Finance Bill

House of Commons

Session 2007 - 08
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Finance Bill

Finance Bill
Schedule 17 — Insurance companies etc
249

payable which fall to be brought into account for that accounting period at
Step 1 in section 76(7) of the Taxes Act 1988”.
      (5)
In paragraph 24 (entitlement to life assurance company tax credit), omit—
(a)
in sub-paragraph (3), “or (13)”, in the first place, and
(b)
in sub-paragraph (2)(b), “or (13)”, “and charges on income” and “and
5
charges”.
      (6)
In paragraph 27(1) (restriction on carrying forward expenses payable)—
(a)
in paragraph (a), omit “or (13)”, and
(b)
in paragraph (b), omit “for the next accounting period”.
      (7)
The amendments made by this paragraph have effect in relation to
10
accounting periods beginning on or after 1 January 2008.
Repeal of ICTA s.56(4)
22    (1)
In section 56 of ICTA (transactions in deposits and debts), omit subsection
(4) (which relates to section 76(2) computations and is spent).
      (2)
In consequence of sub-paragraph (1), in section 164 of FA 1996, omit
15
subsection (4) (which amends section 56(4) of ICTA).
Partnership returns
23
In section 12AE(2) of TMA 1970 (partnership returns: alternative methods
for bringing amounts into charge to tax), for “84(2) or (3)” substitute “84(1)”.
Overseas life assurance business
20
24    (1)
Section 431D of ICTA (meaning of “overseas life assurance business”) is
amended as follows.
      (2)
In subsections (2) and (4), for “Board” substitute “Commissioners”.
      (3)
In subsection (3), for “Board” substitute “Commissioners for Her Majesty’s
Revenue and Customs”.
25
25    (1)
In section 476(3) of ITTOIA 2005 (foreign policies), omit—
(a)
“as a result of section 431D(1)(a) of ICTA (business with a non-UK
resident policy holder)”, and
(b)
“as a result of section 431D(1) of ICTA”.
      (2)
In consequence of sub-paragraph (1), omit paragraph 78 of Schedule 7 to FA
30
2007.
      (3)
The amendments made by this paragraph have effect as if they were made
by Schedule 7 to FA 2007 (see section 38(2) of that Act).
Trades in I minus E
26    (1)
In section 53 of ICTA (farming and market gardening and managing land on
35
commercial basis for profit), insert at the end—
“(5)
The preceding provisions of this section do not apply in relation to—

Finance Bill
Schedule 17 — Insurance companies etc
250

(a)
farming or market gardening by an insurance company on
land which is an asset of the company’s long-term insurance
fund, or
(b)
the occupation by an insurance company of land which is
such an asset for a purpose other than farming or market
5
gardening.”
      (2)
In section 55 of ICTA (mines, quarries etc), insert at the end—
“(3)
Subsection (1) does not apply in relation to any concern carried on by
an insurance company on land which is an asset of the company’s
long-term insurance fund.”
10
      (3)
In section 432AB(5) (losses from Schedule A business etc), for “section 392A
or 392B” substitute “sections 392A and 503, or section 392B,”.
      (4)
The amendments made by this paragraph have effect in relation to
accounting periods beginning on or after 1 January 2008.
Controlled foreign companies
15
27    (1)
In paragraph 4(1A) of Schedule 25 to ICTA (controlled foreign companies),
for “436, 439B or 441” substitute “436A”.
      (2)
The amendment made by sub-paragraph (1) has effect in relation to
accounting periods beginning on or after 1 January 2008.
Offshore income gains
20
28    (1)
In section 757 of ICTA (disposals to which Chapter 5 of Part 17 of that Act
applies), after subsection (1) insert—
“(1A)
But this Chapter does not apply to disposals of assets of an insurance
company’s long-term insurance fund.”
      (2)
The amendment made by sub-paragraph (1) has effect in relation to
25
disposals made in accounting periods beginning on or after 1 January 2008.
Transfers of business
29    (1)
In section 444AB(6) of ICTA (transfer schemes transferring whole of
business), for the words after “means” substitute “the period of account of
the transferor ending, or treated by section 444AA(2) as ending,
30
immediately before the transfer date.”
      (2)
The amendment made by sub-paragraph (1) has effect in relation to transfers
of business taking place on or after 1 July 2008.
30    (1)
In section 444ABB(1A)(b)(ii) of ICTA (retained assets), for “liabilities”
substitute “mathematical reserves (as determined in accordance with section
35
1.2 of the Insurance Prudential Sourcebook)”.
      (2)
The amendment made by sub-paragraph (1) has effect in relation to transfers
of business taking place on or after 1 July 2008.
31    (1)
In section 444ABD(1) of ICTA (transferor’s period of account including
transfer), for “liabilities” substitute “mathematical reserves (as determined
40
in accordance with section 1.2 of the Insurance Prudential Sourcebook)”.

