Finance Bill

House of Commons

Session 2007 - 08
Internet Publications
Other Bills before Parliament

Finance Bill

Finance Bill
Part 2 — Income tax, corporation tax and capital gains tax - general
33

(b)
in FA 1990, section 53,
(c)
in FA 1991, sections 55 and 56,
(d)
in TCGA 1992, paragraph 14(40) and (41) of Schedule 10,
(e)
in FA 1994, paragraph 17 of Schedule 16,
(f)
in FA 1995, section 81,
5
(g)
in FA 1996—
(i)
paragraph 36 of Schedule 20, and
(ii)
paragraph 9 of Schedule 38,
(h)
in FA 1997, section 77,
(i)
in F(No.2)A 1997—
10
(i)
section 26, and
(ii)
paragraph 14 of Schedule 6,
(j)
in FA 2003, paragraph 6 of Schedule 38,
(k)
in ITTOIA 2005, paragraphs 302 and 303 of Schedule 1,
(l)
in ITA 2007—
15
(i)
in section 64(8), paragraph (f) (and the “and” before it),
(ii)
in section 72(5), paragraph (f) (and the “and” before it),
(iii)
in section 448(3), “and section 451”,
(iv)
in section 449(3), “and section 451”,
(v)
section 451,
20
(vi)
in section 505, in subsection (4) “and section 506” and, in
subsection (5) “and in section 506”,
(vii)
section 506, and
(viii)
paragraphs 167 to 170 of Schedule 1, and
(m)
in FA 2007, paragraph 6 of Schedule 14.
25
(5)
The amendments made by subsections (1)(a) and (b), (2) and (3) have effect in
relation to transactions in securities entered into on or after 1 April 2008.
(6)
The amendment made by subsection (1)(c) has effect in relation to cases where
the purchase by the first buyer (within the meaning of section 731(2) of ICTA)
is made on or after that date.
30
(7)
The amendment made by subsection (1)(d) has effect in relation to
distributions made on or after that date.
(8)
The amendments made by subsection (4) have effect in accordance with
subsections (6) and (7).
Miscellaneous
35
64
Income of beneficiaries under settlor-interested settlements
(1)
In section 685A of ITTOIA 2005 (settlor-interested settlements), after
subsection (5) insert—
“(5A)
If the recipient of the annual payment is treated by subsection (3) as
having paid income tax in respect of the annual payment, the amount
40
of the payment is treated as the highest part of the recipient’s total
income for all income tax purposes except the purposes of sections 535
to 537 (gains from contracts for life insurance etc: top slicing relief).

Finance Bill
Part 2 — Income tax, corporation tax and capital gains tax - general
34

(5B)
See section 1012 of ITA 2007 (relationship between highest part rules)
for the relationship between—
(a)
the rule in subsection (5A), and
(b)
other rules requiring particular income to be treated as the
highest part of a person’s income.”
5
(2)
In section 1012(4) of ITA 2007 (relationship between rules on highest part of
total income), after the entry relating to section 465A of ITOIA 2005 insert—
“section 685A(5A) of ITTOIA 2005 (payments from trustees of
settlor-interested settlements to be treated as highest part of
total income),”.
10
(3)
The amendments made by this section have effect for the tax year 2006-07 and
subsequent tax years.
65
Income charged at dividend upper rate
(1)
In section 13(2) of ITA 2007 (income charged at dividend upper rate:
individuals)—
15
(a)
omit “and” at the end of paragraph (a), and
(b)
at the end of paragraph (b) insert “, and
(c)
is not relevant foreign income charged in accordance
with section 832 of ITTOIA 2005.”
(2)
The amendments made by subsection (1) have effect for the tax year 2008-09
20
and subsequent tax years.
66
Payments on account of income tax
(1)
In section 964 of ITA 2007, omit subsection (5) (sums representing income tax
deducted from annual payments not to be taken into account for the purpose
of calculating amounts to be paid on account of income tax).
25
(2)
The repeal made by subsection (1) has effect in relation to the calculation of the
relevant amount (within the meaning of section 59A of ICTA) for the tax year
2008-09 and subsequent tax years.
67
Allowances etc for non-resident nationals of an EEA state
(1)
In section 278 of ICTA (non-residents eligible for reliefs)—
30
(a)
in subsection (2)(a), omit “or an EEA national”, and
(b)
omit subsection (9).
(2)
In section 56(3) of ITA 2007 (non-UK residents eligible for personal allowances
and tax reductions), before paragraph (a) insert—
“(za)
is a national of an EEA state,”.
35
(3)
Accordingly, omit section 145 of FA 1996 (personal reliefs for non-resident EEA
nationals).
(4)
The amendments made by this section have effect for the tax year 2008-09 and
subsequent tax years.

