In paragraph 1 (restriction of deductions), for sub-paragraphs (1) and (2)

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Part 3 — Income tax, corporation tax and capital gains tax
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substitute—
    “(1)
This Schedule applies if, in calculating for corporation tax purposes
the profits of a person (“the employer”) for a period, a deduction
would otherwise be allowable for the period in respect of employee
benefit contributions made or to be made (but see paragraph 8).
5
      (2)
For the purposes of this Schedule, an “employee benefit
contribution” is made if, as a result of any act or omission—
(a)
property is held, or may be used, under an employee benefit
scheme, or
(b)
there is an increase in the total value of property that is so
10
held or may be so used (or a reduction in any liabilities under
an employee benefit scheme).”
(3)
In paragraph 3, for “the third party” substitute “a scheme manager”.
(4)
In paragraph 4—
(a)
in sub-paragraphs (1) and (2), for “the third party” (in both places)
15
substitute “a scheme manager”, and
(b)
in sub-paragraph (3), for “third party” substitute “scheme manager”.
(5)
In paragraph 5, for “the third party” (in both places) substitute “a scheme
manager”.
(6)
In paragraph 9(1) (interpretation)—
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(a)
after the definition of “relevant migrant member” insert—
““scheme manager” means a person who administers an
employee benefit scheme (acting in that capacity);”, and
(b)
omit the definition of “the third party”.
(7)
Part 2 of ITTOIA 2005 (trading income) is amended as follows.
25
(8)
In section 38 (restriction of deductions for employee benefit contributions), for
subsection (1) substitute—
“(1)
This section applies if, in calculating for income tax purposes the profits
of a trade of a person (“the employer”) for a period, a deduction would
otherwise be allowable for the period in respect of employee benefit
30
contributions made or to be made (but see subsection (4)).”
(9)
In section 39 (making of “employee benefit contributions), for subsection (1)
substitute—
“(1)
For the purposes of section 38, an “employee benefit contribution” is
made if, as a result of any act or omission—
35
(a)
property is held, or may be used, under an employee benefit
scheme, or
(b)
there is an increase in the total value of property that is so held
or may be so used (or a reduction in any liabilities under an
employee benefit scheme).”
40
(10)
In section 41 (timing and amount of certain benefits), for “the third party” (in
both places) substitute “a scheme manager”.
(11)
In section 42 (provision or payment out of employee benefit contributions)—

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(a)
in subsection (1), for “the third party”, in the first place, substitute “a
scheme manager” and, in the second place, substitute “the scheme
manager”,
(b)
in subsection (3), for “the third party”, in the first place, substitute “a
scheme manager” and, in the second place, substitute “the scheme
5
manager”, and
(c)
in subsection (5), for “third party” substitute “scheme manager”.
(12)
In section 44(1) (interpretation), for the definition of “the third party”
substitute—
““scheme manager” means a person who administers an
10
employee benefit scheme (acting in that capacity).”
(13)
The amendments made by this section have effect in relation to employee
benefit contributions made on or after 21st March 2007.
34
Schemes etc designed to increase double taxation relief
(1)
Section 804ZA of ICTA (schemes and arrangements designed to increase relief)
15
is amended as follows.
(2)
In subsection (8)(c), omit “resident in a territory outside the United Kingdom”.
(3)
After subsection (11) insert—
“(11A)
In this section “foreign tax” includes any tax which for the purpose of
allowing credit under any arrangements against corporation tax is
20
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
foreign tax which relates to—
(a)
a payment of foreign tax on or after 6th December 2006, or
25
(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).
(5)
In subsection (4)—
(a)
references to foreign tax are to be construed in accordance with section
30
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.
(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
35
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
amended by this section), sections 804ZB and 80ZC of that Act and Schedule
28AB to that Act.
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