Part I Excise duties

Alcoholic liquor duties

1 Rate of duty on beer

(1) In section 36(1) of the [1979 c. 4.] Alcoholic Liquor Duties Act 1979 (rate of duty on beer), for “£11.50” substitute “£11.89”.

(2) This section shall be deemed to have come into force on 1st April 2000.

2 Rates of duty on cider

(1) In section 62(1A) of the [1979 c. 4.] Alcoholic Liquor Duties Act 1979 (rates of duty on cider)—

(a) in paragraph (a) (rate of duty per hectolitre in the case of sparkling cider of a strength exceeding 5.5 per cent.), for “£161.20” substitute “£166.70”;

(b) in paragraph (b) (rate of duty per hectolitre in the case of cider of a strength exceeding 7.5 per cent. which is not sparkling cider), for “£37.92” substitute “£39.21”; and

(c) in paragraph (c) (rate of duty per hectolitre in any other case), for “£25.27” substitute “£26.13”.

(2) This section shall be deemed to have come into force on 1st April 2000.

3 Rates of duty on wine and made-wine

(1) For Part I of the Table of rates of duty in Schedule 1 to the [1979 c. 4.] Alcoholic Liquor Duties Act 1979 (wine and made-wine) substitute—

“Part I Wine or made-wine of a strength not exceeding 22 per cent.

(2) This section shall be deemed to have come into force on 1st April 2000.

Hydrocarbon oil duties

4 Rates of duty and rebate on hydrocarbon oil

(1) In section 6(1A) of the [1979 c. 5.] Hydrocarbon Oil Duties Act 1979 (rates of duty on hydrocarbon oil)—

(a) in paragraph (a) (light oil), for “£0.5288” substitute “£0.5468”;

(b) in paragraph (b) (ultra low sulphur diesel), for “£0.4721” substitute “£0.4882”; and

(c) in paragraph (c) (heavy oil which is not ultra low sulphur diesel), for “£0.5021” substitute “£0.5182”.

(2) In section 11(1) of that Act (rebate on heavy oil)—

(a) in paragraph (a) (fuel oil), for “£0.0265” substitute “£0.0274”; and

(b) in each of paragraphs (b) and (ba) (gas oil which is not ultra low sulphur diesel and ultra low sulphur diesel), for “£0.0303” substitute “£0.0313”.

(3) In section 13A(1A) of that Act (rebate on unleaded petrol)—

(a) in paragraph (a) (higher octane unleaded petrol), for “£0.0367” substitute “£0.0379”; and

(b) in paragraph (b) (other unleaded petrol), for “£0.0567” substitute “£0.0586”.

(4) In section 14(1) of that Act (rebate on light oil for use as furnace fuel), for “£0.0265” substitute “£0.0274”.

(5) This section shall be deemed to have come into force at 6 o'clock in the evening of 21st March 2000.

5 Ultra low sulphur petrol

(1) In section 1 of the [1979 c. 5.] Hydrocarbon Oil Duties Act 1979 (definitions of oil), after subsection (3) insert—

“(3A) “Ultra low sulphur petrol” means unleaded petrol (other than higher octane unleaded petrol)—

(a) the sulphur content of which does not exceed 0.005 per cent. by weight or is nil, and

(b) the aromatics content of which does not exceed 35 per cent. by volume.

(3B) “Unleaded petrol” means petrol that contains not more than 0.013 grams of lead per litre of petrol; and petrol is “leaded petrol” if it is not unleaded.

(3C) “Higher octane unleaded petrol” means unleaded petrol—

(a) whose research octane number is not less than 96 and whose motor octane number is not less than 86; or

(b) which is delivered for home use as petrol that satisfies the condition in paragraph (a) above; or

(c) which is delivered for home use as petrol that is suitable to be used as fuel for engines for which leaded petrol is suitable by virtue of being leaded; or

(d) which is delivered for home use under such a description, or in such a manner, as tends, in the circumstances, to suggest that it is—

(i) petrol satisfying the condition in paragraph (a) above, or

(ii) petrol that is suitable to be used as fuel for engines for which leaded petrol is suitable by virtue of being leaded.”.

(2) In section 2 of that Act (provisions supplementary to section 1), after subsection (1) insert—

“(1A) Subsection (1) above applies, in particular, to the method of testing unleaded petrol for ascertaining its research octane number or motor octane number.”.

(3) In section 6 of that Act (excise duty on hydrocarbon oil), for subsection (1A) (rates of duty) substitute—

“(1A) The rates at which the duty shall be charged are—

(a) £0.4782 a litre in the case of ultra low sulphur petrol;

(b) £0.5468 a litre in the case of light oil other than ultra low sulphur petrol;

(c) £0.4882 a litre in the case of ultra low sulphur diesel; and

(d) £0.5182 a litre in the case of heavy oil other than ultra low sulphur diesel.”.

(4) In section 13A of that Act (rebate on unleaded petrol)—

(a) in subsection (1) after “unleaded petrol” insert “, other than ultra low sulphur petrol,”; and

(b) omit subsections (1B), (1C) and (2).

Any directions given under subsection (1C) and in force immediately before the commencement of this section shall have effect as if given under section 2(1) of that Act.

(5) In section 27(1) of that Act (interpretation), at the appropriate places insert—

““ultra low sulphur petrol” has the meaning given by section 1(3A) above;”;

““unleaded petrol” and “leaded petrol” have the meaning given by section 1(3B) above.”; and

““higher octane unleaded petrol” has the meaning given by section 1(3C) above;”.

