Finance Bill

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Session 2008 - 09
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Finance Bill

Finance Bill
Schedule 1 — Income tax: abolition of non-residents’ personal reliefs
67

Schedules
Schedule 1
Section 5

Income tax: abolition of non-residents’ personal reliefs
Introduction
1
Chapter 1 of Part 7 of ICTA (income tax: personal reliefs) is amended as
5
follows.
Abolition of reliefs
2
Omit—
(a)
section 256 (general),
(b)
section 256A (“adjusted net income”),
10
(c)
section 256B (“the minimum amount”),
(d)
section 257 (personal allowance),
(e)
sections 257A to 257BB (married couple’s allowance etc),
(f)
section 257C (indexation),
(g)
section 265 (blind person’s allowance),
15
(h)
section 273 (payments securing annuities), and
(i)
section 278 (non-residents).
Consequential amendments
3     (1)
Section 266 (life assurance premiums) is amended as follows.
      (2)
In subsection (1)—
20
(a)
for “individual” substitute “eligible individual”, and
(b)
omit “or makes a payment falling within subsection (7) below”.
      (3)
After that subsection insert—
“(1A)
For the purposes of subsection (1) above an individual is an eligible
individual if the individual—
25
(a)
is resident in the United Kingdom, or
(b)
meets the conditions in section 56(3) of ITA 2007.”
      (4)
In subsection (3), omit “(7),”.
      (5)
In subsection (4), for “subsections (7) and” substitute “subsection”.
      (6)
Omit subsection (7).
30
      (7)
In subsection (8), for “and is entitled to relief by virtue of section 278(2) or
(2ZA)” substitute “(but is entitled to relief by virtue of subsection (1A)(b))”.

Finance Bill
Schedule 1 — Income tax: abolition of non-residents’ personal reliefs
68

4     (1)
Section 274 (limits on relief under sections 266 and 273) is amended as
follows.
      (2)
In subsection (1), omit “or other sums”.
      (3)
In subsection (2)—
(a)
for “sections 266 and 273” substitute “section 266”, and
5
(b)
omit “or sums”, and
(c)
for “the appropriate rate” substitute “12.5%”.
      (4)
Omit subsection (3).
      (5)
In subsection (4), “or other sum” (in both places).
      (6)
In the heading, for “sections 266 and 273” substitute “section 266”.
10
5
In paragraph 6(1) of Schedule 14 (provisions ancillary to section 266), omit “,
otherwise than in accordance with subsection (7) of that section,”.
Repeals
6
Omit—
(a)
in TMA 1970—
15
(i)
in section 36(3A), “section 257BA of the principal Act or”,
(ii)
in section 37A, “section 257BB or 265 of the principal Act or”,
and
(iii)
in section 43A(2A)(a), “section 257BA of the principal Act or”,
(b)
in FA 1988, section 33 and, in Schedule 3, paragraphs 8 and 10,
20
(c)
in FA 1989, section 33(4)(a), (5)(b), (8)(a) and (9)(b),
(d)
in F(No.2)A 1992, in Schedule 5, paragraphs 2, 8(4) and 9(3),
(e)
in FA 1993, section 107(3)(a),
(f)
in FA 1994, section 77(1) and (2),
(g)
in FA 1996, in Schedule 20, paragraph 14(3) and, in Schedule 21,
25
paragraphs 4 to 6,
(h)
in FA 1997, section 56(2),
(i)
in FA 1998, section 27(1)(a) and, in Schedule 3, paragraph 10,
(j)
in FA 1999, sections 25(3), 31 and 32,
(k)
in FA 2000, section 39(8) and (9),
30
(l)
in ITEPA 2003, in Schedule 6, paragraph 35,
(m)
in FA 2004, in Schedule 35, paragraph 12,
(n)
in ITTOIA 2005, in Schedule 1, paragraph 124,
(o)
in ITA 2007—
(i)
in section 23, in Step 3, “or section 257 or 265 of ICTA”,
35
(ii)
in sections 26(1)(a) and 27(5), “or section 257A, 257AB, 257BA
or 257BB of ICTA”,
(iii)
in section 423(5), “or section 257 or 265 of ICTA”, “or section
257A, 257AB, 257BA or 257BB of ICTA”, “or section 266(7) of
ICTA” and “or section 273 of ICTA”,
40
(iv)
in section 811, in subsection (5), “or section 278(2) of ICTA”
and, in subsection (6), “or section 257 or 265 of ICTA”, “or
section 257A, 257AB, 257BA or 257BB of ICTA” and “or
section 273 of ICTA”,
(v)
in section 833(5), “or section 258 of ICTA”,
45

