Finance Bill

House of Commons

Session 2008 - 09
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Finance Bill

Finance Bill
Part 2 — Income tax, corporation tax and capital gains tax
31

Miscellaneous anti-avoidance provisions
61
Financial arrangements avoidance
Schedule 30 contains provision to counter avoidance involving financial
arrangements.
62
Sale of lessor companies etc: anti-avoidance
5
Schedule 31 contains provision amending Schedule 10 to FA 2006 (sale of lessor
companies etc) to prevent avoidance.
63
Leases of plant or machinery
Schedule 32 contains provision about leases of plant or machinery.
64
Long funding leases of films
10
Schedule 33 contains provision about long funding leases of films.
65
Real Estate Investment Trusts
Schedule 34 contains provision about Real Estate Investment Trusts.
66
Deductions for employee liabilities
(1)
ITEPA 2003 is amended as follows.
15
(2)
In section 346 (deduction for employee liabilities), after subsection (2) insert—
“(2A)
Nor is a deduction allowed for a payment which falls within paragraph
A, B or C if the payment is made in pursuance of arrangements the
main purpose, or one of the main purposes, of which is the avoidance
of tax.”
20
(3)
After section 556 insert—
“556A
Deductible payments made pursuant to tax avoidance arrangements
No deduction may be made under section 555 if the deductible
payment is made in pursuance of arrangements the main purpose, or
one of the main purposes, of which is the avoidance of tax.”
25
(4)
The amendments made by this section have effect in relation to payments
made on or after 12 January 2009 (irrespective of when the arrangements are
made).
67
Employment loss relief
(1)
In section 128 of ITA 2007 (employment loss relief against general income),
30
after subsection (5) insert—
“(5A)
No claim may be made in respect of the loss if and to the extent that it
is made as a result of anything done in pursuance of arrangements the
main purpose, or one of the main purposes, of which is the avoidance
of tax.”
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Finance Bill
Part 2 — Income tax, corporation tax and capital gains tax
32

(2)
The amendment made by subsection (1)—
(a)
has effect in relation to a loss made in the tax year 2009-10 or a
subsequent tax year, and
(b)
has effect in relation to a loss made in the tax year 2008-09 if or to the
extent that it is occasioned by an act or omission occurring on or after
5
12 January 2009.
(3)
Where a person has made a claim under section 128 of ITA 2007 during the
relevant period, no penalty is payable by the person on the ground that any
return, statement or declaration made in connection with the claim contained
an inaccuracy if it would not have done so but for the amendment made by
10
subsection (1).

For this purpose “the relevant period” is the period—
(a)
beginning with 12 January 2009, and
(b)
ending with 1 April 2009.
(4)
Subsection (2) of section 59C of TMA 1970 (surcharge on unpaid tax) has effect
15
in relation to tax which would not be payable but for the amendment made by
subsection (1) as if the reference in that subsection to the due date were to the
later of 1 April 2009 and the due date.
68
No loss relief for losses from contracts for life insurance etc
(1)
In section 152(8) of ITA 2007 (losses from miscellaneous transactions: cases that
20
are not “section 1016 income”), after “ICTA” insert “or Chapter 9 of Part 4 of
ITTOIA 2005”.
(2)
The amendment made by subsection (1) has effect in relation to losses made in
the tax year 2009-10 or a subsequent tax year.
(3)
That amendment also has effect for the tax year 2008-09 in relation to a loss
25
arising to a person under a policy of life insurance, a contract for a life annuity
or a contract constituting a capital redemption policy if—
(a)
the policy is issued in respect of an insurance made, or the contract is
made, on or after 1 April 2009,
(b)
the policy or contract is varied on or after that date so as to increase the
30
benefits secured (any exercise of rights conferred by the policy or
contract being regarded for this purpose as a variation),
(c)
there is an assignment (or assignation) to the person (whether or not for
money or money’s worth) on or after that date of the rights, or a share
of the rights, conferred by the policy or contract, or
35
(d)
all or part of the rights conferred by the policy or contract become held
on or after that date as a security for a debt of the person.
(4)
Where—
(a)
a person has made a claim under section 152 of ITA 2007 for the tax year
2008-09 or an earlier tax year in respect of a loss, and
40
(b)
by virtue of the amendment made by subsection (1) no claim could
have been made in respect of the loss had it been made in the tax year
2009-10,

no deduction may be made for the tax year 2009-10 or a subsequent tax year in
accordance with step 2 or 3 in section 153 of ITA 2007 in respect of the loss.
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Finance Bill
Part 2 — Income tax, corporation tax and capital gains tax
33

