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
43

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
the armed forces of the Crown of the Operational Allowance.
5
(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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Service charge income
10
(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
respect of dwellings in the United Kingdom and are held on trust.”
15
(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).”
(4)
The amendments made by this section have effect for the tax year 2007-08 and
20
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)
substitute—
25
    “(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.”
(2)
The amendment made by subsection (1) is deemed to have come into force on
30
21st March 2007.
66
Unpaid remuneration and employee benefit contributions
(1)
Section 31 of ITTOIA 2005 (relationship between rules prohibiting and
allowing deductions: trading income) is amended as follows.
(2)
In subsection (1) (priority of relevant permissive rules over relevant
35
prohibitive rules), in paragraph (b) (sections to which that priority rule is
subject), for “sections 48 (car or motor cycle hire) and” substitute “section 36
(unpaid remuneration), section 38 (employee benefit contributions), section 48
(car or motor cycle hire) and section”.

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Part 5 — SDLT, stamp duty and SDRT
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(3)
In subsection (3) (meaning of “relevant prohibitive rule”), after “sections”
insert “36, 38,”.
(4)
Section 274 of ITTOIA 2005 (provision corresponding to section 31 of that Act
in case of property income) is amended as follows.
(5)
In subsection (1)(b), for “sections 48 (car or motor cycle hire) and” substitute
5
“section 36 (unpaid remuneration), section 38 (employee benefit
contributions), section 48 (car or motor cycle hire) and section”.
(6)
In subsection (3), after “sections” insert “36, 38,”.
(7)
The amendments made by this section have effect for the tax year 2007-08 and
subsequent tax years.
10
Part 4
Pensions
67
Abolition of contributions relief for life assurance premium contributions
Schedule 18 contains provisions denying relief for contributions made by or on
behalf of members in respect of life assurance premiums.
15
68
Alternatively secured pensions etc
Schedule 19 contains provisions about alternatively secured pensions and
transfer lump sum death benefit etc.
69
Miscellaneous
Schedule 20 contains miscellaneous provisions about registered pension
20
schemes and employer-financed retirement benefits schemes.
Part 5
SDLT, stamp duty and SDRT
SDLT: anti-avoidance provisions
70
Anti-avoidance
25
(1)
In FA 2003, after section 75 insert (in place of the section inserted by the Stamp
Duty Land Tax (Variation of the Finance Act 2003) Regulations 2006 (S.I. 2006/
3237))—
“75A
Anti-avoidance
(1)
This section applies where—
30
(a)
one person (V) disposes of a chargeable interest and another
person (P) acquires either it or a chargeable interest deriving
from it,
(b)
a number of transactions (including the disposal and
acquisition) are involved in connection with the disposal and
35
acquisition (“the scheme transactions”), and