(6) This section shall come into force on such day as the Commissioners of Customs and Excise may appoint by order made by statutory instrument.

6 Mixing of rebated light oils

(1) Schedule 2A to the [1979 c. 5.] Hydrocarbon Oil Duties Act 1979 (mixing of rebated oils) is amended in accordance with Schedule 1 to this Act.

(2) The amendments in that Schedule come into force on the day appointed under section 5(6).

7 Power to amend definitions of types of hydrocarbon oil

In the [1979 c. 5.] Hydrocarbon Oil Duties Act 1979, after section 2 insert—

“2A Power to amend definitions

(1) The Treasury may by order made by statutory instrument amend the definitions for the purposes of this Act of—

“ultra low sulphur petrol”;

“unleaded petrol” and “leaded petrol”;

“higher octane unleaded petrol”; and

“ultra low sulphur diesel”.

(2) An order under this section may contain such incidental, supplementary and transitional provision as appears to the Treasury to be appropriate.

(3) No order shall be made under this section unless a draft of it has been laid before and approved by a resolution of the House of Commons.”.

8 Penalties for misuse of rebated heavy oil

(1) Section 13 of the [1979 c. 5.] Hydrocarbon Oil Duties Act 1979 (penalties for misuse of rebated heavy oil) is amended as follows.

(2) In subsection (1)—

(a) for “or, as the case may be, his becoming so liable” substitute “or his becoming so liable (or, where his conduct includes both, each of them)”, and

(b) omit the words from “; and the Commissioners” to the end.

(3) After subsection (1) insert—

“(1A) Where oil is used, or is taken into a road vehicle, in contravention of section 12(2) above, the Commissioners may—

(a) assess an amount equal to the rebate on like oil at the rate in force at the time of the contravention as being excise duty due from any person who used the oil or was liable for the oil being taken into the road vehicle, and

(b) notify him or his representative accordingly.”.

(4) This section shall have effect in relation to liability arising on or after 1st May 2000.

9 Use of rebated heavy oil as fuel

(1) Schedule 1 to the [1979 c. 5.] Hydrocarbon Oil Duties Act 1979 (which sets out the categories of excepted vehicle which may use rebated heavy oil as fuel) is amended as follows.

(2) Omit the following provisions—

(a) paragraph 2(1)(b) (which provides that off-road tractors are excepted vehicles) and the word “or” immediately preceding it, and

(b) paragraph 2(4) (which defines off-road tractors).

(3) This section shall have effect in relation to the use of rebated heavy oil as fuel on or after 1st May 2000.

10 Rebates, marking and reliefs

(1) The [1979 c. 5.] Hydrocarbon Oil Duties Act 1979 is amended in accordance with subsections (2) to (4).

(2) In section 11 (rebate on heavy oil), after subsection (2) insert—

“(3) This subsection applies in any case where—

(a) oil is delivered for home use,

(b) regulations under section 24 below require, as a condition of allowing a rebate on the oil under subsection (1) above, that a marker prescribed by regulations under that section shall have been added to the oil, and

(c) the marker is present at the time of delivery for home use but in such a proportion that its presence falls to be disregarded by virtue of provision made by regulations under that section.

(4) In any case where subsection (3) above applies, a rebate may be allowed on the oil at the time it is delivered for home use if it appears to the Commissioners to be appropriate to allow it.

(5) Where a rebate is allowed under subsection (4) above, the rate at which the rebate is allowed—

(a) shall be such rate as appears to the Commissioners to be appropriate, but

(b) shall not be less than 95 per cent. of, and shall not exceed, the rate of rebate specified in the relevant paragraph of subsection (1) above.”.

(3) In section 20AA(2) (provision in connection with allowing reliefs)—

(a) in paragraph (a) (relief may take form of repayment or remission), after “repayment or remission” insert “or an allowance to be set off against duty payable to the Commissioners by the person claiming relief”; and

(b) after paragraph (g) insert—

“(ga) provide for oil on which relief is allowed to be treated for the purposes of this Act as oil on which a rebate has been allowed;”.

(4) In section 24 (regulations controlling use of duty-free and rebated oil), after subsection (4B) insert—

“(4C) In a case where subsection (4D) below applies, the power of the Commissioners under subsection (4A) above includes power, if it appears to them to be appropriate, to assess (and notify) an amount less than the amount of the rebate concerned.

(4D) This subsection applies in any case where—

(a) the Commissioners have power to assess (and notify) an amount under subsection (4A) above by virtue of a contravention of, or failure to comply with, a requirement such as is mentioned in paragraph 5 of Schedule 4 to this Act, and

(b) the marker whose addition is required by the requirement is present at the time of the contravention or failure but in such a proportion that its presence falls to be disregarded by virtue of provision made by regulations under this section for the purpose mentioned in paragraph 7 of that Schedule.”.

(5) In paragraph 4 of Schedule 5 to the [1994 c. 9.] Finance Act 1994 (decisions under the [1979 c. 5.] Hydrocarbon Oil Duties Act 1979 of which a review may be required), after sub-paragraph (1) insert—

“(1A) Any decision which is made under or for the purposes of any regulations made under section 20AA of the [1979 c. 5.] Hydrocarbon Oil Duties Act 1979 and is a decision as to whether or not relief is to be allowed.”.