Finance Bill
Part 3 — Capital allowances
35

Part 3
Capital allowances
Plant and machinery: qualifying expenditure
68
Thermal insulation of buildings
(1)
Section 28 of CAA 2001 (thermal insulation of industrial buildings) is amended
5
as follows.
(2)
In subsection (1)—
(a)
for “consisting of a trade” substitute “other than an ordinary property
business or an overseas property business”,
(b)
for “an industrial” substitute “a”, and
10
(c)
for “the trade” substitute “the qualifying activity”.
(3)
In subsection (2), for “an industrial” substitute “a”.
(4)
After subsection (2) insert—
“(2A)
Subsection (2) is subject to section 35 (expenditure on plant or
machinery for use in dwelling-house not qualifying expenditure).
15
(2B)
This section does not apply to expenditure within subsection (2) if a
deduction for that expenditure is allowable—
(a)
under section 31ZA of ICTA, or
(b)
under section 312 of ITTOIA 2005,

(deductions for expenditure on energy-saving items).
20
(2C)
For the purposes of subsection (2B), whether such a deduction is
allowable is to be determined without regard to subsection (1)(e) of the
section in question.”
(5)
Omit subsection (3).
(6)
In the heading, omit “industrial”.
25
(7)
In section 23(2) of CAA 2001 (expenditure unaffected by sections 21 and 22), in
the entry for section 28, omit “industrial”.
(8)
The amendments made by this section have effect—
(a)
for corporation tax purposes, in relation to expenditure incurred on or
after 1 April 2008, and
30
(b)
for income tax purposes, in relation to expenditure incurred on or after
6 April 2008.
69
Expenditure on required fire precautions
(1)
In CAA 2001, omit section 29 (expenditure on required fire precautions).
(2)
In section 23(2) of that Act, omit “section 29 (fire safety);”.
35
(3)
In consequence of the amendment made by subsection (1)—
(a)
in the Fire and Rescue Services Act 2004 (c. 21) omit paragraph 96 of
Schedule 1, and

Finance Bill
Part 3 — Capital allowances
36

(b)
in the Fire and Rescue Services (Northern Ireland) Order 2006 (S.I.
2006/1254 (N.I. 9)), omit paragraph 24 of Schedule 3 (and the entry
relating to CAA 2001 in Schedule 4).
(4)
The amendments made by subsections (1) and (2) have effect—
(a)
for corporation tax purposes, in relation to expenditure incurred on or
5
after 1 April 2008, and
(b)
for income tax purposes, in relation to expenditure incurred on or after
6 April 2008.
70
Integral features
(1)
In section 23 of CAA 2001 (expenditure unaffected by sections 21 and 22)—
10
(a)
in subsection (2), after the entry for section 33 insert—