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Part 5 — SDLT, stamp duty and SDRT
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(c)
the sum of the amounts of stamp duty land tax payable in
respect of the scheme transactions is less than the amount that
would be payable on a notional land transaction effecting the
acquisition of V’s chargeable interest by P on its disposal by V.
(2)
In subsection (1) “transaction” includes, in particular—
5
(a)
a non-land transaction,
(b)
an agreement, offer or undertaking not to take specified action,
(c)
any kind of arrangement whether or not it could otherwise be
described as a transaction, and
(d)
a transaction which takes place after the acquisition by P of the
10
chargeable interest.
(3)
The scheme transactions may include, for example—
(a)
the acquisition by P of a lease deriving from a freehold owned
or formerly owned by V;
(b)
a sub-sale to a third person;
15
(c)
the grant of a lease to a third person subject to a right to
terminate;
(d)
the exercise of a right to terminate a lease or to take some other
action;
(e)
an agreement not to exercise a right to terminate a lease or to
20
take some other action;
(f)
the variation of a right to terminate a lease or to take some other
action.
(4)
Where this section applies—
(a)
any of the scheme transactions which is a land transaction shall
25
be disregarded for the purposes of this Part, but
(b)
there shall be a notional land transaction for the purposes of this
Part effecting the acquisition of V’s chargeable interest by P on
its disposal by V.
(5)
The chargeable consideration on the notional transaction mentioned in
30
subsections (1)(c) and (4)(b) is the largest amount (or aggregate
amount)—
(a)
given by or on behalf of any one person by way of consideration
for the scheme transactions, or
(b)
received by or on behalf of V (or a person connected with V
35
within the meaning of section 839 of the Taxes Act 1988) by way
of consideration for the scheme transactions.
(6)
The effective date of the notional transaction is—
(a)
the last date of completion for the scheme transactions, or
(b)
if earlier, the last date on which a contract in respect of the
40
scheme transactions is substantially performed.
(7)
This section does not apply where subsection (1)(c) is satisfied only by
reason of—
(a)
sections 71A to 73, or
(b)
a provision of Schedule 9.
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75B
Anti-avoidance: incidental transactions
(1)
In calculating the chargeable consideration on the notional transaction
for the purposes of section 75A(5), consideration for a transaction shall
be ignored if or in so far as the transaction is merely incidental to the
transfer of the chargeable interest from V to P.
5
(2)
A transaction is not incidental to the transfer of the chargeable interest
from V to P—
(a)
if or in so far as it forms part of a process, or series of
transactions, by which the transfer is effected,
(b)
if the transfer of the chargeable interest is conditional on the
10
completion of the transaction, or
(c)
if it is of a kind specified in section 75A(3).
(3)
A transaction may, in particular, be incidental if or in so far as it is
undertaken only for a purpose relating to—
(a)
the construction of a building on property to which the
15
chargeable interest relates,
(b)
the sale or supply of anything other than land, or
(c)
a loan to P secured by a mortgage, or any other provision of
finance to enable P, or another person, to pay for part of a
process, or series of transactions, by which the chargeable
20
interest transfers from V to P.
(4)
In subsection (3)—
(a)
paragraph (a) is subject to subsection (2)(a) to (c),
(b)
paragraph (b) is subject to subsection (2)(a) and (c), and
(c)
paragraph (c) is subject to subsection (2)(a) to (c).
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(5)
The exclusion required by subsection (1) shall be effected by way of just
and reasonable apportionment if necessary.
(6)
In this section a reference to the transfer of a chargeable interest from V
to P includes a reference to a disposal by V of an interest acquired by P.
75C
Anti-avoidance: supplemental
30
(1)
A transfer of shares or securities shall be ignored for the purposes of
section 75A if but for this subsection it would be the first of a series of
scheme transactions.
(2)
The notional transaction under section 75A attracts any relief under this
Part which it would attract if it were an actual transaction (subject to the
35
terms and restrictions of the relief).
(3)
The notional transaction under section 75A is a land transaction
entered into for the purposes of or in connection with the transfer of an
undertaking or part for the purposes of paragraphs 7 and 8 of Schedule
7, if any of the scheme transactions is entered into for the purposes of
40
or in connection with the transfer of the undertaking or part.
(4)
In the application of section 75A(5) no account shall be taken of any
amount paid by way of consideration in respect of a transaction to
which any of sections 60, 61, 63, 64, 65, 66, 67, 69, 71, 74 and 75, or a
provision of Schedule 6A or 8, applies.
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Finance Bill
Part 5 — SDLT, stamp duty and SDRT
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(5)
In the application of section 75A(5) an amount given or received partly
in respect of the chargeable interest acquired by P and partly in respect
of another chargeable interest shall be subjected to just and reasonable
apportionment.
(6)
Section 53 applies to the notional transaction under section 75A.
5
(7)
Paragraph 5 of Schedule 4 applies to the notional transaction under
section 75A.
(8)
For the purposes of section 75A—
(a)
an interest in a property-investment partnership (within the
meaning of paragraph 14 of Schedule 15) is a chargeable interest
10
in so far as it concerns land owned by the partnership, and
(b)
where V or P is a partnership, Part 3 of Schedule 15 applies to
the notional transaction as to the transfer of a chargeable
interest from or to a partnership.
(9)
For the purposes of section 75A a reference to an amount of
15
consideration includes a reference to the value of consideration given
as money’s worth.
(10)
Stamp duty land tax paid in respect of a land transaction which is to be
disregarded by virtue of section 75A(4)(a) is taken to have been paid in
respect of the notional transaction by virtue of section 75A(4)(b).
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(11)
The Treasury may by order provide for section 75A not to apply in
specified circumstances.
(12)
An order under subsection (11) may include incidental, consequential
or transitional provision and may make provision with retrospective
effect.”
25
(2)
The amendment made by subsection (1) has effect in respect of disposals and
acquisitions if the disposal mentioned in new section 75A(1)(a) (inserted by
that subsection) takes place on or after 6th December 2006.
(3)
But—
(a)
the transitional provisions of sub-paragraphs (2) to (5) of paragraph 1
30
of the Schedule to the Stamp Duty Land Tax (Variation of the Finance
Act 2003) Regulations 2006 (S.I. 2006/3237) continue to have effect in
relation to this section as in relation to that paragraph, and
(b)
a provision of new section 75C (inserted by subsection (1) above) shall
not have effect where the disposal mentioned in new section 75A(1)(a)
35
took place before the day on which this Act is passed, if or in so far as
the provision would make a person liable for a higher amount of tax
than would have been charged in accordance with those regulations.
71
Partnerships
(1)
Schedule 15 to FA 2003 (stamp duty land tax: partnerships) is amended as
40
follows.
(2)
A reference in this section to a provision of that Schedule is to the provision as
it had effect before variation by the Stamp Duty Land Tax (Variation of the
Finance Act 2003) Regulations 2006.