11 Emulsions of water in gas oil

(1) In section 6A of the [1979 c. 5.] Hydrocarbon Oil Duties Act 1979 (duty on fuel substitutes), after subsection (2) (definition of chargeable use) insert—

“(2A) But the use of water is not a chargeable use if—

(a) the water is comprised in an emulsion of water in gas oil, and

(b) the emulsion is stabilised by additives.”.

(2) This section shall have effect in relation to duty charged on or after the day on which this Act is passed.

Tobacco products duty

12 Rates of tobacco products duty

(1) For the Table of rates of duty in Schedule 1 to the [1979 c. 7.] Tobacco Products Duty Act 1979 substitute—

(2) This section shall be deemed to have come into force at 6 o'clock in the evening of 21st March 2000.

13 Basis of calculation of ad valorem element of duty on cigarettes

(1) Section 5 of the [1979 c. 7.] Tobacco Products Duty Act 1979 (retail price of cigarettes) is amended as follows.

(2) In subsection (1) (meaning of retail price) for the words from “shall be taken to be” to the end substitute “shall be taken to be—

(a) the higher of—

(i) the recommended price for the sale by retail at that time in the United Kingdom of cigarettes of that description, and

(ii) any (or, if more than one, the highest) retail price shown at that time on the packaging of the cigarettes in question,

or

(b) if there is no such price recommended or shown, the highest price at which cigarettes of that description are normally sold by retail at that time in the United Kingdom.”.

(3) In subsection (3) (determination of price by Commissioners), for “paragraph (a) of subsection (1)” substitute “paragraph (b) of subsection (1)”.

(4) In subsection (4) (reference to arbitration of Commissioners' determination), for “subsection (1)(a)” substitute “subsection (1)(b)”.

14 Fiscal marks on tobacco products

After section 8 of the [1979 c. 7.] Tobacco Products Duty Act 1979 insert the following sections—

“8A Fiscal marks: introductory

Fiscal marking applies to tobacco products that are—

(a) cigarettes, or

(b) hand-rolling tobacco.

8B Power to alter range of products to which fiscal marking applies

(1) The Commissioners may by order made by statutory instrument amend section 8A above for the purpose of causing fiscal marking—

(a) to apply to any description of tobacco products to which it does not apply, or

(b) to cease to apply to any description of tobacco products to which it does apply.

(2) Where fiscal marking applies to any description of tobacco products, the Commissioners may by regulations provide that fiscal marking does not apply to such products of that description as are of a description specified in the regulations.

(3) A statutory instrument containing (whether alone or with other provisions) an order under subsection (1)(a) above shall not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.

(4) A statutory instrument that—

(a) contains (whether alone or with other provisions) an order under subsection (1) above, and

(b) is not subject to any requirement that a draft of the instrument be laid before and approved by a resolution of each House of Parliament,

shall be subject to annulment in pursuance of a resolution of either House of Parliament.

8C Fiscal mark regulations

(1) The Commissioners may make provision by regulations—

(a) requiring the carrying of fiscal marks by tobacco products to which fiscal marking applies, and

(b) as to such matters relating to fiscal marks as appear to the Commissioners to be necessary or expedient.

(2) In this Act “fiscal mark” means a mark carried by tobacco products indicating all or any of the following—

(a) that excise duty has been paid on the products;

(b) the rate at which excise duty was paid on the products;

(c) the amount of excise duty paid on the products;

(d) when excise duty was paid on the products;

(e) that sale of the products—

(i) is only permissible on dates ascertainable from the mark;

(ii) is not permissible after (or on or after) a date so ascertainable;

(iii) is not permissible before (or before or on) a date so ascertainable.

(3) Regulations under this section may, in particular, make provision about—

(a) the contents of a fiscal mark;

(b) the appearance of a fiscal mark;

(c) in the case of tobacco products that have more than one layer of packaging, which of the layers is (or are) to carry a fiscal mark;

(d) the positioning of a fiscal mark on the packaging of any tobacco products;

(e) when tobacco products are required to carry a fiscal mark.

(4) Regulations under this section may make different provision for different cases.

8D Fiscal marks: public notices

(1) The Commissioners may by notices published by them regulate any of the matters mentioned in paragraphs (a) to (d) of section 8C(3) above.

(2) A notice under this section may provide for provision made by regulations under section 8C above to have effect subject to provisions of the notice.

(3) A notice under this section may make different provision for different cases.

8E Failure to comply with fiscal mark regulations and public notices

(1) This section applies if a person fails to comply with any requirement imposed by or under—

(a) regulations made under section 8C above, or

(b) a notice published under section 8D above.

(2) Any article in respect of which the person fails to comply with the requirement shall be liable to forfeiture.

(3) The person’s failure to comply shall attract a penalty under section 9 of the [1994 c. 9.] Finance Act 1994 (civil penalties).

(4) The Commissioners may by regulations make such provision as is mentioned in subsection (5) below about the calculation of the penalty in a case where the failure involves post-dating of any tobacco products.

For this purpose “post-dating” means that the products carry a fiscal mark (“the later period mark”) that—

(a) is not one they are required to carry by virtue of this Act, and

(b) is one they would be required to carry by virtue of this Act if the requirement to pay the duty charged on them under section 2 above took effect at a time later than that at which it in fact takes effect.

(5) The provision that may be made by regulations under subsection (4) above is for the penalty to be calculated by reference to the duty currently charged on the products.

For this purpose “the duty currently charged” on the products is the amount of the duty charged under section 2 above that would be payable on the products if the requirement to pay the duty took effect at the time of the failure.