Finance Bill
Schedule 18 — Friendly societies
251

      (2)
The amendment made by sub-paragraph (1) has effect in relation to transfers
of business with a transfer date after 21 March 2007.
Periodical return
32
In section 431(2) of ICTA, in the definition of “periodical return”, insert at the
end “(and does not include the Forms mentioned in Rule 9.3(5))”.
5
Commencement of repeal of section 83(3) of FA 1989 etc
33
In paragraph 17(3) of Schedule 9 to FA 2007 (commencement of repeal of
section 83(3) of FA 1989 etc)—
(a)
after “effect” insert “(a)”, and
(b)
insert at the end “and
10
(b)
in relation to periods of account ending after 30 June
2008 where the transfer of business or
demutualisation concerned took place on or after 21
March 2007 and before 1 July 2008.”
Commencement of Business Transfer Schemes Order
15
34    (1)
In article 1(5) of the Insurance Business Transfer Schemes (Amendment of
the Corporation Tax Acts) Order 2008 (S.I. 2008/381), for “other” substitute
“earlier”.
      (2)
In article 29(2), for ““assuming the transferor had continued to carry on the
business transferred after the transfer”” substitute ““assuming that the
20
transferor had continued to carry on the business transferred””.
      (3)
The amendments made by this paragraph are to be treated as always having
had effect.
Gross roll-up business
35    (1)
In section 436A(6) of ICTA (gross roll-up business: separate charge on
25
profits), omit “under subsection (4) above”.
      (2)
The amendment made by sub-paragraph (1) has effect in relation to periods
of account beginning on or after 1 January 2008 and ending on or after 12
March 2008.
Schedule 18
30
Section 41

Friendly societies
Introduction
1
Chapter 2 of Part 12 of ICTA (friendly societies etc) is amended as follows.
PHI business
2     (1)
In section 466(1) (“life or endowment business”), for paragraph (b)
35

Finance Bill
Schedule 18 — Friendly societies
252

substitute—
“(b)
any PHI business (as defined in section 431) if—
(i)
the contract is one made before 1 September 1996, or
(ii)
the contract is one made on or after that date and the
effecting and carrying out of the business also
5
constitutes business within paragraphs I, II or III of
Part II of Schedule 1 to the Financial Services and
Markets Act (Regulated Activities) Order 2001.”
      (2)
The amendment made by sub-paragraph (1) has effect for periods of account
beginning on or after 1 January 2007.
10
Transfers of exempt “other” business
3     (1)
After section 461C insert—
“461D
Transfers of other business
(1)
Where—
(a)
at any time a friendly society (“the transferee”) acquires by
15
way of transfer of engagements or amalgamation from
another friendly society (“the transferor”) any business, other
than life or endowment business, consisting of business
which relates to contracts made before that time, and
(b)
immediately before that time the transferor was exempt from
20
corporation tax on profits arising from that business,

the transferee is so exempt after that time.
(2)
But if during an accounting period of the transferee there is an
increase in the scale of benefits which it undertakes to provide in the
course of carrying on that business, the transferee shall not be
25
exempt from corporation tax by virtue of subsection (1) above for
that or any subsequent accounting period.
(3)
Where—
(a)
at any time a friendly society (“the transferee”) acquires by
way of transfer of engagements or amalgamation from
30
another friendly society (“the transferor”) any business, other
than life or endowment business, consisting of business
which relates to contracts made before that time, and
(b)
immediately before that time the transferor was not exempt
from corporation tax on profits arising from that business,
35

the transferee is not so exempt after that time.
(4)
The Treasury may by regulations provide that, where any business
of a friendly society is exempt from corporation tax by virtue of
subsection (1) above, the Corporation Tax Acts have effect subject to
such modifications (or exceptions) as the Treasury consider
40
appropriate.
(5)
Regulations under subsection (4) above—
(a)
may make different provision for different cases,
(b)
may include any incidental, supplementary, consequential or
transitional provisions which the Treasury consider
45
appropriate, and

Finance Bill
Schedule 19 — Reduction of basic rate of income tax: transitional relief for gift aid charities
253

(c)
may include retrospective provision.
      (2)
The amendment made by sub-paragraph (1) has effect in relation to transfers
of engagements and amalgamations taking place on or after the day on
which this Act is passed.
Repeal of obsolete provisions
5
4     (1)
Omit—
(a)
section 462(3) and (4) (tax exempt business: insurances made in 1984-
85), and
(b)
section 462A (election relating to profits attributable to pre-1991
contracts expressed not to be part of tax exempt business).
10
      (2)
In section 462(1), for “subsections (2) to (4)” substitute “subsection (2)”.
      (3)
In consequence of sub-paragraph (1), omit—
(a)
paragraph 2 of Schedule 9 to FA 1991,
(b)
paragraph 9 of Schedule 9 to F(No.2)A 1992, and
(c)
section 45(4) and (5) of FA 2007.
15
Schedule 19
Section 50

