Finance (No. 3) Bill

Session 2010 - 11
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Other Bills before Parliament

Finance (No. 3) Bill

Finance (No. 3) Bill
Part 2 — Income tax, corporation tax and capital gains tax
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Tainted charity donations
Schedule 3 contains provision about gifts and other disposals to charities and
community amateur sports clubs.
28
Amounts not fully recognised for accounting purposes
Schedule 4 contains amendments of Parts 5 and 7 of CTA 2009 (loan
5
relationships and derivative contracts) relating to cases where amounts are not
fully recognised for accounting purposes.
29
Loan relationships involving connected debtor and creditor
(1)
In section 418 of CTA 2009 (loan relationships involving connected debtor and
creditor where debits exceed credits), in subsection (2), after “creditor
10
company” insert “or any company connected with it”.
(2)
In section 419 of that Act (section 418: supplementary), after subsection (6)
insert—
“(6A)
References in section 418 to a company bringing debits or credits into
account under or for the purposes of this Part include bringing debits
15
or credits into account under or for the purposes of this Part in
determining the chargeable profits of the company (or in determining
that there were no such profits) for the purposes of Chapter 4 of Part 17
of ICTA (controlled foreign companies).”
(3)
The amendments made by this section have effect in relation to loan
20
relationships to which a company is a party (or to which it is treated as a party
under section 418(6A) of CTA 2009) on or after 6 December 2010.
(4)
But amounts are to continue to be brought into account for the purposes of Part
5 of CTA 2009 disregarding those amendments if the amounts relate to a time
before that day.
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30
Group mismatch schemes
Schedule 5 contains provision about group mismatch schemes.
31
Company ceasing to be member of group: availability of relief
(1)
Section 179 of TCGA 1992 (company ceasing to be member of group: post-
appointed day cases) is amended as follows.
30
(2)
In subsection (2A)—
(a)
for “Where” substitute “Subsection (2AA) applies where”, and
(b)
for paragraphs (c) and (d) and the words following those paragraphs
substitute—
“(c)
at the time company A ceases to be a member of the first
35
group there is a connection between that group and the
group of companies of which company A becomes a
member on leaving the first group (“the second group”),
and
(d)
subsequently—
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(i)
company A ceases to be a member of the second
group, or

Finance (No. 3) Bill
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(ii)
(before sub-paragraph (i) applies) there ceases to
be a connection between the two groups.”
(3)
After that subsection insert—
“(2AA)
Where this subsection applies—
(a)
in a case within subsection (2A)(d)(ii), for the purposes of this
5
section (other than subsection (2A)) as it applies as respects the
acquisition, company A and any associated company are to be
treated as having ceased to be members of the second group at
the time the connection between the two groups ceases,
(b)
subsection (1) has effect in relation to company A’s ceasing to be
10
a member of the second group as if it had been the second group
of which both companies had been members at the time of the
acquisition, and
(c)
nothing in subsection (2) prevents subsection (1) applying by
virtue of paragraph (b).”
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(4)
In subsection (2B) for “if, at the time when company A ceases to be a member
of the second group” substitute “at a particular time if, at that time,”.
(5)
The amendments made by this section have effect in relation to a company in
any case in which the time of the company’s ceasing to be a member of the first
group is on or after 23 March 2011.
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32
Leasing businesses
Schedule 6 contains provision about leasing businesses carried on by
companies alone or in partnership.
33
Long funding finance leases
(1)
Chapter 6 of Part 2 of CAA 2001 (which includes provision about lessees under
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long funding leases) is amended as follows.
(2)
In section 70C (long funding finance lease: amount of capital expenditure),
after subsection (4) insert—
“(4A)
But where the minimum lease payments include a relievable amount,
the present value of that amount must be excluded in determining the
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commencement PVMLP.
(4B)
An amount (“amount X”) is a relievable amount if—
(a)
an arrangement is in place under which all or part of any
residual amount (as defined in section 70YE) is guaranteed by
the lessee or a person connected with the lessee,
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(b)
amount X is within the minimum lease payments because of
that arrangement (see subsection (1)(a) of that section), and
(c)
it is reasonable to assume that, were amount X to be incurred
under the arrangement, relief would be available as a result
(beyond relief, by virtue of this section and section 70E, because
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amount X is within those minimum lease payments).
(4C)
In deciding for the purposes of subsection (4B)(c) whether relief would
be available as a result, no account is to be taken of—

