Finance (No.2) Bill

House of Commons

Session 2010 - 11
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Other Bills before Parliament

Finance (No.2) Bill

Finance (No.2) Bill
Part 1 — Income tax, corporation tax and capital gains tax
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825A
Deemed disposal event
(1)
Subsection (2) applies to a care business pool for a relevant chargeable
period of a relevant individual if the previous chargeable period was
not a relevant chargeable period.
(2)
CAA 2001 is to apply as if—
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(a)
a disposal event occurs immediately after the beginning of the
relevant chargeable period in respect of plant or machinery in
the pool,
(b)
disposal receipts fall to be brought into account in the pool for
the period because of that event, and
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(c)
the total of the receipts equals the sum of amount A and amount
B (or nil if there are no such amounts).
(3)
Amount A is the amount of any expenditure treated as allocated to the
pool for the period by virtue of section 825 (whether or not any of it is
actually so allocated).
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(4)
Amount B is the amount of any unrelieved qualifying expenditure
carried forward in the pool from the previous chargeable period.
825B
Plant or machinery used for care business
(1)
This section applies if—
(a)
disposal receipts fall to be brought into account in a pool for a
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relevant chargeable period by virtue of section 825A, and
(b)
on the re-start date, the relevant individual still owns any of the
plant or machinery which was in that pool and is still using any
of it for the purposes of the care business.
(2)
The re-start date is the first day of the first subsequent chargeable
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period which is not a relevant chargeable period.
(3)
A reference in this section to the retained plant or machinery is to so
much of the plant or machinery in the pool as the relevant individual—
(a)
still owns on the re-start date, and
(b)
is still using on that date for the purposes of the care business.
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(4)
The individual is to be treated under CAA 2001—
(a)
as having brought the retained plant or machinery into use on
the re-start date for the purposes of the care business,
(b)
as having incurred capital expenditure on the provision of that
plant or machinery for those purposes on that date, and
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(c)
as owning that plant and machinery as a result of having
incurred that expenditure.
(5)
The total amount of expenditure which the individual is to be treated
as having incurred (for all of the retained plant or machinery) is the
smaller of—
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(a)
the total market value of the retained plant or machinery on the
re-start date, and
(b)
an amount equal to the disposal receipts brought into account
in the pool as described in subsection (1)(a).
(6)
If the individual is treated under section 13 of CAA 2001 as having
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incurred notional expenditure before the re-start date as a result of

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bringing plant or machinery in the pool into use for the purposes of
another activity, the amount mentioned in subsection (5)(b) must be
reduced by the total amount of that expenditure, as determined in
accordance with section 825C(2).
(7)
But subsection (6) does not apply if the plant or machinery which was
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brought into use for the purposes of another activity is the retained
plant or machinery (for example, where it was brought into use only
partly for the purposes of that other activity).
(8)
The question whether the provision of the retained plant or machinery
is to be treated as wholly or only partly for the purposes of the care
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business is to be determined according to whether the use referred to in
subsection (3)(b) is wholly or only partly for those purposes.
825C
Plant or machinery used for other qualifying activities
(1)
This section applies if—
(a)
disposal receipts fall to be brought into account in a pool by
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virtue of section 825A because of a disposal event, and
(b)
after that disposal event, the relevant individual brings any of
the plant or machinery in that pool into use for the purposes of
another activity.
(2)
Section 13 of CAA 2001 has effect as if the total amount of the notional
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expenditure which the individual is treated under that section as
having incurred, for all of the plant or machinery in that pool which is
brought into use for the purposes of the other activity, were the smaller
of—
(a)
the total market value of that plant or machinery on the day on
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which it is brought into use for the purposes of that other
activity, and
(b)
an amount equal to the disposal receipts brought into account
in the pool as mentioned in subsection (1)(a).
(3)
Subsection (2) does not apply to plant or machinery brought into use
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for the purposes of another activity if—
(a)
the individual is treated by virtue of section 825B as having
already brought that plant or machinery into use for the
purposes of the care business, or
(b)
this section has already applied to that plant or machinery since
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the disposal event.
(4)
The amount mentioned in subsection (2)(b) must be reduced by the
appropriate sum if some plant or machinery in the pool is brought into
use for the purposes of another activity after —
(a)
the individual is treated by virtue of section 825B as having
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brought other plant or machinery in that pool into use for the
purposes of the care business, or
(b)
this section has applied to other plant or machinery in that pool
since the disposal event.
(5)
The appropriate sum is—
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(a)
in a case within paragraph (a) of subsection (4), the total amount
of expenditure which the individual is treated by virtue of