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(3)
In Step Two of paragraph 12(1) (transfer to partnership: how to calculate the
“sum of the lower proportions”)—
(a)
in paragraph (b), for “or is connected with the relevant owner”
substitute “or is an individual connected with the relevant owner”, and
(b)
insert at the end—
5

“(If there is no relevant owner with a corresponding partner, the
sum of the lower proportions is nil.)”
(4)
In paragraph 12, after sub-paragraph (2) insert—
    “(3)
For the purpose of paragraph (b) of Step 2 a company is to be treated
as an individual connected with the relevant owner in so far as it—
10
(a)
holds property as trustee, and
(b)
is connected with the relevant owner only because of section
839(3) of the Taxes Act 1988.”
(5)
Omit paragraph 13 (transfer to partnership where all partners are companies).
(6)
In paragraph 14 (transfer of interest in property-investment partnership)—
15
(a)
omit sub-paragraphs (1)(b) and (4), and
(b)
insert at the end—
    “(9)
An interest in respect of the transfer of which this paragraph
applies shall be treated as a chargeable interest for the
purposes of paragraph 3(1) of Schedule 7 to the extent that
20
the relevant partnership property consists of a chargeable
interest.”,

and in the italic cross-heading before it, omit “for consideration”.
(7)
In Step Two of paragraph 20(1) (transfer from partnership: how to calculate the
“sum of the lower proportions”)—
25
(a)
in paragraph (b), for “or was connected with the relevant owner”
substitute “or was an individual connected with the relevant owner”,
and
(b)
insert at the end—

“(If there is no relevant owner with a corresponding partner, the
30
sum of the lower proportions is nil.)”
(8)
In paragraph 20, after sub-paragraph (2) insert—
    “(3)
For the purpose of paragraph (b) of Step 2 a company is to be treated
as an individual connected with the relevant owner in so far as it—
(a)
holds property as trustee, and
35
(b)
is connected with the relevant owner only because of section
839(3) of the Taxes Act 1988.”
(9)
After paragraph 27 insert—
“27A  (1)
This paragraph applies where in calculating the sum of the lower
proportions in relation to a transaction (in accordance with
40
paragraph 12)—
(a)
a company (“the connected company”) would have been a
corresponding partner of a relevant owner (“the original
owner”) but for the fact that paragraph (b) of Step Two
includes connected persons only if they are individuals, and
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Finance Bill
Part 5 — SDLT, stamp duty and SDRT
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(b)
the connected company and the original owner are members
of the same group.
      (2)
The charge in respect of the transaction shall be reduced to the
amount that would have been payable had the connected company
been a corresponding partner of the original owner for the purposes
5
of calculating the sum of the lower proportions.
      (3)
The provisions of Part 1 of Schedule 7 apply to group relief under
sub-paragraph (2) above as to group relief under paragraph 1(1) of
Schedule 7, but—
(a)
with the omission of paragraph 2(2)(a),
10
(b)
with the substitution for “the purchaser” in paragraph 3(1)(a)
of “a partner who was, at the effective date of the transaction,
a partner and a member of the same group as the transferor
(“the relevant partner”)”, and
(c)
with the other modifications specified in paragraph 27(3) to
15
(6) above.”
(10)
For paragraph 36 substitute—
“36
For the purposes of this Part of this Schedule, where a person
acquires or increases a partnership share there is a transfer of an
interest in the partnership (to that partner and from the other
20
partners).”
(11)
In paragraph 39 (“connected persons”), insert at the end—
    “(3)
As applied by sub-paragraph (1) for the purposes of paragraph 12 or
20, that section has effect with the omission of subsection (3)(c)
(trustee connected with settlement).”
25
(12)
In Schedule 16 to FA 2003 (trusts and powers)—
(a)
in paragraph 3(1) (bare trust), after “a chargeable interest” insert “or an
interest in a partnership”, and
(b)
in paragraph 4 (trustees of settlement), after “a chargeable interest”
insert “or an interest in a partnership”.
30
(13)
The amendments made by subsections (1) to (11) have effect in respect of
transfers occurring on or after the day on which this Act is passed.
(14)
But the amendments made by subsections (6) and (10) do not have effect in
respect of anything done in respect of a property-investment partnership
established before the day on which this Act is passed if—
35
(a)
the partnership does not acquire a chargeable interest on or after that
day, and
(b)
stamp duty land tax was paid in respect of each chargeable interest
acquired before that day, by reference to chargeable consideration of
not less than the market value.
40
(15)
The amendment made by subsection (12) has effect in respect of acquisitions
occurring on or after the day on which this Act is passed.
(16)
An amendment made by this section replaces, to the extent provided for by
subsections (13) to (15), any variation made by the Stamp Duty Land Tax
(Variation of the Finance Act 2003) Regulations 2006 (S.I. 2006/3237).
45