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(a)
any part of the arrangement other than the part by virtue of
which all or part of the residual amount is guaranteed, or
(b)
any other arrangement connected with the arrangement or
forming part of a set of arrangements that includes the
arrangement.”
5
(3)
In section 70D (long funding finance lease: additional expenditure: allowances
for lessee), after subsection (1) insert—
“(1A)
Any increase attributable to a relievable amount is to be ignored for the
purposes of subsection (1)(d).
(1B)
Subsections (4B) and (4C) of section 70C apply (with any necessary
10
modifications) for the purposes of this section as for the purposes of
that section.”
(4)
In section 70E (disposal events and disposal values), in subsection (2C)(b), after
“section 70YE)” insert “other than any relievable payment”.
(5)
In that section, after subsection (2D) insert—
15
“(2DA)
A payment (“payment X”) is a relievable payment if—
(a)
an arrangement is in place under which all or part of any
residual amount (as defined in section 70YE) is guaranteed by
the lessee or a person connected with the lessee,
(b)
payment X is within the minimum lease payments because of
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that arrangement (see subsection (1)(a) of that section), and
(c)
it is reasonable to assume that relief would be available as a
result of making payment X (beyond relief, by virtue of section
70C or 70D and this section, because payment X is within those
minimum lease payments).
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(2DB)
For the purposes of subsection (2DA)(c)—
(a)
“relief” has the meaning given in section 70C, and
(b)
subsection (4C) of that section applies as it applies for the
purposes of subsection (4B)(c) of that section.”
(6)
The amendments made by subsections (2) and (3) have effect in cases where the
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arrangement is entered into on or after 9 March 2011.
(7)
The amendments made by subsections (4) and (5) have effect in relation to
payments made on or after 9 March 2011 (regardless of when the arrangement
was entered into).
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Investment companies
35
Schedule 7 contains provision about investment companies.
Exemptions and reliefs
35
Reduction in childcare relief for higher earners
Schedule 8 contains provision for reducing childcare relief for higher earners.

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Childcare: salary sacrifice etc and the national minimum wage
(1)
In section 270A of ITEPA 2003 (limited exemption for qualifying childcare
vouchers), after subsection (5) insert—
“(5A)
Where the scheme under which the vouchers are provided involves—
(a)
relevant salary sacrifice arrangements, or
5
(b)
relevant flexible remuneration arrangements,

Condition C is not prevented from being met by reason only that the
scheme is not open to relevant low-paid employees.
(5B)
In subsection (5A)—
“relevant salary sacrifice arrangements” means arrangements
10
(whenever made) under which the employees for whom the
vouchers are provided give up the right to receive an amount of
general earnings or specific employment income in return for
the provision of the vouchers;
“relevant flexible remuneration arrangements” means
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arrangements (whenever made) under which the employees for
whom the vouchers are provided agree with the employer that
they are to be provided with the vouchers rather than receive
some other description of employment income;
“relevant low-paid employees” means any of the employer’s
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employees who are remunerated by the employer at a rate such
that, if the relevant salary sacrifice arrangements or relevant
flexible remuneration arrangements applied to them, the rate at
which they would then be so remunerated would be likely to be
lower than the national minimum wage.”
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(2)
In section 318A of that Act (exemption for childcare other than employer-
provided care), after subsection (5) insert—
“(5A)
Where the scheme under which the care is provided involves—
(a)
relevant salary sacrifice arrangements, or
(b)
relevant flexible remuneration arrangements,
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Condition C is not prevented from being met by reason only that the
scheme is not open to relevant low-paid employees.
(5B)
In subsection (5A)—
“relevant salary sacrifice arrangements” means arrangements
(whenever made) under which the employees for whom the
35
care is provided give up the right to receive an amount of
general earnings or specific employment income in return for
the provision of the care;
“relevant flexible remuneration arrangements” means
arrangements (whenever made) under which the employees for
40
whom the care is provided agree with the employer that they
are to be provided with the care rather than receive some other
description of employment income;
“relevant low-paid employees” means any of the employer’s
employees who are remunerated by the employer at a rate such
45
that, if the relevant salary sacrifice arrangements or relevant
flexible remuneration arrangements applied to them, the rate at
which they would then be so remunerated would be likely to be
lower than the national minimum wage.”

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(3)
The amendments made by this section have effect for the tax year 2005-06 and
subsequent tax years.
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Accommodation expenses of MPs
(1)
In section 292 of ITEPA 2003 (accommodation expenses of MPs), after
subsection (4) insert—
5
“(5)
The reference in subsection (1) to a payment made to a member of the
House of Commons under section 5(1) of the Parliamentary Standards
Act 2009 includes a payment made under that section to another person
at the direction of a member (see section 6(7) of that Act).”
(2)
The amendment made by this section has effect in relation to payments made
10
under section 5(1) of the Parliamentary Standards Act 2009 on or after 1
November 2010.
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Experts seconded to European Union bodies
(1)
In Chapter 8 of Part 4 of ITEPA 2003 (employment income: special kinds of
employment), after section 304 insert—
15
“304A
Experts seconded to other European Union bodies
(1)
No liability to income tax arises in respect of any subsistence
allowances paid by a relevant EU body to persons who, because of their
expertise in matters relating to the subject matter of the functions of the
relevant EU body, have been seconded to the body by their employers.
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(2)
Each of the following is a “relevant EU body”—
(a)
the European Medicines Agency, established as the European
Agency for the Evaluation of Medicinal Products by Council
Regulation (EEC) No 2309/93 of 22 July 1993,
(b)
the European Police College, established by Council Decision of
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20 September 2005 (2005/681/JHA),
(c)
the European Banking Authority, established by Regulation
(EU) No 1093/2010 of 24 November 2010, and
(d)
any other body established by an EU instrument which is
designated as a relevant EU body for the purposes of this
30
section by an order made by the Treasury.”
(2)
The amendment made by this section has effect in relation to subsistence
allowances paid in respect of periods beginning on or after 1 January 2011.
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Employment income: exemption for fees relating to monitoring schemes
(1)
In Chapter 11 of Part 4 of ITEPA 2003 (employment income: miscellaneous
35
exemptions), after section 326 insert—
“Monitoring schemes
326A
Fees relating to monitoring schemes relating to vulnerable persons
(1)
No liability to income tax arises by virtue of the payment or
reimbursement of a fee in respect of an application to join the scheme
40
administered under section 44 of the Protection of Vulnerable Groups