8F Sale of marked tobacco when not permitted: penalties

(1) This section applies if provision made by or under—

(a) regulations made under section 8C above, or

(b) a notice published under section 8D above,

provides for any tobacco products to carry a period of sale mark.

(2) In this section—

• “a period of sale mark” means a fiscal mark indicating any of the matters mentioned in subsection (2)(e) of section 8C above; and

• “prohibited time”, in relation to tobacco products that carry a period of sale mark, means a time when, according to the mark, sale of the products is not permissible.

(3) If—

(a) a person sells by way of retail sale, or exposes for retail sale, any tobacco products that carry a period of sale mark, and

(b) he so sells or exposes the products at a prohibited time,

his so selling or exposing the products shall attract a penalty under section 9 of the [1994 c. 9.] Finance Act 1994 (civil penalties) and the products are liable to forfeiture.

8G Offences: possession and sale etc. of unmarked tobacco

(1) In this section “unmarked products” means tobacco products that are subject to fiscal marking but do not carry a compliant duty-paid fiscal mark.

(2) For the purposes of this section “duty-paid fiscal mark” means a fiscal mark carried by tobacco products indicating that excise duty has been paid on the products.

(3) For the purposes of this section a duty-paid fiscal mark carried by tobacco products of any description is “compliant” if it complies with all relevant requirements for any duty-paid fiscal mark that by virtue of this Act is required to be carried by such tobacco products of that description as are by virtue of this Act required to carry such a mark.

For this purpose “relevant requirement” means a requirement, imposed by virtue of this Act, as to any of the matters mentioned in paragraphs (a) to (d) of section 8C(3) above (contents, appearance and positioning etc. of fiscal marks).

(4) If a person—

(a) is in possession of, transports or displays, or

(b) sells, offers for sale or otherwise deals in,

unmarked products then, except in such cases as may be prescribed in regulations made by the Commissioners, that person commits an offence and the products are liable to forfeiture.

(5) It is a defence for a person charged with an offence under subsection (4) above to prove that the unmarked products were not required by virtue of this Act to carry a duty paid fiscal mark.

(6) A person guilty of an offence under subsection (4) above shall be liable on summary conviction to a fine not exceeding level 5 on the standard scale.

8H Offences: use of premises for sale of unmarked tobacco

(1) A manager of premises commits an offence if he suffers the premises to be used for the sale of unmarked products.

In this section “unmarked products” has the same meaning as in section 8G above.

(2) It is a defence for a person charged with an offence under subsection (1) above to prove that the unmarked products were not required by virtue of this Act to carry a duty-paid fiscal mark.

For this purpose “duty-paid fiscal mark” has the same meaning as in section 8G above.

(3) A person guilty of an offence under subsection (1) above shall be liable on summary conviction to a fine not exceeding level 5 on the standard scale.

(4) A court by or before which a person is convicted of an offence under subsection (1) above may make an order prohibiting the use of the premises in question for the sale of tobacco products during a period specified in the order.

(5) The period specified in an order under subsection (4) above shall not exceed six months; and the first day of the period shall be the day specified as such in the order.

(6) A manager of premises commits an offence if he suffers the premises to be used in breach of an order under subsection (4) above.

(7) A person guilty of an offence under subsection (6) above shall be liable on summary conviction to a fine not exceeding level 5 on the standard scale.

(8) For the purposes of this section a person is a manager of premises if he—

(a) is entitled to control their use,

(b) is entrusted with their management, or

(c) is in charge of them.

8J Interfering with fiscal marks: penalties

(1) This section applies where a person—

(a) alters or overprints any fiscal mark carried by any tobacco products in compliance with any provision made under this Act, or

(b) causes any such mark to be altered or overprinted.

(2) His altering or overprinting of the mark, or his causing it to be altered or overprinted, shall attract a penalty under section 9 of the [1994 c. 9.] Finance Act 1994 (civil penalties).

(3) The products that carried the mark shall be liable to forfeiture.

(4) The penalty under subsection (2) above shall be calculated by reference to the duty currently charged on the products.

For this purpose “the duty currently charged” on the products is the amount of the duty charged under section 2 above that would be payable on the products if the requirement to pay the duty took effect at the time of the conduct attracting the penalty.”.

15 Management of excise duty on tobacco products

(1) The [1979 c. 7.] Tobacco Products Duty Act 1979 has effect subject to the following amendments.

(2) In section 2(2) (remission or repayment of duty where tobacco products exported, shipped as stores or used for research or experiment), for the words from “that” to the end of paragraph (b) substitute—

“that—

(a) the products in question have been—

(i) exported or shipped as stores, or

(ii) used solely for the purposes of research or experiment; and

(b) any fiscal marks carried by the products have been obliterated;”.

(3) Section 7 (regulations for management of duty) is amended as follows.

(4) After paragraph (a) of subsection (1) (method of charging duty and securing and collecting duty) insert—

“(aa) for charging the duty, in such circumstances as may be specified in the regulations, by reference to the weight of the tobacco products at a time specified in the regulations or by the Commissioners (whether the time at which the products become chargeable or that at which the duty becomes payable or any other time);”.

(5) In paragraph (b) of subsection (1) (registration of premises for storage of tobacco), after “regulating their” insert “storage and”.

(6) After that paragraph insert—

“(ba) for the registration of premises for the manufacture of tobacco products, for restricting or prohibiting the manufacture of tobacco products otherwise than in premises so registered and for regulating their storage and treatment in, and removal from, such premises;”.