“section 33A (integral features);”, and
(b)
in subsection (4), in List C—
(i)
in item 2, omit “Electrical systems (including lighting systems)
and cold water,”,
15
(ii)
omit item 3, and
(iii)
in item 6, for “Lifts, hoists, escalators and moving walkways.”
substitute “Hoists.”
(2)
After section 33 of that Act insert—
“Expenditure on integral features
20
33A
Expenditure on provision or replacement of integral features
(1)
This section applies where a person carrying on a qualifying activity
incurs expenditure on the provision or replacement of an integral
feature of a building or structure used by the person for the purposes
of the qualifying activity.
25
(2)
This Part (including in particular section 11(4)) applies as if—
(a)
the expenditure were capital expenditure on the provision of
plant or machinery for the purposes of the qualifying activity,
and
(b)
the person who incurred the expenditure owned plant or
30
machinery as a result of incurring it.
(3)
If the expenditure is qualifying expenditure, it may not be deducted in
calculating the income from the qualifying activity.
(4)
If the expenditure is not qualifying expenditure, whether it may be so
deducted is to be determined without regard to this section.
35
(5)
For the purposes of this section each of the following is an integral
feature—
(a)
an electrical system (including a lighting system),
(b)
a cold water system,
(c)
a space or water heating system, a powered system of
40
ventilation, air cooling or air purification, and any floor or
ceiling comprised in such a system,
(d)
a lift, an escalator or a moving walkway,
(e)
external solar shading.

Finance Bill
Part 3 — Capital allowances
37

(6)
The items listed in subsection (5) do not include any asset whose
principal purpose is to insulate or enclose the interior of a building or
to provide an interior wall, floor or ceiling which (in each case) is
intended to remain permanently in place.
(7)
The Treasury may by order—
5
(a)
provide that subsection (5) does not include a feature of a
building or structure specifed in the order, expenditure on
which would (if not within subsection (5)) be qualifying
expenditure other than special rate expenditure, and
(b)
add to the list in subsection (5) a feature of a building or
10
structure expenditure on the provision of which would not
(apart from the order) be expenditure on the provision of plant
or machinery.
(8)
An order under subsection (7) may make such incidental,
supplemental, consequential and transitional provision as the Treasury
15
thinks fit.
33B
Meaning of “replacement” in section 33A
(1)
Expenditure to which this section applies is to be treated for the
purposes of section 33A as expenditure on the replacement of an
integral feature.
20
(2)
This section applies to expenditure incurred by a person on an integral
feature if the amount of the expenditure is more than 50% of the cost of
replacing the integral feature at the time the expenditure is incurred.
(3)
Subsection (4) applies where—
(a)
a person incurs expenditure (“initial expenditure”) on an
25
integral feature which is not more than 50% of the cost of
replacing the integral feature at the time it is incurred, but
(b)
in the period of 12 months beginning with the initial
expenditure being incurred the person incurs further
expenditure on the integral feature.
30
(4)
If the aggregate of—
(a)
the amount of the initial expenditure, and
(b)
the amount (or the aggregate of the amounts) of the further
expenditure,

is more than 50% of the cost of replacing the integral feature at the time
35
the initial expenditure was incurred, this section applies to the initial
expenditure and the further expenditure.
(5)
Where section 33A applies because of subsection (4), all such
assessments and adjustments of assessments are to be made as are
necessary to give effect to that section.”
40
(3)
In section 74(1) of ICTA (general rules as to deductions not allowable), after
paragraph (d) insert—
“(da)
any expenditure to which section 33A(3) of the Capital
Allowances Act (expenditure on provision or replacement of
integral features) applies;”.
45
(4)
In Chapter 4 of Part 2 of ITTOIA 2005 (rules restricting deductions from trade

Finance Bill
Part 3 — Capital allowances
38

profits), after section 55 insert—
“Integral features
55A
Expenditure on integral features
Section 33A(3) of CAA 2001 provides that no deduction is allowed in
respect of certain expenditure on an integral feature of a building or
5
structure (within the meaning of that section).”
(5)
In the table in section 272(2) of ITTOIA 2005 (provisions of Part 2 applicable to
profits of property business), after the entry relating to section 55 insert—

“section 55A
expenditure on integral features”