69
Intangible fixed assets and goodwill
(1)
Part 8 of CTA 2009 (intangible fixed assets) is amended as follows.
(2)
In section 712(1) (meaning of “intangible asset”), insert at the end “(and
includes an internally-generated intangible asset)”.
(3)
In section 715 (application of Part 8 to goodwill)—
5
(a)
in subsection (3), insert at the end “(and includes internally-generated
goodwill)”, and
(b)
insert at the end—
“(4)
For the purposes of this Part, goodwill is treated as created in
the course of carrying on the business in question.”
10
(4)
In section 883 (assets treated as created or acquired when expenditure
incurred)—
(a)
in subsection (1), for paragraph (b) substitute—
“(b)
has effect subject to the provisions specified in
subsection (2).”,
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(b)
in subsection (2)(a), omit “internally-generated”,
(c)
in subsection (2)(b), for “certain other internally-generated assets”
substitute “assets representing non-qualifying expenditure”, and
(d)
in subsection (3), omit “to which this section applies”.
(5)
In section 884 (internally-generated goodwill: time of creation)—
20
(a)
omit “internally-generated”,
(b)
for the words from “before” to the end substitute “—
(a)
before (and not on or after) 1 April 2002 in a case in
which the business in question was carried on at any
time before that date by the company or a related party,
25
and
(b)
on or after 1 April 2002 in any other case.”, and
(c)
in the heading, omit “Internally-generated”.
(6)
In section 885 (certain other internally-generated assets: time of creation)—
(a)
in subsection (1)(b), omit “internally-generated”,
30
(b)
in subsection (7), for “before” to the end substitute “—
(a)
before (and not on or after) 1 April 2002 in a case in
which the asset in question was held at any time before
that date by the company or a related party, and
(b)
on or after 1 April 2002 in any other case.”, and
35
(c)
in the heading, for “Certain other internally-generated assets”
substitute “Assets representing non-qualifying expenditure”.
(7)
The amendments made by this section have effect in relation to accounting
periods beginning on or after 22 April 2009 (and, in relation to those accounting
periods, are to be treated as always having had effect).
40
(8)
For the purposes of subsection (7), an accounting period beginning before, and
ending on or after, 22 April 2009 is to be treated as if so much of the period as
falls before that date, and so much of the period as falls on or after that date,
were separate accounting periods.

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Part 2 — Income tax, corporation tax and capital gains tax
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70
Taxable benefit of living accommodation: lease premiums
(1)
Chapter 5 of Part 3 of ITEPA 2003 (taxable benefits: living accommodation) is
amended as follows.
(2)
In section 105 (cash equivalent: cost of accommodation not over £75,000)—
(a)
in subsection (3), after “is” insert “(subject to subsections (4) and (4A))”,
5
and
(b)
for subsection (4) substitute—
“(4)
Subsection (4A) applies where—
(a)
a rental amount is payable by the person (“P”) at whose
cost the accommodation is provided in respect of the
10
whole or part of the taxable period (“the relevant
period”), and
(b)
the amount so payable is payable at an annual rate
greater than the annual value.
(4A)
Where this subsection applies—
15
(a)
subsection (3) does not apply to the relevant period, and
(b)
instead the “rental value of the accommodation” for the
relevant period is the rental amount payable by P in
respect of the relevant period.
(4B)
A reference in subsection (4) or (4A) to a rental amount payable
20
by P in respect of the relevant period is to the sum of—
(a)
any rent for the period payable by P, and
(b)
any amount attributed to the period in respect of a lease
premium (see sections 105A and 105B).”
(3)
After that section insert—
25
“105A
Lease premiums
(1)
For the purposes of section 105(4B)(b) an amount is attributed to the
relevant period “in respect of a lease premium” if—
(a)
the property consists of premises, or a part of premises, that are
subject to a lease,
30
(b)
the premises are not mainly used by P for a purpose other than
the provision of living accommodation to which this Chapter
applies,
(c)
the lease is for a term of 10 years or less, and
(d)
the net amount payable by P in relation to the lease by way of
35
lease premium is greater than zero.
(2)
The amount so attributed is—

where—
A is the relevant period (in days);
B is the term of the lease (in days);
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C is the net amount payable by P in relation to the lease by way of
lease premium.

Finance Bill
Part 2 — Income tax, corporation tax and capital gains tax
35

(3)
For provision about the application of this section in relation to certain
leases with break clauses, see section 105B.
(4)
For the purposes of this section the net amount payable by P in relation
to a lease by way of lease premium is—
(a)
the total amount (if any) that has been paid, or is or will become
5
payable, by P in relation to the lease by way of lease premium,
less
(b)
any amount within paragraph (a) that has been repaid or is or
will become repayable.
(5)
In this section and section 105B “lease premium” means any premium
10
payable—
(a)
under a lease, or
(b)
otherwise under the terms on which a lease is granted.
(6)
In the application of this section to Scotland, “premium” includes a
grassum.
15
105B
Lease premiums in the case of leases with break clauses
(1)
This section applies to a lease (“the original lease”) that contains one or
more relevant break clauses.
(2)
For the purposes of this section—
(a)
“break clause” means a provision of a lease that gives a person
20
a right to terminate it so that its term is shorter than it otherwise
would be, and
(b)
a break clause contained in the original lease is “relevant” if the
right to terminate the lease that it confers is capable of being
exercised in such a way that the term of the original lease is 10
25
years or less.
(3)
For the purposes of section 105A—
(a)
the term of the original lease, and
(b)
the net amount payable by P in relation to the lease by way of
lease premium,
30

