Finance Bill

House of Commons

Session 2008 - 09
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Finance Bill

Finance Bill
Schedule 32 — Leases of plant or machinery
285

16
In section 70H of CAA 2001 (lessee: requirement for tax return treating lease
as long funding lease), after subsection (1B) insert—
“(1C)
In a case in which paragraphs (a) and (b) of subsection (1) of section
70DA (leaseback of plant or machinery) are satisfied, subsection (1)
of this section does not apply to the lease referred to in section
5
70DA(1)(b).”
17
The amendments made by paragraphs 12 to 16 have effect in relation to
cases where the commencement of the term of the lease referred to in
subsection (1)(b) of section 70DA of CAA 2001 is on or after 13 November
2008.
10
Transfer followed by hire-purchase etc: restrictions on hirer’s allowances
18
In section 51A(10) of CAA 2001 (annual investment allowances), after
“218A” insert “, 229A(2)”.
19
In section 52(5) of CAA 2001 (first-year allowances), after “217” insert “,
229A(2)”.
15
20
In section 57(3) of CAA 2001 (available qualifying expenditure), after
“228(2)” insert “, 229A”.
21
In CAA 2001, after section 229 insert—
“229A
Transfer followed by hire-purchase etc: restrictions on hirer’s
allowances
20
(1)
This section applies where—
(a)
a person (“S”) transfers plant or machinery to another person
(“B”),
(b)
at any time after the date of the transfer, the plant or
machinery is available to be used by S, or a person (other than
25
B) who is connected with S (“CS”),
(c)
it is available to be so used under a contract which provides
that S or CS is to or may become the owner of the plant or
machinery on the performance of the contract, and
(d)
S or CS incurs capital expenditure on the provision of the
30
plant or machinery under that contract.
(2)
No annual investment allowance or first-year allowance is to be
made in respect of the expenditure of S or CS under the contract.
(3)
The amount, if any, by which E exceeds D is to be left out of account
in determining the available qualifying expenditure of S or CS.
35
(4)
E is the capital expenditure of S or CS on the provision of the plant or
machinery under the contract referred to in subsection (1)(c).
(5)
If S is required to bring a disposal value into account under this Part
because of the transfer referred to in subsection (1)(a), D is that
disposal value.
40
(6)
Otherwise, D is whichever of the following is the smallest—
(a)
the market value of the plant or machinery;

Finance Bill
Schedule 32 — Leases of plant or machinery
286

(b)
if S incurred capital expenditure on the provision of the plant
or machinery before the transfer referred to in subsection
(1)(a), the amount of that expenditure;
(c)
if a person connected with S incurred capital expenditure on
the provision of the plant or machinery before that transfer,
5
the amount of that expenditure.
(7)
Sections 214 and 215 do not apply in relation to the contract referred
to in subsection (1)(c).
(8)
Section 70Y(3) applies to references in this section to a transfer of
plant or machinery by a person.
10
(9)
For the purposes of this section, a transfer involving the grant of a
lease takes place on the commencement of the term of the lease.”
22
The amendments made by paragraphs 18 to 21 have effect in relation to
cases where the contract referred to in subsection (1)(c) of section 229A of
CAA 2001 is entered into on or after 13 November 2008.
15
Finance leaseback
23
In section 216(1)(b)(i) of CAA 2001 (sale and leaseback etc), after “S” insert
“or by a person (other than B) who is connected with S”.
24
In section 221(1)(b)(i) of CAA 2001 (meaning of “sale and finance
leaseback”), for “a qualifying activity carried on by S” substitute “an activity
20
carried on by S or by a person (other than B) who is connected with S,”.
25
The amendment made by paragraph 23 has effect—
(a)
where the date of the transaction referred to in section 216(1)(a) of
CAA 2001 is on or after 22 April 2009, and
(b)
for the purposes of section 227 of that Act (which applies section
25
216(1)(b) of that Act), where the date of the transaction referred to in
section 227(1)(a) is on or after 22 April 2009.
26
The amendment made by paragraph 24 has effect—
(a)
where the date of the transaction referred to in section 221(1)(a) of
CAA 2001 is on or after 22 April 2009, and
30
(b)
for the purposes of section 228A of that Act (which applies section
221(1)(b) of that Act), where the date of the transaction referred to in
section 228A(2)(a) is on or after 22 April 2009.
Interpretation
27
In this Schedule “commencement” and “inception” have the meaning given
35
in section 70YI(1) of CAA 2001.