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section 825B as having incurred on the provision of that other
plant or machinery, and
(b)
in a case within paragraph (b) of that subsection, the total
amount of the notional expenditure (as determined in
accordance with subsection (2)) which the individual is treated
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under section 13 of CAA 2001 as having incurred on the
provision of that other plant or machinery since the disposal
event.
825D
Subsequent disposal events
(1)
This section applies to an item of plant or machinery which a relevant
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individual—
(a)
is treated by virtue of section 825B as bringing into use, or
(b)
brings into use in circumstances where section 825C(2) applies.
(2)
The date (in either case) on which the item is brought or treated as
brought into such use is referred to in this section as the applicable date.
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(3)
The first disposal event to occur in respect of the item on or after the
applicable date is to be regarded for the purposes of section 60(3) of
CAA 2001 as the first such event.
(4)
That event requires a disposal value to be brought into account
regardless of anything to the contrary in section 64(1) of that Act.
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(5)
But a reference in section 62 of that Act to the amount of qualifying
expenditure incurred by the individual on the provision of that item is
a reference to the amount of qualifying expenditure originally incurred
by the individual on its provision (and not to any proportion of the total
amount treated by virtue of section 825B or 825C as having been
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incurred).”
(4)
The amendments made by this section have effect in relation to chargeable
periods ending on or after the day on which this Act is passed (“the
commencement day”).
(5)
For anyone who was a relevant individual for the most recent chargeable
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period ending before the commencement day, sections 825B and 825C of
ITTOIA 2005 have effect (on and after that day) as if references in those sections
to section 825A were references to section 825 as it was in force immediately
before the commencement day.
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Seafarers’ earnings
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(1)
Section 378 of ITEPA 2003 (deductions from seafarers’ earnings: eligibility) is
amended as follows.
(2)
In subsection (1)(a), after “relevant taxable earnings” insert “or EEA-resident
earnings”.
(3)
After subsection (5) insert—
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“(6)
In this section—
“EEA-resident earnings” means section 15 or 27 earnings for a
period—
(a)
in which the employee is resident for tax purposes in an
EEA State (other than the United Kingdom), and
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(b)
which falls within a tax year in which the employee is
not ordinarily UK resident,
“resident for tax purposes” means liable, under the law of the EEA
State, to tax there by reason of domicile or residence,
“section 15 earnings” means general earnings to which section 15
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applies, and
“section 27 earnings” means general earnings to which section 27
applies.”
(4)
The amendments made by this section have effect for the tax year 2011-12 and
subsequent tax years but only in relation to eligible periods beginning on or
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after 6 April 2011.
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Venture capital schemes
Schedule 2 contains provision about venture capital schemes.
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Enterprise management incentives
(1)
Schedule 5 to ITEPA 2003 (enterprise management incentives) is amended as
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follows.
(2)
In paragraph 8 (qualifying companies: introduction), omit the “and” at the end
of the entry relating to “number of employees” and after the entry relating to
“trading activities” insert “, and
UK permanent establishment (see paragraph 14A).”
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(3)
After paragraph 14 insert—
“The UK permanent establishment requirement
14A   (1)
The UK permanent establishment requirement is met if condition A
or B is met.
      (2)
Condition A is that the company has a permanent establishment in
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the United Kingdom.
      (3)
Condition B is that—
(a)
the company is a parent company, and
(b)
any other member of the group—
(i)
meets the conditions in paragraph 14(1)(a) (trading
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activities requirement), and
(ii)
has a permanent establishment in the United
Kingdom.”
(4)
In paragraph 15(1) (meaning of “qualifying trade”), omit paragraph (a)
(requirement that trade be carried on wholly or mainly in United Kingdom).
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(5)
The amendments made by this section have effect in relation to options
granted on or after the day on which this Act is passed.
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Settlor to return excess repayment to trustees etc
(1)
Section 646 of ITTOIA 2005 (adjustments between settlor and trustees etc) is
amended as follows.
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(2)
For subsection (4) substitute—
“(4)
Subsection (5) applies if a settlor chargeable to tax under section 624 or
629 obtains a repayment by reason of the payment of the tax by—
(a)
any trustee, or
(b)
any other person to whom the income is payable by virtue of or
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as a result of the settlement.”
(3)
In subsection (5), for “excess” substitute “repayment”.
(4)
After subsection (6) insert—
“(6A)
For the purpose of subsection (5), the settlor may require an officer of
Revenue and Customs to provide the settlor with a certificate
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specifying—
(a)
that the settlor has obtained a repayment as mentioned in
subsection (4), and
(b)
the amount of the repayment.
(6B)
A certificate provided under subsection (6A) is conclusive evidence of
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the facts stated in it.”
(5)
In subsection (7), for “Any” substitute “Subject to subsections (6A) and (6B),
any”.
(6)
The amendments made by this section have effect in relation to repayments of
tax for the tax year 2010-11 or any subsequent tax year.
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Collection of income tax where sum deducted by payer
In Chapter 16 of Part 15 of ITA 2007, after section 963 (collection of income tax
on certain payments by other persons) insert—
“963A
Power to make regulations modifying section 963
(1)
The Commissioners for Her Majesty’s Revenue and Customs may by
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regulations modify, replace or supplement any provision of section
963(2) to (4).
(2)
Regulations under this section may only be made for the purpose of
regulating the time at and manner in which persons making payments
within section 963(1)(a) or (b) are to account for and pay income tax
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which is to be collected from them in respect of those payments.
(3)
In particular, regulations under this section may, in relation to income
tax for which a person is liable to account—
(a)
modify any provision of Parts 2 to 6 of TMA 1970, or
(b)
apply any such provision with or without modifications.
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(4)
Regulations under this section may—
(a)
make different provision for different kinds of payer,
(b)
make different provision for different circumstances, and
(c)
authorise the Commissioners for Her Majesty’s Revenue and
Customs, if they think there are special circumstances justifying
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it, to make special arrangements in relation to income tax for
which a person is liable to account.

