Session 2010 - 11
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Finance (No. 3) Bill


Finance (No. 3) Bill
Schedule 3 — Tainted charity donations
Part 3 — Capital gains tax

126

 

Supplementary

939G    

Connected charities

   

For the purposes of this Part, a “connected charity” in relation to

another charity means a charity which is connected with that other

charity in a matter relating to the structure, administration or control

5

of either charity.

939H    

Connected persons

(1)   

Section 1122 (meaning of “connected” persons) applies for the

purposes of this Part (except section 939G), but subject to the

following modification.

10

(2)   

Section 1122 has effect as if after subsection (8) there were inserted—

“(9)   

A person who is a beneficiary of a settlement is connected

with—

(a) a person in the capacity as trustee of the settlement, and

(b) the settlor in relation to the settlement.

15

(10)   

For the purposes of this section—

(a) a man and woman living together as husband and wife are

treated as if they were husband and wife,

(b) two people of the same sex living together as if they were civil

partners of each other are treated as if they were civil partners

20

of each other, and

(c) “close company” includes a company that would be a close

company if it were resident in the United Kingdom.”

939I    

Minor definitions

(1)   

In this Part—

25

“arrangements” includes any scheme, arrangement or

understanding of any kind, whether or not legally

enforceable, involving a single transaction or two or more

transactions;

“charity” includes a registered club within the meaning of

30

section 658(6) (meaning of “community amateur sports club”

and “registered club”).

(2)   

In this Part, in the case of a charitable trust, references to a charity

being entitled to a repayment of tax are to be read as references to the

trustees of the trust being so entitled.”

35

Part 3

Capital gains tax

3          

After section 257 of TCGA 1992 insert—

“257A   

 Tainted charity donations

(1)   

Section 257 does not apply in relation to—

40

(a)   

a tainted donation made by a person, or

(b)   

any associated donation.

 
 

Finance (No. 3) Bill
Schedule 3 — Tainted charity donations
Part 4 — Consequential amendments

127

 

(2)   

For the purposes of this section—

(a)   

“tainted donation” means a tainted donation within the

meaning of Chapter 8 of Part 13 of ITA 2007 (tainted charity

donations: removal of income tax reliefs etc) or Part 21C of

CTA 2010 (tainted charity donations: removal of corporation

5

tax relief), and

(b)   

“associated donation” means an associated donation within

the meaning of section 809ZM of ITA 2010 or section 939F of

CTA 2010.”

Part 4

10

Consequential amendments

Capital Allowances Act 2001

4          

In section 63 of CAA 2001 (cases in which disposal value is nil), in subsection

(4)—

(a)   

after “Subsection (2)” insert “—

15

(a)   

”, and

(b)   

at the end insert “, and

(b)   

is subject to section 809ZM of ITA 2007 and section

939F of CTA 2010 (removal of tax relief in respect of

tainted charity donations etc).”

20

Income Tax (Employment and Pensions) Act 2003

5          

In section 713 of ITEPA 2003 (donations to charity: payroll deduction

scheme), after subsection (5) insert—

“(6)   

This section is subject to section 809ZM of ITA 2007 (removal of

income tax relief in respect of tainted charity donations etc).”

25

Income Tax (Trading and Other Income) Act 2005

6          

In section 108 of ITTOIA 2005 (gifts of trading stock to charities etc), in

subsection (5)—

(a)   

after “This section” insert “—

(a)   

”, and

30

(b)   

at the end insert “, and

(b)   

is subject to section 809ZM of ITA 2007 (removal of

income tax relief in respect of tainted charity

donations etc).”

Income Tax Act 2007

35

7          

ITA 2007 is amended as follows.

8          

In section 30 (calculation of income tax liability: additional tax)—

(a)   

in subsection (1) before the entry for section 205 of FA 2004 insert—

“section 809ZN (tainted gift aid donations: charge to

tax),

40

section 809ZO (tainted charity donations by trustees:

charge to tax),”, and

 
 

Finance (No. 3) Bill
Schedule 3 — Tainted charity donations
Part 4 — Consequential amendments

128

 

(b)   

for subsection (2) substitute—

“(2)   

If the taxpayer is a trustee, the provisions referred to at Step

7 of the calculation in section 23 are—

section 496 (discretionary payments by trustees: tax pool

adjustment),

5

section 809ZN (tainted gift aid donations: charge to tax),

and

section 809ZO (tainted charity donations by trustees:

charge to tax).”

9          

In section 58 (meaning of “adjusted net income), at the end insert—

10

“(4)   

Subsection (6) of section 809ZM (removal of income tax relief in

respect of tainted donations etc) excludes certain donations from

being deducted at step 2 in subsection (1).”

10         

In section 413 (gift aid: overview of Chapter), after subsection (4) insert—

“(4A)   

This Chapter is subject to section 809ZM (removal of income tax

15

relief in respect of tainted charity donations etc).”

11         

In section 431 (gifts of shares, securities and real property to charities etc),

after subsection (6) insert—

“(7)   

This Chapter is subject to section 809ZM (removal of income tax

relief in respect of tainted charity donations etc).”

