Finance (No. 2) Bill

House of Commons

Session 2010 - 11
Internet Publications
Other Bills before Parliament

Finance (No. 2) Bill

Finance (No. 2) Bill
Part 1 — Income tax, corporation tax and capital gains tax
1

A
Bill
[AS AMENDED IN PUBLIC BILL COMMITTEE]
To
grant certain duties, to alter other duties, and to amend the law relating to the
National Debt and the Public Revenue, and to make further provision in
connection with finance.
Most Gracious Sovereign
WE, Your Majesty’s most dutiful and loyal subjects, the Commons of the
United Kingdom in Parliament assembled, towards raising the necessary
supplies to defray Your Majesty’s public expenses, and making an addition to the
public revenue, have freely and voluntarily resolved to give and to grant unto Your
Majesty the several duties hereinafter mentioned; and do therefore most humbly
beseech Your Majesty that it may be enacted, and be it enacted by the Queen’s most
Excellent Majesty, by and with the advice and consent of the Lords Spiritual and
Temporal, and Commons, in this present Parliament assembled, and by the authority
of the same, as follows:—
Part 1
Income tax, corporation tax and capital gains tax
Income tax and corporation tax
1
Shared lives care
Schedule 1 contains provision extending foster-care relief to other forms of
5
care.
2
Payments to special guardians and those in receipt of residence orders
(1)
Part 6 of ITTOIA 2005 (exempt income) is amended as follows.

Bill 100
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Finance (No. 2) Bill
Part 1 — Income tax, corporation tax and capital gains tax
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(2)
In section 744 (payments to adopters: England and Wales)—
(a)
the existing provision becomes subsection (1),
(b)
in that subsection, omit the “and” before paragraph (e) and after that
paragraph insert—
“(f)
payments made under regulations under section 14F of
5
the Children Act 1989 (special guardianship support
services) to a person appointed as a child’s special
guardian,
(g)
payments made to a person under section 17 of that Act
(provision of services for children in need, their families
10
and others) by reason of that person being a person in
whose favour a residence order with respect to a child is
in force,
(h)
payments made to a person, in respect of a child, under
paragraph 15 of Schedule 1 to that Act (local authority
15
contribution to child’s maintenance to recipients in
whose favour residence order is in force), and
(i)
payments made in accordance with—
(i)
an order under that Schedule (orders for
financial relief against parents etc), or
20
(ii)
a maintenance agreement,

for the benefit of a child, to a person appointed as the
child’s special guardian or a person in whose favour a
residence order with respect to the child is in force.”,
(c)
after that subsection insert—
25
“(2)
But a payment is not within subsection (1)(f), (g), (h) or (i) if—
(a)
it is made to an excluded relative of the child,
(b)
it is made to a person appointed as the child’s special
guardian and an excluded relative is also appointed as
the child’s special guardian, or
30
(c)
it is made to a person in whose favour a residence order
is in force with respect to the child and that order is also
in favour of an excluded relative.
(3)
In this section—
“excluded relative”, in relation to a child, means—
35
(a)
a parent of the child, or
(b)
a person who is, or has been, the husband or wife
or civil partner of a parent of the child;
“maintenance agreement” has the meaning given by
paragraph 10(1) of Schedule 1 to the Children Act 1989;
40
“residence order” has the meaning given by section 8 of
that Act.”, and
(d)
in the heading, after “adopters” insert “, etc”.
(3)
In section 745 (payments to adopters: Scotland)—
(a)
the existing provision becomes subsection (1),
45
(b)
in that subsection, omit the “and” before paragraph (d) and after that
paragraph insert—
“(e)
payments made to a person under section 50 of the
Children Act 1975, or section 22 of the Children

Finance (No. 2) Bill
Part 1 — Income tax, corporation tax and capital gains tax
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(Scotland) Act 1995, by reason of that person being a
person with whom a child is to live by virtue of a
residence order, and
(f)
payments of aliment made—
(i)
in accordance with an award of aliment under
5
the Family Law (Scotland) Act 1985, or
(ii)
under an agreement (within the meaning of
section 7(5) of that Act),