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(Scotland) Act 2007 (asp 14) (scheme to collate and disclose information
about individuals working with vulnerable persons).
(2)
The Treasury may by order amend subsection (1) so as—
(a)
to add to the fees covered by that subsection a fee of a specified
kind payable in connection with a scheme for England and
5
Wales or Northern Ireland which corresponds to the scheme
administered under section 44 of the Protection of Vulnerable
Groups (Scotland) Act 2007, or
(b)
to amend or remove a reference to a fee added under paragraph
(a).”
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(2)
The amendment made by this section has effect for the tax year 2010-11 and
subsequent tax years.
40
Individual investment plans for children
(1)
Chapter 3 of Part 6 of ITTOIA 2005 (income from individual investment plans)
is amended in accordance with subsections (2) to (5).
15
(2)
In section 694 (income from individual investment plans), after subsection (1)
insert—
“(1A)
In subsection (1) “income of an individual from investments under a
plan” includes income from investments which is treated as the
individual’s income by virtue of section 629 (income paid to relevant
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children of settlor).”
(3)
After section 695 insert—
“695A
Investment plans for children
(1)
This section applies where investment plan regulations provide that
income of a child from investments under a plan (a “child plan”) is
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exempt from income tax (either wholly or to such extent as is specified
in the regulations).
(2)
In addition to any provision which may be made by virtue of any other
provision of this Chapter, investment plan regulations may—
(a)
specify descriptions of persons by whom investments may be
30
made for a child,
(b)
provide that withdrawals may be made only in the
circumstances specified in the regulations, and
(c)
provide that, in the case of a child who is under 16, the plan
managers may act only on the direction of a person of a
35
description specified in the regulations.
(3)
They may also provide—
(a)
that any assignment of, or agreement to assign, investments
under a child plan, and any charge on or agreement to charge
any such investments, is void,
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(b)
that, on the bankruptcy of a child with investments under a
child plan, the entitlement to those investments does not pass to
any trustee or other person acting on behalf of the child’s
creditors, and

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(c)
that, where a contract is entered into by or on behalf of a child
who is 16 or over in connection with a child plan under which
investments are held—
(i)
by the child, or
(ii)
by another child in relation to whom the child has
5
parental responsibility,

the contract has effect as if the child had been 18 or over when
it was entered into.
(4)
Where, by virtue of provision made in investment plan regulations
under subsection (2)(a), investments are made for a child under a child
10
plan, for the purposes of this Chapter the child is treated as having
made those investments.
(5)
In this section—
“assignment” includes assignation, and “assign” is to be construed
accordingly;
15
“bankruptcy”, in relation to a child, includes the sequestration of
the child’s estate;
“charge on or agreement to charge” includes a right in security
over or an agreement to create a right in security over;
“child” means an individual under 18;
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“parental responsibility” means—
(a)
parental responsibility within the meaning of the
Children Act 1989 or the Children (Northern Ireland)
Order 1995, or
(b)
parental responsibilities within the meaning of the
25
Children (Scotland) Act 1995;

and any reference to investments being held by a child includes a
reference to investments being held by plan managers on behalf of the
child by virtue of section 696(1).”
(4)
In section 699 (non-entitlement to exemption), at the end insert—
30
“(9)
In this section references to an investor include an individual entitled
to an exemption given by investment plan regulations by virtue of
section 694(1A).”
(5)
In section 701 (general and supplementary powers), at the end insert—
“(6)
In this section references to an investor include an individual entitled
35
to an exemption given by investment plan regulations by virtue of
section 694(1A).”
(6)
In section 151 of TCGA 1992 (personal equity plans), in subsection (2)—
(a)
for “section 694(1) and (2)” substitute “section 694(1) to (2)”, and
(b)
for the words from “but with” to the end substitute “but with the
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following modifications—
(a)
any reference to income tax is to be read as a reference to
capital gains tax,
(b)
the reference in section 695A(1) to the case where
regulations provide that income of a child from
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investments under a plan is exempt from income tax is
to be read as a reference to the case where regulations
provide that a child who invests under a plan is entitled