Reduction of basic rate of income tax: transitional relief for gift aid charities
Payment of gift aid supplement
1     (1)
A charity is entitled to be paid an amount by the Commissioners (referred to
in this Schedule as a payment of “gift aid supplement”) if the following
20
conditions are met.
      (2)
Condition A is that a gift aid donation is made to the charity in a transitional
tax year.
      (3)
Condition B is that the charity makes a claim for the donation to be exempt
from tax by virtue of—
25
(a)
section 505(1)(c)(ii) of ICTA (charitable companies),
(b)
section 521(4) of ITA 2007 (charitable trusts), or
(c)
paragraph 5(1)(c) of Schedule 18 to FA 2002 (community amateur
sports clubs).
      (4)
Condition C is that the claim is made within the period of two years
30
beginning immediately after the end of—
(a)
the accounting period to which the claim relates (in a case falling
within sub-paragraph (3)(a) or (c)), or
(b)
the tax year to which the claim relates (in a case falling within sub-
paragraph (3)(b)).
35
      (5)
Condition D is that the claim is allowed.

Finance Bill
Schedule 19 — Reduction of basic rate of income tax: transitional relief for gift aid charities
254

Amount of gift aid supplement
2     (1)
The amount of gift aid supplement that a charity is entitled to be paid in
respect of a gift aid donation—
DGN — DGA

where—
DGN is the amount of the gift aid donation grossed up by reference to
5
the notional basic rate for the transitional tax year, and
DGA the amount of the gift aid donation grossed up by reference to the
actual basic rate of income tax for the transitional tax year.
      (2)
A charity is not entitled to be paid gift aid supplement in respect of a gift aid
donation if the amount determined in accordance with sub-paragraph (1) is
10
a negative amount.
The “notional basic rate”
3     (1)
The “notional basic rate” for a transitional tax year is calculated by adding
together—
(a)
the actual basic rate of income tax for that year, and
15
(b)
the transitional supplement for that year.
      (2)
But if the rate calculated for a transitional tax year by adding those two
things together is more than 22%, the notional basic rate for that year is 22%.
      (3)
The “transitional supplement” for each transitional tax year is 2%.
      (4)
Section 998 of ITA 2007 applies to the grossing up of an amount by reference
20
to a notional basic rate as if the notional basic rate were an actual rate of tax.
Errors in connection with payment of gift aid supplement
4     (1)
This paragraph applies if an officer of Revenue and Customs discovers that
payment or set-off of an amount of gift aid supplement—
(a)
ought not to have been made, or
25
(b)
is or has become excessive.
      (2)
The relevant amount of gift aid supplement may be recovered as if it were
an amount of income tax wrongly repaid to the charity (and, in particular,
section 30 of TMA 1970 and paragraph 52 of Schedule 18 to FA 1998 apply
accordingly).
30
      (3)
An amount to be recovered in accordance with sub-paragraph (2) is liable to
interest as if it were an amount of income tax wrongly repaid to the charity.
      (4)
In this paragraph “relevant amount of gift aid supplement” means the
payment or set-off of the amount of gift aid supplement, to the extent that
it—
35
(a)
ought not to have been made, or
(b)
is or has become excessive.
      (5)
For the purposes of this paragraph income tax is “wrongly repaid” to a
charity if it is an amount repaid to the charity which ought not to have been
repaid.
40

Finance Bill
Schedule 20 — Leases of plant or machinery
255

      (6)
For the purposes of this paragraph it does not matter if a charity is within the
charge to income tax or the charge to corporation tax.
General
5
Gift aid supplement is not—
(a)
income for the purposes of income tax, or
5
(b)
profits for the purposes of corporation tax.
6
Any expenditure incurred by the Commissioners under this Schedule is to
be paid out of money provided by Parliament.
7
In this Schedule—
“charity” has the same meaning as in Chapter 2 of Part 8 of ITA 2007
10
(gift aid);
“the Commissioners” means the Commissioners for Her Majesty’s
Revenue and Customs;
“gift aid donation” means a gift which is a qualifying donation for the
purposes of Chapter 2 of Part 8 of ITA 2007;
15
“gift aid supplement” has the meaning given in paragraph 1(1);
“transitional tax year” means each of the tax years 2008-09, 2009-10 and
2010-11.
Amendments
8
In section 25 of FA 1990 (donations to charities by individuals), after
20
subsection (10) insert—
“(10A)
Schedule 19 to the Finance Act 2008 contains provision for
transitional payments to charitable companies in respect of gifts
made in the tax years 2008-09 to 2010-11.”
9
In section 521 of ITA 2007 (gifts entitling donor to gift aid relief: income tax
25
liability and exemption of charity), after subsection (6) insert—
“(7)
Schedule 19 to the Finance Act 2008 contains provision for
transitional payments to charitable trusts in respect of gifts made in
the tax years 2008-09 to 2010-11.”
Schedule 20
30
Section 52

Leases of plant or machinery
Capital received in respect of lease to be treated as income
1     (1)
In Chapter 6 of Part 17 of ICTA (tax avoidance: miscellaneous), after section
785A insert—
“785B
Plant and machinery leases: capital receipts to be treated as income
35
(1)
This section applies if—
(a)
there is an unconditional obligation, under a lease of plant or
machinery or a relevant arrangement, to make a relevant
capital payment (at any time), or