20

12         

In section 543 (meaning of “non-charitable expenditure”), omit subsection

(1)(g) and (h).

13         

Sections 549 to 557 (substantial donor transactions) are repealed.

14         

In Schedule 2 (transitionals and savings), omit paragraphs 105 and 106.

15         

In Schedule 4 (index of defined expressions), at the appropriate places

25

insert—

 

“arrangements (in Chapter 8 of Part 13)

section 809ZR”

 
 

“charity (in Chapter 8 of Part 13)

paragraph 1 of

 
  

Schedule 6 to

 
  

FA 2010 (and

 

30

  

see also section

 
  

809ZR)”

 
 

“the donor (in Chapter 8 of Part 13)

section

 
  

809ZJ(3)”

 
 

“potentially advantaged person (in

section

 

35

 

Chapter 8 of Part 13)

809ZJ(5)”

 
 

“relievable charity donation (in Chapter 8

section

 
 

of Part 13)

809ZI(1)”

 
 

“tainted donation (in Chapter 8 of Part 13)

section 809ZJ”.

 
 
 

Finance (No. 3) Bill
Schedule 3 — Tainted charity donations
Part 4 — Consequential amendments

129

 

Housing and Regeneration Act 2008

16         

In Schedule 9 (amendment of enactments: Part 1), omit paragraph 34.

Corporation Tax Act 2009

17         

In section 105 of CTA 2009 (gifts of trading stock to charities etc), in

subsection (6) after “charity)” insert “and section 939F of that Act (removal

5

of corporation tax relief in respect of tainted charity donations etc)”.

18         

In Schedule 1 (minor and consequential amendments), omit paragraphs 703

and 704.

Corporation Tax Act 2010

19         

CTA 2010 is amended as follows.

10

20         

In section 1 (overview of Act), in subsection (4)—

(a)   

in the opening words for “21” substitute “21C”, and

(b)   

after paragraph (j) insert “, and

(k)   

tainted donations made to charities (see Part 21C).”

21         

In section 189 (relief for qualifying charitable donations), in subsection (5)

15

for “any” substitute “section 939F and to any other”.

22         

In section 496 (meaning of “non-charitable expenditure”), omit subsection

(1)(e) and (f).

23         

Sections 502 to 510 (substantial donor transactions) are repealed.

24         

In Schedule 1 (minor and consequential amendments), omit paragraphs 532

20

to 535.

25         

In Schedule 2 (transitionals and savings etc), omit paragraphs 73 to 76.

26         

In Schedule 4 (index of defined expressions), at the appropriate places

insert—

 

“arrangements (in Part 21C)

section 939I”

 

25

 

“charity (in Part 21C)

paragraph 1 of

 
  

Schedule 6 to

 
  

FA 2010 (and

 
  

see also section

 
  

939I)”

 

30

 

“the donor (in Part 21C)

section

 
  

939C(3)”

 
 

“potentially advantaged person (in Part

section

 
 

21C)

939C(5)”

 
 

“relievable charity donation (in Part 21C)

section

 

35

  

939B(1)”

 
 

“tainted donation (in Part 21C)

section 939C”.

 
 
 

Finance (No. 3) Bill
Schedule 3 — Tainted charity donations
Part 5 — Commencement and transitional provision

130

 

Part 5

Commencement and transitional provision

Commencement

27    (1)  

Subject to sub-paragraph (2), the amendments made by this Schedule have

effect in relation to relievable charity donations made on or after 1 April

5

2011.

      (2)  

The repeals made by paragraphs 12 to 14, 16, 18 and 22 to 25 have effect in

relation to any transaction, other than an excluded transaction, occurring on

or after 1 April 2013.

      (3)  

A transaction is “excluded” if it is entered into in pursuance of a contract

10

made before 1 April 2013, other than in pursuance of a variation of the

contract made on or after that date.

Treatment of existing arrangements

28         

In the amendments made by Parts 1 and 2 of this Schedule, references to

arrangements include arrangements made, or made and implemented,

15

before 1 April 2011.

Treatment of substantial donor transactions

29    (1)  

For the purposes of section 549(2) of ITA 2007 (meaning of substantial

donor), relievable gifts (within the meaning of section 550 of that Act)

received by a charitable trust on or after 1 April 2011 are to be disregarded.

20

      (2)  

Sub-paragraphs (3) and (4) apply where—

(a)   

a substantial donor transaction is entered into before, or on or after 1

April 2011, and

(b)   

that transaction is not tainted.

      (3)  

Where a payment made on or after 1 April 2011 by a charitable trust to a

25

substantial donor in the course of, or for the purposes of, the substantial

donor transaction would (in the absence of this sub-paragraph) be treated

under section 551(1) or (5) of ITA 2007 as non-charitable expenditure, that

payment is not to be so treated.

      (4)  

Where, as a result of the substantial donor transaction, non-charitable

30

expenditure would (in the absence of this sub-paragraph) be treated as

incurred under section 551(2) of that Act on or after 1 April 2011, that

expenditure is not to be treated as so incurred.