Finance Bill
Schedule 2 — Income tax rates
Part 1 — Amendments of ITA 2007
69

(vi)
in Schedule 1, paragraphs 27 to 35, 36(5) and (6), 37 and
232(2), and
(vii)
in Schedule 2, Part 4,
(p)
in FA 2008—
(i)
in section 2(1) and (2), paragraph (b) and the “and” before it,
5
(ii)
in section 3, in subsection (1), “and section 257(2) of ICTA”
and “and section 257(3) of ICTA” and, in subsection (2),
paragraph (b) and the “and” before it, and
(iii)
in Schedule 39, paragraphs 18 to 20, and
(q)
in this Act, in section 3(1) and (2), paragraph (b) and the “and” before
10
it.
Commencement
7
The amendments made by this Schedule have effect for the tax year 2010-11
and subsequent tax years.
Schedule 2
15
Section 6

Income tax rates
Part 1
Amendments of ITA 2007
1
ITA 2007 is amended as follows.
2     (1)
Section 6 (rates of income) is amended as follows.
20
      (2)
In subsection (2), for “and higher rate” substitute “, higher rate and
additional rate”.
      (3)
In the heading, for “and higher rate” substitute “, higher rate and additional
rate”.
3     (1)
Section 8 (dividend ordinary rate and dividend upper rate) is amended as
25
follows.
      (2)
Insert at the end—
“(3)
The dividend additional rate is 42.5%.”
      (3)
In the heading, for “and dividend upper rate” substitute “, dividend upper
rate and dividend additional rate”.
30
4     (1)
Section 10 (income charged at basic and higher rates: individuals) is
amended as follows.
      (2)
In subsection (3), insert at the end “and up to the higher rate limit.”
      (3)
After that subsection insert—
“(3A)
Income tax is charged at the additional rate on an individual’s
35
income above the higher rate limit.”

Finance Bill
Schedule 2 — Income tax rates
Part 1 — Amendments of ITA 2007
70

      (4)
After subsection (5) insert—
“(5A)
The higher rate limit is £150,000.”
      (5)
In subsection (6), for “is” substitute “and higher rate limit are”.
      (6)
In the heading, for “and higher” substitute “, higher and additional”.
5     (1)
Section 13 (income charged at dividend ordinary and dividend upper rates:
5
individuals) is amended as follows.
      (2)
After subsection (2) insert—
“(2A)
Income tax is charged at the dividend additional rate on an
individual’s income which—
(a)
is dividend income,
10
(b)
would otherwise be charged at the additional rate, and
(c)
is not relevant foreign income charged in accordance with
section 832 of ITTOIA 2005.
      (3)
In subsection (3), for “and (2)” substitute “to (2A)”.
      (4)
In subsection (4), for “or higher” substitute “, higher or additional”.
15
      (5)
In the heading, for “and dividend upper” substitute “, dividend upper and
dividend additional”.
6
In section 414(2)(b) (relief for gifts to charity), after “limit” insert “and the
higher rate limit”.
7
In section 515(a) (rate of tax in respect of heritage maintenance settlements),
20
for “higher rate” substitute “additional rate”.
8     (1)
Section 989 (definitions) is amended as follows.
      (2)
After the definition of “Act” insert—
““additional rate” means the rate of income tax determined in
pursuance of section 6(2),”.
25
      (3)
After the definition of “distribution” insert—
““dividend additional rate” means the rate of income tax
specified in section 8(3),”.
      (4)
After the definition of “higher rate” insert—
““higher rate limit” has the meaning given by section 10,”.
30
9     (1)
Schedule 4 (index of defined expressions) is amended as follows.
      (2)
After the entry relating to “accumulated or discretionary income (in Chapter
3 of Part 9)” insert—

“additional rate
section 6(2) (as applied by

section 989)”.

35
      (3)
In the entry relating to “basic rate limit”, for “20(2)” substitute “10”.
      (4)
After the entry relating to “dividends (in Chapter 1 of Part 13)” insert—

Finance Bill
Schedule 2 — Income tax rates
Part 2 — Amendments of other Acts
71

“dividend additional rate
section 8(3) (as applied by

section 989)”.

      (5)
After the entry relating to “higher rate” insert—

“higher rate limit
section 10 (as applied by section

989)”.