(7) In paragraph (c) of subsection (1), omit sub-paragraph (i) (which is superseded by the amendment made by subsection (6) above).

(8) In paragraph (d) of subsection (1), for “and the making of such returns, as may be specified in the regulations” substitute “the notification of such information, and the making of such returns, as may be specified in the regulations or required by the Commissioners”.

(9) After subsection (1) insert—

“(1A) Regulations under subsection (1) above may, in particular, include provision—

(a) imposing, or providing for the imposition under the regulations of, conditions and restrictions relating to any of the matters mentioned in that subsection;

(b) enabling the Commissioners to dispense with compliance with any provision contained in the regulations in such circumstances and subject to such conditions (if any) as they may determine.”.

Gaming duty

16 Rates of gaming duty

(1) For the table in section 11(2) of the [1997 c. 16.] Finance Act 1997 (rates of gaming duty) substitute—

(2) This section has effect in relation to accounting periods beginning on or after 1st April 2000.

Amusement machine licence duty

17 Amusement machine licence duty

Schedule 2 to this Act (which amends the [1981 c. 63.] Betting and Gaming Duties Act 1981) shall have effect.

Air passenger duty

18 Rates of duty

(1) Section 30 of the [1994 c. 9.] Finance Act 1994 is amended as follows.

(2) In subsection (1) (basis on which duty is charged) for the words from “appropriate” to the end substitute “determined in accordance with subsections (2) to (4) below.”

(3) In subsection (2) (rate where destination is in an EEA State etc)—

(a) for “The rate is £10 if that place” substitute “If the place where the passenger’s journey ends”, and

(b) after paragraph (b) add— “the rate shall be determined in accordance with subsection (3A) below.”.

(4) After subsection (3) insert—

“(3A) In a case falling within subsection (2) above—

(a) if the passenger’s agreement for carriage provides for standard class travel in relation to every flight on his journey, the rate is £5;

(b) in any other case, the rate is £10.”.

(5) For subsection (4) (rate where destination is not in an EEA State etc) substitute—

“(4) In a case not falling within subsection (2) above—

(a) if the passenger’s agreement for carriage provides for standard class travel in relation to every flight on his journey, the rate is £20;

(b) in any other case, the rate is £40.”.

(6) At the end of the section add—

“(10) In this section “standard class travel”, in relation to carriage on an aircraft, means—

(a) in the case of an aircraft on which only one class of travel is available, that class of travel;

(b) in any other case, the lowest class of travel available on the aircraft.”.

(7) In consequence of the provision made by the preceding provisions of this section, in section 39 of the [1994 c. 9.] Finance Act 1994 (schemes for simplifying operation of reliefs)—

(a) in subsection (4)(b), for “at the rate mentioned in section 30(2) above” substitute—

“(i) at the rate mentioned in paragraph (a) of section 30(3A) above, and

(ii) at the rate mentioned in paragraph (b) of that provision”;

(b) in subsection (4B)(c), for “at the rate mentioned in section 30(2) above” substitute—

“(i) at the rate mentioned in paragraph (a) of section 30(3A) above, and

(ii) at the rate mentioned in paragraph (b) of that provision”;

(c) in subsection (8)(b), for the words from “on the carriage” to the end substitute—

“(i) on the carriage of each of those falling within paragraph (a) of section 30(4) above at the rate mentioned in that paragraph, and

(ii) on the carriage of each of those falling within paragraph (b) of section 30(4) above at the rate mentioned in that paragraph”; and

(d) in subsection (8A)(c), for the words from “on the carriage” to the end substitute—

“(i) on the carriage of each of those falling within paragraph (a) of section 30(4) above at the rate mentioned in that paragraph, and

(ii) on the carriage of each of those falling within paragraph (b) of section 30(4) above at the rate mentioned in that paragraph”.

(8) This section applies to any carriage of a passenger on an aircraft which begins on or after 1st April 2001.

19 Changes in exemption from duty

(1) Section 31 of the [1994 c. 9.] Finance Act 1994 is amended as follows.

(2) Omit subsections (1) and (2) (exemption in relation to passengers making return journeys within the United Kingdom).

(3) After subsection (4A) insert—

“(4B) A passenger is not a chargeable passenger in relation to a flight if under his agreement for carriage (whether or not it is evidenced by a ticket) the flight is to depart from an airport which is in a region of the United Kingdom designated by order.

(4C) An order may be made for the purposes of subsection (4B) above in respect of any region which has a population density of not more than 12.5 persons per square kilometre.

(4D) In subsections (4B) and (4C) above, references to a region are references to an area which is determined by the Treasury to constitute a region for the purposes of those subsections.”.

(4) Omit subsection (6) (provision by regulations for subsection (1) to have effect in relation to journeys begun in the Isle of Man).

(5) In consequence of the provision made by subsection (2) above, in section 43 of the [1994 c. 9.] Finance Act 1994 (interpretation)—

(a) in subsection (2) (meaning of “journey” etc), omit “Subject to subsection (3) below”, and

(b) omit subsection (3) (interpretation of references to a return ticket).

(6) This section applies to any carriage of a passenger on an aircraft which begins on or after 1st April 2001.

Vehicle excise duty

20 Threshold for reduced general rate

(1) In paragraph 1 of Schedule 1 to the [1994 c. 22.] Vehicle Excise and Registration Act 1994 (rate of duty applicable where no other rate specified), in sub-paragraphs (2) and (2A) for “1,100 cubic centimetres” (the reduced rate threshold) substitute “1,200 cubic centimetres”.