for the benefit of a child, to a person in whose favour a
residence order with respect to the child is in force.”,
10
(c)
after that subsection insert—
“(2)
A payment is not within subsection (1)(e) or (f) if—
(a)
it is made to an excluded relative of the child, or
(b)
it is made to a person in whose favour a residence order
is in force with respect to the child and that order is also
15
in favour of an excluded relative.
(3)
In this section—
“excluded relative”, in relation to a child, means—
(a)
a parent of the child, or
(b)
a person who is, or has been, the husband or wife
20
or civil partner of a parent of the child;
“residence order” has the meaning given by section
11(2)(c) of the Children (Scotland) Act 1995.”, and
(d)
in the heading, after “adopters” insert “, etc”.
(4)
In section 746 (payments to adopters: Northern Ireland)—
25
(a)
the existing provision becomes subsection (1),
(b)
in that subsection, omit the “and” before paragraph (c) and after that
paragraph insert—
“(d)
payments made to a person under Article 18 of the
Children (Northern Ireland) Order 1995 (S.I. 1995/755
30
(NI 2)) (general duty of authority to provide personal
social services) by reason of that person being a person
in whose favour a residence order with respect to a child
is in force,
(e)
payments made to a person, in respect of a child, under
35
paragraph 17 of Schedule 1 to that Order (local authority
contribution to child’s maintenance to recipients in
whose favour residence order is in force), and
(f)
payments made in accordance with—
(i)
an order under that Schedule (orders for
40
financial relief against parents etc), or
(ii)
a maintenance agreement,

for the benefit of a child, to a person in whose favour a
residence order with respect to the child is in force.”,
(c)
after that subsection insert—
45
“(2)
But a payment is not within subsection (1)(d), (e) or (f) if—
(a)
it is made to an excluded relative of the child, or

Finance (No. 2) Bill
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(b)
it is made to a person in whose favour a residence order
is in force with respect to the child and that order is also
in favour of an excluded relative.
(3)
In this section—
“excluded relative”, in relation to a child, means—
5
(a)
a parent of the child, or
(b)
a person who is, or has been, the husband or wife
or civil partner of a parent of the child;
“maintenance agreement” has the meaning given by
paragraph 12 of Schedule 1 to the Children (Northern
10
Ireland) Order 1995;
“residence order” has the meaning given by Article 8 of
that Order.”, and
(d)
in the heading, after “adopters” insert “, etc”.
(5)
The amendments made by this section have effect in relation to the tax year
15
2010-11 and subsequent tax years.
3
Qualifying care relief: capital allowances
(1)
Chapter 2 of Part 7 of ITTOIA 2005 (qualifying care relief) is amended as
follows.
(2)
In section 824 (capital allowances: introduction), after subsection (2) insert—
20
“(2A)
In this group of sections, in relation to a relevant individual—
(a)
“the care business” means the provision of qualifying care by
the individual,
(b)
“care business expenditure” means qualifying expenditure
incurred on the provision of plant or machinery wholly or
25
partly for the care business,
(c)
“care business pool” means a pool of care business expenditure
(even if the balance for the time being is nil), and
(d)
a reference to “another activity” is to a qualifying activity
carried on by the individual other than the care business.
30
(2B)
In this group of sections, plant or machinery is referred to as being “in”
a pool if qualifying expenditure incurred on its provision has been
allocated at any time to that pool.”
(3)
For section 825 substitute—
“825
Unallocated capital expenditure
35
(1)
This section applies if—
(a)
at the beginning of a relevant chargeable period of a relevant
individual, there is care business expenditure which has not
been allocated to a care business pool,
(b)
the individual is entitled under CAA 2001 to allocate the
40
expenditure, or a part of it, to a care business pool for that
period, and
(c)
the previous chargeable period was not a relevant chargeable
period.

Finance (No. 2) Bill
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(2)
So much of the expenditure as the individual is entitled to allocate to a
care business pool for that period is to be treated for the purposes of
CAA 2001 as allocated to the appropriate kind of care business pool for
that period (whether or not any of it is actually so allocated).
(3)
For the different kinds of pool, see section 54 of CAA 2001.
5
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—
10
(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
15
(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).
20
(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
25
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
30
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.
35
(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
40
(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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Finance (No. 2) Bill
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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
5
incurred notional expenditure before the re-start date as a result of
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).
10
(7)
But subsection (6) does not apply if the plant or machinery which was
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
15
is to be treated as wholly or only partly for the purposes of the care
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—
20
(a)
disposal receipts fall to be brought into account in a pool by
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.
25
(2)
Section 13 of CAA 2001 has effect as if the total amount of the notional
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—
30
(a)
the total market value of that plant or machinery on the day on
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).
35
(3)
Subsection (2) does not apply to plant or machinery brought into use
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
40
(b)
this section has already applied to that plant or machinery since
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 —
45
(a)
the individual is treated by virtue of section 825B as having
brought other plant or machinery in that pool into use for the
purposes of the care business, or

Finance (No. 2) Bill
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(b)
this section has applied to other plant or machinery in that pool
since the disposal event.
(5)
The appropriate sum is—
(a)
in a case within paragraph (a) of subsection (4), the total amount
of expenditure which the individual is treated by virtue of
5
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
10
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
15
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.
20
(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.
25
(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
30
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
35
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.
4
Seafarers’ earnings
40
(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”.