5
Part 2
Amendments of other Acts
FA 2004
10
Part 4 of FA 2004 (pension schemes etc) is amended as follows.
11
In section 192 (relief for pension contributions at source), for subsection (4)
10
substitute—
“(4)
If (apart from this section) income tax at the higher rate or the
additional rate is chargeable in respect of any part of the individual’s
total income for the tax year, on the making of a claim the basic rate
limit and the higher rate limit for the tax year in the individual’s case
15
are increased by the amount of the contribution.”
12
In section 208 (unauthorised payments charge), for subsection (6)
substitute—
“(6)
The Treasury may by order amend subsection (5) so as to vary the
rate of the unauthorised payments charge.
20
(6A)
An order under subsection (5) may make provision for there to be
different rates in different circumstances.”
13
In section 209 (unauthorised payments surcharge), for subsection (7)
substitute—
“(7)
The Treasury may by order amend subsection (6) so as to vary the
25
rate of the unauthorised payments surcharge.
(8)
An order under subsection (7) may make provision for there to be
different rates in different circumstances.”
14
In section 215 (amount of lifetime allowance charge), after subsection (2)
insert—
30
“(2A)
The Treasury may by order amend subsection (2) so as to vary the
rates of the lifetime allowance charge.
(2B)
An order under subsection (2A) may make provision for there to be
different rates in different circumstances.”
15
In section 227 (annual allowance charge), after subsection (5) insert—
35
“(5A)
The Treasury may by order amend subsection (4) so as to vary the
rate of the annual allowance charge.

Finance Bill
Schedule 2 — Income tax rates
Part 2 — Amendments of other Acts
72

(5B)
An order under subsection (5A) may make provision for there to be
different rates in different circumstances.”
16
In section 240 (amount of scheme sanction charge), after subsection (3)
insert—
“(3A)
The Treasury—
5
(a)
may by order amend subsection (1) so as to vary the rate of
the scheme sanction charge, and
(b)
may by order amend subsection (3)(a) so as to vary the
percentage mentioned there.
(3B)
An order under subsection (3A) may make provision for there to be
10
different rates or percentages in different circumstances.”
17
In section 242 (de-registration charge), insert at the end—
“(5)
The Treasury may by order amend subsection (4) so as to vary the
rate of the de-registration charge.
(6)
An order under subsection (5) may make provision for there to be
15
different rates in different circumstances.”
18    (1)
Section 282 (orders and regulations) is amended as follows.
      (2)
After subsection (1) insert—
“(1A)
No order may be made under section 208(6), 209(7), 215(2A),
227(5A), 240(3A) or 242(5) unless a draft of the statutory instrument
20
containing it has been laid before, and approved by a resolution of,
the House of Commons.”
      (3)
In subsection (2), after “Part” insert “, if made without a draft having been
approved by a resolution of the House of Commons,”.
ITTOIA 2005
25
19
ITTOIA 2005 is amended as follows.
20
In section 640(6)(b) (grossing-up of deemed income)—
(a)
omit the “and” at the end of sub-paragraph (i), and
(b)
insert at the end “up to and including the year 2009-2010, and
(iii)
50%, if the relevant tax year is the year 2010-
30
2011 or any subsequent tax year.”
21
In section 685A(3) (settlor-interested settlements), for “higher rate”
substitute “additional rate”.
22
In section 669(3) (reduction in residuary income: inheritance tax on accrued
income)—
35
(a)
in paragraph (a), after “charged at” insert “the additional rate or”,
and
(b)
in paragraph (b), after “charged at” insert “the dividend additional
rate or”.
23    (1)
Part 2 of Schedule 4 (index of defined expressions) is amended as follows.
40
      (2)
After the entry relating to “acquisition expenditure (in Chapter 9 of Part 2)”
insert—

Finance Bill
Schedule 3 — VAT: supplementary charge and orders changing rate
Part 1 — Supplementary charge to VAT
73

“additional rate
section 6(2) of ITA 2007 (as

applied by section 989 of that

Act)”.

      (3)
After the entry relating to “distribution” insert—

“the dividend additional rate
section 8(3) of ITA 2007 (as

5

applied by section 989 of that

Act)”.

F(No.2)A 2005
24
In section 7(5) of F(No.2)A 2005 (charge to income tax on social security
pension lump sum)—
10
(a)
in paragraph (d), after “basic rate limit for that year” insert “but does
not exceed the higher rate limit for that year”, and
(b)
after that paragraph insert—
“(e)
if P’s Step 3 income for that year of assessment
exceeds the higher rate limit for that year, the
15
additional rate for that year.”
Part 3
Commencement
25    (1)
The powers conferred by the amendments made by this Schedule may be
exercised at any time on or after the day on which this Act is passed but not
20
so as to make provision having effect before the tax year 2010-11.
      (2)
Subject to that, the amendments made by this Schedule have effect for the
tax year 2010-11 and subsequent tax years.
Schedule 3
Section 9

VAT: supplementary charge and orders changing rate
25
Part 1
Supplementary charge to VAT
The charge
1     (1)
There is a supplementary charge on a supply of goods or services that is
treated as taking place on or after 25 November 2008 if—
30
(a)
the supply spans the date of the VAT change,
(b)
it is subject to VAT at the rate in force under section 2 of VATA 1994,
(c)
the person to whom the supply is made is not entitled under VATA
1994 to credit for, or the repayment or refund of, all of the VAT on
the supply, and
35