This amendment applies to licences issued on or after 1st March 2001.

(2) Refunds shall be made by the Secretary of State, in accordance with the following provisions of this section, in respect of licences—

(a) issued in the period beginning with 1st March 2000 and ending with 28th February 2001, and

(b) not surrendered before the end of that period,

where the amount of vehicle excise duty chargeable on the licence would have been less if the amendment in subsection (1) had applied.

(3) The amount of the refund is—

(a) £55 for a 12 month licence, and

(b) £27.50 for a 6 month licence.

(4) The person entitled to the refund is—

(a) in the case of a licence in force on 28th February 2001, the keeper of the vehicle on that date;

(b) in the case of a licence that has ceased to be in force before that date, the keeper of the vehicle when the licence expired.

(5) For the purposes of subsection (4) the keeper of the vehicle shall be taken to be—

(a) the person registered as keeper of the vehicle on the date in question, or

(b) if the Secretary of State has received notification of a change of ownership of the vehicle as a result of which another person is on that date entitled to be registered as the new keeper of the vehicle, that person.

(6) A refund shall only be made if an application is made for it in such form, and containing such particulars and supported by such documents, as the Secretary of State may require.

(7) The Secretary of State shall give notice in writing to any person appearing to him to be entitled to a refund—

(a) informing him that he appears to be entitled to a refund,

(b) enclosing an application form, and

(c) specifying the particulars and supporting documents to be provided.

(8) An application for, or the making of, a refund under this section in respect of a licence does not affect the validity of the licence.

(9) For the purposes of section 19 of the [1994 c. 22.] Vehicle Excise and Registration Act 1994 (surrender of licences) as it applies to the surrender on or after 1st March 2001 of a licence in respect of which a refund under this section has been made, or applied for, the annual rate of duty chargeable on the licence shall be taken to be that which would have been chargeable if the amendment in subsection (1) above had applied.

(10) Section 45 of that Act (offence of false or misleading declaration) applies to a declaration in connection with an application for a refund under this section as it applies to a declaration in connection with an application for a vehicle licence.

(11) In the application of this section to Northern Ireland, references to registration as the keeper of a vehicle shall be read as references to registration as the owner of the vehicle.

21 Increase in general rate

(1) In paragraph 1 of Schedule 1 to the [1994 c. 22.] Vehicle Excise and Registration Act 1994 (rate of duty applicable where no other rate specified)—

(a) in sub-paragraph (2) (the standard rate), for “£155” substitute “£160”; and

(b) in sub-paragraph (2A) (the reduced rate), for “£100” substitute “£105”.

(2) This section applies to licences issued on or after 1st March 2001.

22 Rates of duty for new cars and vans

Schedule 3 to this Act has effect with respect to vehicle excise duty on light passenger vehicles and light goods vehicles first registered on or after 1st March 2001.

23 Enforcement provisions for graduated rates

Schedule 4 to this Act has effect with respect to vehicle licences for vehicles in respect of which vehicle excise duty is chargeable at different rates.

24 Rates of duty for goods vehicles

(1) Schedule 5 to this Act (which makes provision for new rates of vehicle excise duty for goods vehicles etc.) has effect.

(2) The provisions of that Schedule apply in relation to licences issued after 21st March 2000.

Enforcement of duties

25 Power to search premises

In Part XII of the [1979 c. 2.] Customs and Excise Management Act 1979 (general supplementary provisions), for section 161 (power to search premises) substitute—

“161 Power to search premises: writ of assistance

(1) The powers conferred by this section are exercisable by an officer having a writ of assistance if there are reasonable grounds to suspect that anything liable to forfeiture under the customs and excise Acts—

(a) is kept or concealed in any building or place, and

(b) is likely to be removed, destroyed or lost before a search warrant can be obtained and executed.

(2) The powers are—

(a) to enter the building or place at any time, whether by day or night, on any day, and search for, seize, and detain or remove any such thing, and

(b) so far as is necessary for the purpose of such entry, search, seizure, detention or removal, to break open any door, window or container and force and remove any other impediment or obstruction.

(3) An officer shall not exercise the power of entry conferred by this section by night unless accompanied by a constable.

(4) A writ of assistance shall continue in force during the reign in which it is issued and for six months thereafter.

161A Power to search premises: search warrant

(1) If a justice of the peace is satisfied by information upon oath given by an officer that there are reasonable grounds to suspect that anything liable to forfeiture under the customs and excise Acts is kept or concealed in any building or place, he may by warrant under his hand authorise any officer, and any person accompanying an officer, to enter and search the building or place named in the warrant.

(2) An officer or other person so authorised has power—

(a) to enter the building or place at any time, whether by day or night, on any day, and search for, seize, and detain or remove any such thing, and

(b) so far as is necessary for the purpose of such entry, search, seizure, detention or removal, to break open any door, window or container and force and remove any other impediment or obstruction.

(3) Where there are reasonable grounds to suspect that any still, vessel, utensil, spirits or materials for the manufacture of spirits is or are unlawfully kept or deposited in any building or place, subsections (1) and (2) above apply in relation to any constable as they would apply in relation to an officer.

(4) The powers conferred by a warrant under this section are exercisable until the end of the period of one month beginning with the day on which the warrant is issued.