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(5)
Regulations under this section may contain incidental, supplemental,
consequential and transitional provision and savings.
(6)
The Commissioners for Her Majesty’s Revenue and Customs must not
make any regulations under this section unless a draft of them has been
laid before and approved by a resolution of the House of Commons.
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(7)
References in this Act and in any other enactment to any of the
provisions of section 963(2) to (4) are to be read as references to those
provisions as modified, replaced or supplemented by provision made
by regulations under this section.”
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Company distributions
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Schedule 3 contains provision about company distributions.
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REITs: stock dividends
Schedule 4 contains provision about the issue of stock dividends by a company
UK REIT or the principal company of a group UK REIT.
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Financing costs and income of group companies
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Schedule 5 contains—
(a)
amendments of Part 7 of TIOPA 2010 (tax treatment of financing costs
and income of companies that are members of a group) and
consequential amendments of other provisions of that Act, and
(b)
provision enabling a group, by election, to defer the application in
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relation to it of certain amendments contained in the Schedule.
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Consortium claims for group relief
Schedule 6 contains provision about claims for group relief from corporation
tax made by companies which are members of, or owned by, a consortium.
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R&D relief for SMEs: removal of intellectual property condition
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(1)
Part 13 of CTA 2009 (additional relief for expenditure on research and
development) is amended as follows.
(2)
In section 1052 (qualifying expenditure on in-house direct R&D)—
(a)
in subsection (1), for “conditions A to E” substitute “conditions A, B, D
and E”, and
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(b)
omit subsection (4) (condition C: intellectual property created as result
of research and development to which expenditure is attributable to be
vested in company).
(3)
In section 1053 (qualifying expenditure on contracted out R&D)—
(a)
in subsection (1)(b), for “conditions A to D” substitute “conditions A, C
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and D”, and
(b)
omit subsection (3) (condition B: same intellectual property condition).
(4)
In section 1071 (subsidised qualifying expenditure on in-house direct R&D)—
(a)
in subsection (1), for “conditions A to E” substitute “conditions A to C
and E”, and
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(b)
omit subsection (5) (condition D: same intellectual property condition).
(5)
In section 1072 (subsidised qualifying expenditure on contracted out R&D)—
(a)
in subsection (1)(b), for “conditions A to F” substitute “conditions A to
D and F”, and
(b)
omit subsection (6) (condition E: same intellectual property condition).
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(6)
Omit section 1139 (meaning of “intellectual property”).
(7)
In Schedule 4 to CTA 2009 (index of defined expressions), omit the entry
relating to “intellectual property (in Part 13)”.
(8)
The amendments made by this section have effect in relation to expenditure
incurred by a company in an accounting period ending on or after 9 December
10
2009.
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Film tax credit: unused losses
(1)
Section 1201 of CTA 2009 (film tax credit claimable where company has
surrenderable loss) is amended as follows.
(2)
In subsection (2)—
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(a)
for “any period” substitute “an accounting period”, and
(b)
in paragraph (a), for “the company’s loss” substitute “the company’s
available loss”.
(3)
After that subsection insert—
“(2A)
The company’s available loss for an accounting period is given by—
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where—
L is the amount of the company’s loss for the period in the
separate film trade, and
RUL is the amount of any relevant unused loss of the company.
(2B)
The “relevant unused loss” of a company is so much of any available
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loss of the company for the previous accounting period as has not
been—
(a)
surrendered under section 1202(1), or
(b)
carried forward under section 45 of CTA 2010 and set against
profits of the separate film trade.”
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(4)
In subsection (4), in the definition of “S”, for “surrendered in previous periods”
substitute “previously surrendered”.
(5)
After that subsection insert—
“(5)
If a period of account of the separate film trade does not coincide with
an accounting period, any necessary apportionments are to be made by
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reference to the number of days in the periods concerned.”
(6)
In section 1202(4) of that Act (company’s loss reduced by amount
surrendered), for “loss in the separate film trade” substitute “available loss”.
(7)
The amendments made by this section have effect in relation to accounting
periods ending on or after 9 December 2009.
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