Finance Bill
Schedule 33 — Long funding leases of films
287

Schedule 33
Section 64

Long funding leases of films
1
In ICTA, after section 502GC insert—
“502GD
Cases where ss 502B to 502G do not apply: films
(1)
If a company is or has been a lessor under a long funding lease of a
5
film, sections 502B to 502G do not apply in respect of the lease.
(2)
“Film” has the same meaning as in Part 15 of CTA 2009 (see section
1181 of that Act).”
2
In ITTOIA 2005, after section 148FC insert—
“148FD
Cases where ss 148A to 148F do not apply: films
10
(1)
If a person is or has been a lessor under a long funding lease of a film,
sections 148A to 148F do not apply in respect of the lease.
(2)
“Film” has the same meaning as in Part 15 of CTA 2009 (see section
1181 of that Act).”
3
The amendments made by paragraphs 1 and 2 have effect where the
15
inception of the long funding lease is on or after 13 November 2008 (“the
relevant date”).
4
Paragraphs 5 to 8 apply in respect of a long funding finance lease of a film—
(a)
whose inception is before the relevant date, and
(b)
which has not terminated before that date.
20
5     (1)
Section 502B of ICTA or section 148A of ITTOIA 2005 (rental earnings) does
not apply to a period of account within sub-paragraph (2).
      (2)
A period of account is within this sub-paragraph if—
(a)
it begins on or after the relevant date, and
(b)
no rentals due (wholly or partly) in respect of any part of the period
25
of account were due under the lease before the relevant date.
6     (1)
For the purpose of calculating the profits of the lessor under the lease for a
period of account—
(a)
that ends on or after the relevant date, and
(b)
that is not within paragraph 5(2),
30

treat the lessor as receiving for that period of account income attributable to
the lease of an amount equal to the relevant amount (in addition to any
amount brought into account under section 502B(2) of ICTA or section
148A(2) of ITTOIA 2005).
      (2)
The “relevant amount” is an amount equal to so much of the rentals as—
35
(a)
become due on or after the relevant date, and
(b)
are due wholly or partly in respect of the period of account,

as would not reasonably be regarded as reflected in the rental earnings for
that period of account.
      (3)
If any rental is paid for a period (“the rental period”) which—
40
(a)
begins before the relevant date, or
(b)
is not wholly within the period of account,

Finance Bill
Schedule 34 — Real Estate Investment Trusts
288


for the purposes of sub-paragraph (2) treat the amount of that rental as equal
to the amount apportioned (on a time basis) in respect of so much of the
rental period as falls on or after the relevant date and within the period of
account.
7
Section 502C of ICTA or section 148B of ITTOIA 2005 (exceptional items)
5
does not apply in relation to any profit or loss arising on or after the relevant
date.
8     (1)
If section 502D of ICTA or section 148C of ITTOIA 2005 (lessor making
termination payment) applies in respect of the termination of the lease on or
after the relevant date, a deduction is allowed (in calculating the profits of
10
the lessor) in respect of any sum calculated by reference to the termination
value paid to the lessee.
      (2)
The amount of the deduction is (if it would otherwise exceed that amount)
limited to the total amount brought into account in respect of the lease by
virtue of paragraph 5 or 6.
15
9
For the purpose of paragraphs 3 to 8—
(a)
“film” has the same meaning as in Part 15 of CTA 2009 (see section
1181 of that Act),
(b)
“rental earnings” has the same meaning as in section 502B of ICTA or
section 148A of ITTOIA 2005, and
20
(c)
Chapter 6A of Part 2 of CAA 2001 (interpretation of provisions about
long funding leases) applies.
Schedule 34
Section 65

Real Estate Investment Trusts
Introduction
25
1
Part 4 of FA 2006 (Real Estate Investment Trusts) is amended as follows.
Property rental business
2     (1)
In section 104 (property rental business), insert at the end—
“(3)
For the purposes of section 104(1) ignore the effect of section 42 of
CTA 2009 (which provides for receipts and expenses in connection
30
with tied premises to be treated as part of a trade and not as part of
a property business).”
      (2)
The amendment made by sub-paragraph (1) has effect in relation to
accounting periods ending on or after 22 April 2009.
Conditions for company
35
3     (1)
Section 106 (conditions for company) is amended as follows.
      (2)
In subsection (2), insert at the end “(subject to section 109 and regulations
under section 116)”.
      (3)
In subsection (7)(a)(ii)—

Finance Bill
Schedule 34 — Real Estate Investment Trusts
289

(a)
for “fixed-rate” substitute “relevant”, and
(b)
omit “(within the meaning of paragraph 2 of Schedule 25 to ICTA
(acceptable distribution policy))”.
      (4)
After subsection (7) insert—
“(7A)
For the purposes of Condition 5—
5
(a)
“relevant preference share” means a share which is a
“relevant preference share” for the purposes of Schedule 18 to
ICTA (group relief) or would be but for the fact that it carries
a right of conversion into shares or securities in the company,
and
10
(b)
a share is “non-voting” if it carries no right to vote at a general
meeting of the company or if it carries a right to vote which is
contingent on the non-payment of a dividend and which has
not become exercisable.”
      (5)
The amendment made by sub-paragraph (2) is to be treated as always
15
having had effect.
      (6)
The amendments made by sub-paragraphs (3) and (4) have effect in relation
to accounting periods ending on or after 22 April 2009.
Conditions for balance of business
4     (1)
In section 108(3)(a) (conditions for balance of business), for “if it is property
20
involved in the relevant property rental business within the meaning given
by section 107(6)(a),” substitute “if it would be shown as an asset if separate
accounts were produced for C (tax-exempt),”.
      (2)
The amendment made by sub-paragraph (1) has effect in relation to
accounting periods ending on or after 22 April 2009.
25
Entry notice: conditions for company
5     (1)
Section 109 (entry notice) is amended as follows.
      (2)
After subsection (2) insert—
“(2A)
Subsection (2B) applies where a company—
(a)
does not expect to satisfy Condition 3 of section 106 on the
30
first day of an accounting period, but
(b)
reasonably expects to satisfy that Condition throughout the
rest of the accounting period.
(2B)
Where this subsection applies—
(a)
subsection (2)(c) does not apply, but
35
(b)
the notice under subsection (1) must be accompanied by a
statement by the company containing the assertions specified
in subsection (2C).
(2C)
Those assertions are—
(a)
that Conditions 1, 2, 4, 5 and 6 of section 106 are reasonably
40
expected to be satisfied in respect of the company throughout
the specified accounting period, and
(b)
that Condition 3 of section 106 is reasonably expected to be
satisfied in respect of the company for at least a part of the