are to be determined on the assumption that any relevant break clause
is exercised in such a way that the term of the lease is as short as
possible.
(4)
If a relevant break clause is not in fact exercised in such a way that the
term of the original lease is as short as possible, the parties to the lease
35
are treated for the purposes of section 105A as if they were parties to
another lease (a “notional lease”) the term of which—
(a)
begins immediately after the time at which the term of the
original lease would have ended, if that break clause had been
so exercised, and
40
(b)
ends at the time mentioned in subsection (5).
(5)
The term of a notional lease ends—
(a)
at the time the term of the original lease would end, on the
assumption that any relevant break clause that is exercisable
only after the beginning of the term of the notional lease is
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exercised in such a way that the term of the original lease is as
short as possible, or

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Part 2 — Income tax, corporation tax and capital gains tax
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(b)
if earlier, the tenth anniversary of the beginning of the term of
the original lease.
(6)
For the purposes of section 105A, the net amount payable by P in
relation to a notional lease by way of lease premium is, in the case of a
notional lease the term of which ends under paragraph (a) of subsection
5
(5)—
(a)
the net amount that would be payable by P in relation to the
original lease by way of lease premium on the assumption
mentioned in that paragraph, less
(b)
any part of that amount that has already been attributed to a
10
period in respect of a lease premium under section 105(4B)(b).
(7)
For the purposes of section 105A, the net amount payable by P in
relation to a notional lease by way of lease premium is, in the case of
notional lease the term of which ends under paragraph (b) of
subsection (5), the relevant proportion of—
15
(a)
the net amount that would be payable by P in relation to the
original lease by way of lease premium, on the assumption that
no break clause is exercised, less
(b)
any part of that amount that has already been attributed to a
period in respect of a lease premium under section 105(4B)(b).
20
(8)
In subsection (7) “the relevant proportion” means—

where—
D is the term of the notional lease (in days);
E is the sum of—
(a)
the term of the notional lease (in days), and
25
(b)
the number of days by which the term of the original
lease would exceed 10 years, on the assumption that no
break clause is exercised.”
(4)
The amendments made by this section have effect in relation to—
(a)
any lease entered into on or after 22 April 2009, and
30
(b)
subject to subsection (5), any lease entered into before that date the term
of which is extended on or after that date.
(5)
In relation to a lease of the kind mentioned in subsection (4)(b) the
amendments made by this section have effect—
(a)
as if the additional term of the lease created by the extension were the
35
whole of the term of the lease, and
(b)
ignoring any lease premium payable in respect of the unextended term
of the lease.
(6)
In this section “lease premium” has the same meaning as in sections 105A and
105B of ITEPA 2003.
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Finance Bill
Part 3 — Pensions
37

Part 3
Pensions
71
Special annual allowance charge etc
Schedule 35 contains provision for and in connection with a special annual
allowance charge in respect of pension schemes.
5
72
Financial assistance scheme
(1)
The Treasury may by regulations make provision for and in connection with—
(a)
the application of the relevant taxes in relation to the financial
assistance scheme, and
(b)
the application of the relevant taxes in relation to any person in
10
connection with the financial assistance scheme.
(2)
“The financial assistance scheme” means the scheme provided for by
regulations under section 286 of the Pensions Act 2004.
(3)
The provision that may be made by regulations under this section includes
provision imposing any of the relevant taxes (as well as provisions for
15
exemptions or reliefs).
(4)
The relevant taxes are—
(a)
income tax,
(b)
capital gains tax,
(c)
corporation tax,
20
(d)
inheritance tax,
(e)
value added tax,
(f)
stamp duty land tax,
(g)
stamp duty, and
(h)
stamp duty reserve tax.
25
(5)
Regulations under this section may, in particular, include provision for and in
connection with the taxation of payments made by virtue of regulations under
section 286 of the Pensions Act 2004.
(6)
The exemptions and reliefs that may be given by regulations under this section
include, in particular, exemption from charges to income tax, corporation tax
30
or capital gains tax in respect of—
(a)
income arising from any assets held or managed by, or receipts of, the
person who manages the financial assistance scheme (“the scheme
manager”) and any chargeable gains arising from the disposal of any
such assets, and
35
(b)
the receipt of fraud compensation payments (within the meaning of
Part 2 of the Pensions Act 2004: see section 182(1) of that Act).
(7)
Regulations under this section may include provision having effect in relation
to any time before they are made if the provision does not increase any
person’s liability to tax.
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(8)
The provision made by regulations under this section may be framed as
provision applying with appropriate modifications provisions having effect in
relation to registered pension schemes; and for this purpose “registered