(6)
The amendments made by this section have effect—
10
(a)
for corporation tax purposes, in relation to expenditure incurred on or
after 1 April 2008, and
(b)
for income tax purposes, in relation to expenditure incurred on or after
6 April 2008.
Plant and machinery: annual investment allowance
15
71
Annual investment allowance
Schedule 24 contains provision about an annual investment allowance in
respect of certain qualifying expenditure on plant or machinery.
Plant and machinery: first-year allowances
72
First-year allowance for small and medium-sized enterprises discontinued
20
(1)
CAA 2001 is amended as follows.
(2)
Omit section 44 (expenditure incurred by small or medium-sized enterprises).
(3)
In consequence of the repeal made by subsection (2)—
(a)
in the list in section 39 (provisions under which first-year allowances
available), omit the entry relating to section 44,
25
(b)
in the list in section 46(1) (provisions subject to general exclusions),
omit the entry relating to section 44,
(c)
omit sections 47 to 49 (definition of small and medium-sized
enterprises), and
(d)
in section 52(3) (first-year allowances) omit—
30
(i)
in the table, the entry relating to expenditure qualifying under
section 44, and
(ii)
the words from “In the case” to the end.
(4)
Omit the following provisions (which relate to provisions repealed by
subsection (3))—
35
(a)
section 142 of FA 2004 (increase in first-year allowance under section 44
for 2004),

Finance Bill
Part 3 — Capital allowances
39

(b)
section 30 of FA 2006 (increase in first-year allowance under section 44
for 2006), and
(c)
section 37 of FA 2007 (increase in first-year allowance under section 44
for 2007).
(5)
The repeals made by subsections (2) and (3) have effect in relation to
5
expenditure incurred on or after the relevant date.
(6)
But subsection (7) applies in relation to an additional VAT liability incurred on
or after the relevant date which under section 235 of CAA 2001 is treated as
qualifying expenditure.
(7)
If the original expenditure (within the meaning of that section) was first-year
10
qualifying expenditure by virtue of section 44 of CAA 2001, Chapter 18 of Part
2 of that Act (additional VAT liabilities and rebates) applies to the additional
VAT liability as if the provisions repealed by this section were not so repealed.
(8)
The relevant date is—
(a)
for corporation tax purposes, 1 April 2008, and
15
(b)
for income tax purposes, 6 April 2008.
73
Repeal of spent first-year allowances
(1)
CAA 2001 is amended as follows.
(2)
Omit sections 40 to 43 (first-year allowance for Northern Ireland expenditure
incurred on or before 11 May 2002).
20
(3)
Omit section 45 (first-year allowance for ICT expenditure incurred on or before
31 March 2004).
(4)
In Schedule 3 (transitionals and savings), omit paragraphs 46 to 51 (first-year
allowance for additional VAT liabilities).
(5)
In consequence of the amendments made by subsections (2) to (4), omit the
25
following provisions—
(a)
in the list in section 39 (provisions under which first-year allowances
available), the entries relating to section 40 and section 45,
(b)
in section 46 (general exclusions)—
(i)
in the list in subsection (1), the entries relating to section 40 and
30
section 45, and
(ii)
in the heading, from “applying” to “45”,
(c)
section 51 (disclosure of information between HMRC and Northern
Ireland department),
(d)
in the table in section 52(3) (first-year allowances), the entries relating
35
to expenditure qualifying under section 40 and expenditure qualifying
under section 45,
(e)
section 237(2) (exception to section 236 where section 43 applies), and
(f)
in Schedule 3 (transitionals and savings), paragraph 14 (application of
section 45).
40
(6)
In consequence of the amendments made by this section, omit—
(a)
in section 98 of TMA 1970, in the second column of the table, in the
entry relating to requirements imposed by CAA 2001 “43(5) and (6),”,
(b)
sections 165 and 166 of FA 2003, and
(c)
paragraph 84 of Schedule 4 to CRCA 2005.
45