(5) A person other than a constable shall not exercise the power of entry conferred by this section by night unless accompanied by a constable.”.

26 Power to search articles

In Part XII of the [1979 c. 2.] Customs and Excise Management Act 1979 (general supplementary provisions), after section 163 (power to search vehicles or vessels) insert—

“163A Power to search articles

(1) Without prejudice to any other power conferred by the Customs and Excise Acts 1979, where there are reasonable grounds to suspect that a person in the United Kingdom (referred to in this section as “the suspect”) has with him, or at the place where he is, any goods to which this section applies, an officer may—

(a) require the suspect to permit a search of any article that he has with him or at that place, and

(b) if the suspect is not under arrest, detain him (and any such article) for so long as may be necessary to carry out the search.

(2) The goods to which this section applies are dutiable alcoholic liquor, or tobacco products, which are—

(a) chargeable with any duty of excise, and

(b) liable to forfeiture under the customs and excise Acts.

(3) Notwithstanding anything in subsection (4) of section 24 of the [1995 c. 39.] Criminal Law (Consolidation) (Scotland) Act 1995 (detention and questioning by customs officers), detention of the suspect under subsection (1) above shall not prevent his subsequent detention under subsection (1) of that section.”.

27 Security for customs and excise duties

(1) Section 157 of the [1979 c. 2.] Customs and Excise Management Act 1979 (bonds and security) is amended as follows.

(2) In subsection (1) (power to require security), for “by bond” substitute “(or further security) by bond, guarantee”.

(3) After that subsection insert—

“(1A) For the purposes of this section “condition in connection with excise” includes a condition in connection with excise duty charged, under the law of a member State other than the United Kingdom, on—

(a) manufactured tobacco,

(b) alcohol or alcoholic beverages, or

(c) mineral oils.

The expressions used in paragraphs (a) to (c) above have the same meaning as in Council Directive 92/12/EEC.”.

(4) In subsection (2) (bonds for the purposes of assigned matters), after “Any bond” insert “, guarantee or other security”.

(5) In paragraph (a) of that subsection (bonds to be taken on behalf of Her Majesty), for “on behalf of Her Majesty” substitute “either on behalf of Her Majesty or on behalf of Her Majesty and the tax authorities of each member State other than the United Kingdom”.

(6) At the end of that subsection add—

“In this subsection “assigned matter” includes any excise duty charged as mentioned in subsection (1A) above.”.

28 Civil penalties for breach of excise duty requirements

In section 9(2)(a) of the [1994 c. 9.] Finance Act 1994 (how to calculate the penalty in cases where provision is made by any enactment for conduct to attract a penalty calculated by reference to an amount of excise duty), for “or any other enactment” substitute “, or by or under any other enactment,”.

29 Correction of reference

In section 127 of the [1999 c. 16.] Finance Act 1999 (interest on repayments of customs duty), in subsection (1)(b) for “Council Regulation 2454/93” substitute “Commission Regulation 2454/93”.

This amendment shall be deemed always to have had effect.

Part II Climate change levy

30 Climate change levy

(1) Schedule 6 to this Act (which makes provision for a new tax that is to be known as climate change levy) shall have effect.

(2) Schedule 7 to this Act (climate change levy: consequential amendments) shall have effect.

(3) Part V of Schedule 6 to this Act (registration for the purposes of climate change levy) shall not come into force until such date as the Treasury may appoint by order made by statutory instrument; and different days may be appointed under this subsection for different purposes.

Part III Income Tax, Corporation Tax and Capital Gains Tax

Chapter I Charge and rates

Income tax

31 Charge and rates for 2000-01

Income tax shall be charged for the year 2000-01, and for that year—

(a) the starting rate shall be 10%,

(b) the basic rate shall be 22%, and

(c) the higher rate shall be 40%.

32 Extension of starting rate to savings income of individuals

(1) Section 1A of the Taxes Act 1988 (application of lower rate or Schedule F ordinary rate to income from savings and distributions) is amended as follows.

(2) In subsection (1)(b) (income of individuals to which those rates do not apply), after the words “is not” insert “—

(i) savings income falling within section 1(2)(aa), or

(ii)”.

(3) After subsection (1) insert—

“(1AA) In subsection (1)(b)(i) above “savings income” means income to which this section applies other than—

(a) income chargeable under Schedule F, or

(b) equivalent foreign income falling within subsection (3)(b) below and chargeable under Case V of Schedule D.”.

(4) This section has effect for the year 2000-01 and subsequent years and shall be deemed to have had effect for the year 1999-00.

33 Deduction of income tax from foreign dividends

(1) In section 4 of the Taxes Act 1988 (construction of references in Income Tax Acts to deduction of tax), after subsection (1A) (which provides for deduction at lower rate from savings and distributions) insert—

“(1B) To the extent that section 118E (paying and collecting agents: deduction of tax) applies in relation to foreign dividend income—

(a) subsections (1) and (1A) above shall not apply, and

(b) any provision of that section of the kind mentioned in subsection (1) above shall be construed as referring to deduction or payment of income tax at the Schedule F ordinary rate in force for the relevant year of assessment.

For this purpose “foreign dividend income” means any such dividend or other distribution of a company not resident in the United Kingdom as would be chargeable under Schedule F if the company were resident in the United Kingdom.”.

(2) This section has effect for the year 2000-01 and shall be deemed to have had effect for the year 1999-00.

34 Children’s tax credit

(1) In section 257AA(2) of the Taxes Act 1988 (which specifies the amount by reference to which the children’s tax credit is calculated) for “£4,160” substitute “£4,420”.