Finance Bill
Schedule 34 — Real Estate Investment Trusts
290

first day of the specified accounting period, and throughout
the remainder of that period.”
      (3)
In subsection (3), omit “by reason only that its shares have not been listed
and dealt with on a recognised stock exchange within the preceding 12
months,”.
5
      (4)
In subsection (5)—
(a)
after “Conditions 1, 2,” insert “3,” and
(b)
omit paragraph (b) (but not the “and” at the end).
      (5)
Insert at the end—
“(6)
A company may take advantage both of subsections (2A) to (2C) and
10
of subsections (3) to (5) (in which case the assertion under subsection
(2C)(a) should omit reference to Condition 4 and the assertion under
subsection (5)(a) should omit reference to Condition 3.”
      (6)
The amendments made by this paragraph have effect in relation to
accounting periods beginning on or after 22 April 2009.
15
Funds awaiting re-investment
6     (1)
In section 118(5) (funds awaiting re-investment), after “one or more periods
of” insert “(in aggregate)”.
      (2)
The amendment made by sub-paragraph (1) has effect in relation to
accounting periods ending on or after 22 April 2009.
20
Connected persons
7     (1)
Before section 137 (miscellaneous: insurance companies) insert—
“136A
Connected persons
(1)
If they consider it expedient in the public interest the Treasury may
make regulations about the application of this Part to activities or
25
situations which involve, or arise in connection with, a relationship
between a REIT company and another person.
(2)
In subsection (1) “REIT company” means—
(a)
a company to which this Part applies, and
(b)
a member of a group to which this Part applies (a “REIT
30
group”).
(3)
The regulations may, in particular—
(a)
treat a specified person, or a person in specified
circumstances, as forming part of a REIT group for specified
purposes;
35
(b)
provide for a specified provision which applies in respect of
members of a REIT group also to apply, with or without
modifications, in respect of a specified person or a person in
specified circumstances.
(4)
No regulations may be made under this section unless a draft of the
40
statutory instrument containing them has been laid before, and
approved by a resolution of, the House of Commons.”

Finance Bill
Schedule 35 — Pensions: special annual allowance charge
291

      (2)
Regulations under section 136A (inserted by sub-paragraph (1)) may make
provision in relation to accounting periods ending on or after the date on
which the regulations are made.
Schedule 35
Section 71

Pensions: special annual allowance charge
5
Special annual allowance charge
1     (1)
A charge to income tax, to be known as the special annual allowance charge,
arises where—
(a)
the total adjusted pension input amount for a tax year in the case of
a high-income individual who is a member of one or more registered
10
pension schemes, exceeds
(b)
the amount of the special annual allowance.
      (2)
The individual is a high-income individual if the individual’s relevant
income for the tax year is £150,000 or more.

Paragraph 2 makes provision for calculating the individual’s relevant
15
income.
      (3)
Paragraphs 3 to 16 explain what is the total adjusted pension input amount.
      (4)
The special annual allowance is £20,000.
      (5)
But if, in calculating the total adjusted pension input amount of the
individual for the tax year, a deduction is made in respect of—
20
(a)
protected pension input amounts (see paragraphs 7 to 14), or
(b)
a pre-22 April 2009 pension input amount that is such an amount by
virtue of paragraph 16(3),

(or both) the special annual allowance is £20,000 less the amount of the
deduction or, if the deduction is £20,000 or more, is nil.
25
      (6)
The person liable to the special annual allowance charge is the individual.
      (7)
The individual is liable to the special annual allowance charge whether or
not—
(a)
the individual, and
(b)
the scheme administrator of the pension scheme or schemes
30
concerned,

are UK resident, ordinarily UK resident or domiciled in the United
Kingdom.
      (8)
The special annual allowance charge is a charge at the rate of 20% in respect
of the amount by which—
35
(a)
the total adjusted pension input amount, exceeds
(b)
the amount of the special annual allowance.
      (9)
But where—
(a)
the individual’s total pension input amount under section 229 of FA
2004 (annual allowance charge) for the tax year, exceeds
40
(b)
the amount of the annual allowance for the tax year (see section 228
of that Act and orders made under it),