      (5)  

A substantial donor transaction is “tainted” if (and only if) it is reasonable to

assume from—

35

(a)   

the likely effects of the relevant relievable gifts and the substantial

donor transaction, and

(b)   

the circumstances in which the relevant relievable gifts were made

and the circumstances in which the substantial donor transaction

was entered into,

40

           

that the relevant relievable gifts (or one or more of them) would not have

been made and the transaction would not have been entered into

independently of one another.

 
 

Finance (No. 3) Bill
Schedule 3 — Tainted charity donations
Part 5 — Commencement and transitional provision

131

 

      (6)  

In this section—

“relevant relievable gifts”, in relation to the substantial donor

transaction, means the relievable gifts by reason of which a person is

a substantial donor and the transaction is a substantial donor

transaction;

5

“relievable gift” has the meaning given by section 550 of ITA 2007;

“substantial donor” and “substantial donor transaction” have the

meaning given by section 549 of that Act.

30    (1)  

For the purposes of section 502(2) of CTA 2010 (meaning of substantial

donor), relievable gifts (within the meaning of section 503 of that Act)

10

received by a charitable company on or after 1 April 2011 are to be

disregarded.

      (2)  

Sub-paragraphs (3) and (4) apply where—

(a)   

a substantial donor transaction is entered into before, or on or after,

1 April 2011, and

15

(b)   

that transaction is not tainted.

      (3)  

Where a payment made on or after 1 April 2011 by a charitable company to

a substantial donor in the course of, or for the purposes of, the substantial

donor transaction would (in the absence of this sub-paragraph) be treated

under section 504(1) or (5) of CTA 2010 as non-charitable expenditure, that

20

payment is not to be so treated.

      (4)  

Where, as a result of the substantial donor transaction, non-charitable

expenditure would (in the absence of this sub-paragraph) be treated as

incurred under section 504(2) of that Act on or after 1 April 2011, that

expenditure is not to be treated as so incurred.

25

      (5)  

The substantial donor transaction is “tainted” if (and only if) it is reasonable

to assume from—

(a)   

the likely effects of the relevant relievable gifts and the substantial

donor transaction, and

(b)   

the circumstances in which the relevant relievable gifts were made

30

and the circumstances in which the substantial donor transaction

was entered into,

           

that the relevant relievable gifts (or one or more of them) would not have

been made and the transaction would not have been entered into

independently of one another.

35

      (6)  

In this section—

“relevant relievable gifts”, in relation to the substantial donor

transaction, means the relievable gifts by reason of which a person is

a substantial donor and the transaction is a substantial donor

transaction;

40

“relievable gift” has the meaning given by section 503 of CTA 2010;

“substantial donor” and “substantial donor transaction” have the

meaning given by section 502 of that Act.

Housing (Scotland) Act 2010 (asp 17)

31         

Until such time as section 20 of the Housing (Scotland) Act 2010 is brought

45

into force, the references to that section in the following provisions are to be

read as references to section 57 of the Housing (Scotland) Act 2001 (asp 10)—

 
 

Finance (No. 3) Bill
Schedule 4 — Amounts not fully recognised for accounting purposes

132

 

(a)   

the definition of “relevant housing provider” in section 809ZJ(8) of

ITA 2007;

(b)   

the definition of “relevant housing provider” in section 939C(8) of

CTA 2010.

5

Schedule 4

Section 28

 

Amounts not fully recognised for accounting purposes

Loan relationships

1          

Part 5 of CTA 2009 (loan relationships) is amended as follows.

2     (1)  

Section 311 (amounts not fully recognised for accounting purposes) is

10

amended as follows.

      (2)  

In subsection (2)—

(a)   

at the end of paragraph (a) insert “and”, and

(b)   

for paragraphs (b) and (c) substitute—

“(b)   

as a result of tax avoidance arrangements to which the

15

company is at any time a party, an amount is (in

accordance with generally accepted accounting

practice) not fully recognised for the period in respect

of the creditor relationship.”

      (3)  

Omit subsections (3) to (5A).

20

      (4)  

In subsection (6)—

(a)   

in the opening words—

(i)   

after “section” insert “and section 312”, and

(ii)   

omit “, a contribution to it or securities issued by it”, and

(b)   

in paragraphs (a) and (b), omit “, contribution or securities”.

25

      (5)  

After subsection (6) insert—

“(7)   

For the purposes of this section arrangements are “tax avoidance

arrangements” if the main purpose, or one of the main purposes, of

any party to the arrangements, in entering into them, is to obtain a

tax advantage.

30

(8)   

In subsection (7) “arrangements” includes any arrangements,

scheme or understanding of any kind, whether or not legally

enforceable, involving a single transaction or two or more

transactions.

(9)   

For the purposes of this section a company is to be treated as a party

35

to a creditor relationship even though it has disposed of its rights

under the relationship to another person—

(a)   

under a repo or stock lending relationship, or

(b)   

under a transaction which is treated as not involving any

disposal as a result of section 26 of TCGA 1992 (mortgages

40

and charges not to be treated as disposals).”

 
 

 
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Revised 31 March 2011