(2) This section has effect for the year 2001-02 and subsequent years of assessment.

Corporation tax

35 Charge and main rate for financial year 2001

Corporation tax shall be charged for the financial year 2001 at the rate of 30%.

36 Small companies' rate for financial year 2000

For the financial year 2000—

(a) the small companies' rate shall be 20%, and

(b) the fraction mentioned in section 13(2) of the Taxes Act 1988 (marginal relief for small companies) shall be one fortieth.

Capital gains tax

37 Application of starting rate to capital gains tax

(1) In section 4 of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (rates of capital gains tax), after subsection (1AA) insert—

“(1AB) If (after allowing for any deductions in accordance with the Income Tax Acts) an individual has no income for a year of assessment or his total income for the year is less than the starting rate limit, then—

(a) if the amount on which he is chargeable to capital gains tax does not exceed the unused part of his starting rate band, the rate of capital gains tax in respect of gains accruing to him in the year shall be equivalent to the starting rate;

(b) if the amount on which he is chargeable to capital gains tax exceeds the unused part of his starting rate band, the rate of capital gains tax in respect of such gains accruing to him in the year as correspond to the unused part shall be equivalent to the starting rate.

(1AC) The references in subsection (1AB) above to the unused part of an individual’s starting rate band are to the amount by which the starting rate limit exceeds his total income (as reduced by any deductions made in accordance with the Income Tax Acts).”.

(2) This section has effect for the year 2000-01 and subsequent years of assessment.

Chapter II Other provisions

Giving to charity

38 Payroll deduction scheme

(1) Where in accordance with a scheme approved under section 202 of the Taxes Act 1988 (donations to charity: payroll deduction scheme) an agent is to pay to a charity any sum which—

(a) is withheld by an employer from a payment which an employee is entitled to receive; and

(b) is paid by the employer to the agent,

the agent shall, within a period prescribed by regulations made by the Treasury, pay a supplement equal to 10% of that sum to the charity.

(2) On a claim made by an agent in such form as the Board may prescribe, the Board shall pay to the agent out of money provided by Parliament—

(a) such amounts as are required—

(i) to fund the payment of supplements falling to be paid by him; or

(ii) to reimburse him for supplements paid by him the payment of which has not been so funded; and

(b) in the case of an agent which is a charity, an amount which is equal to 10% of the aggregate of sums which—

(i) are withheld and paid as mentioned in paragraphs (a) and (b) of subsection (1) above; and

(ii) are sums to which the agent is itself entitled in its capacity as a charity.

(3) The Treasury may by regulations make provision—

(a) requiring agents to notify the Board of any failures of theirs to comply with subsection (1) above, and of the reasons for those failures;

(b) requiring agents to keep records of supplements paid by them under that subsection; and

(c) for the assessment and recovery under the Taxes Acts of amounts paid to agents under subsection (2) above which ought not to have been so paid.

The regulations may contain such supplementary and incidental provision as appears to the Treasury necessary or expedient.

(4) In this section—

• “agent” means any such person or charity as is mentioned in subsection (4) of section 202 of the Taxes Act 1988;

• “employee” and “employer” shall be construed in accordance with subsection (1) of that section;

• “charity” has the same meaning as in section 506 of that Act and includes each of the bodies mentioned in section 507 of that Act;

• “the Taxes Acts” has the same meaning as in the [1970 c. 9.] Taxes Management Act 1970.

(5) In section 202 of the Taxes Act 1988—

(a) in subsection (6), the words “must not be paid by the employee under a covenant” shall cease to have effect;

(b) subsection (7) shall cease to have effect; and

(c) in subsection (11), in the definition of “charity”, after “section 506” there shall be inserted “and includes each of the bodies mentioned in section 507”.

(6) Subsections (1) to (4) above shall have effect in relation to supplements or other amounts payable in respect of sums withheld on or after 6th April 2000 and before 6th April 2003; and no claim under subsection (2) above shall be entertained if made on or after 6th April 2004.

(7) Subsection (5) above shall have effect in relation to sums withheld on or after 6th April 2000.

39 Gift aid payments by individuals

(1) Section 25 of the [1990 c. 29.] Finance Act 1990 (donations to charity by individuals) shall be amended in accordance with subsections (2) to (7) below.

(2) In subsection (1)(c), for “an appropriate certificate” there shall be substituted “an appropriate declaration”.

(3) In subsection (2)—

(a) paragraphs (c) and (g) shall cease to have effect;

(b) in paragraph (e), for “two and a half per cent of the amount of the gift” there shall be substituted “the limit imposed by subsection (5A) below”; and

(c) for paragraph (i) there shall be substituted—

“(i) either—

(i) at the time the gift is made, the donor is resident in the United Kingdom or performs duties which by virtue of section 132(4)(a) of the Taxes Act 1988 (Crown employees serving overseas) are treated as being performed in the United Kingdom; or

(ii) the grossed up amount of the gift would, if in fact made, be payable out of profits or gains brought into charge to income tax or capital gains tax.”.

(4) For subsection (3) there shall be substituted—

“(3) The reference in subsection (1)(c) above to an appropriate declaration is a reference to a declaration which—

(a) is given in such manner as may be prescribed by regulations made by the Board; and

(b) contains such information and such statements as may be so prescribed.

(3A) Regulations made for the purposes of subsection (3) above may—

(a) provide for declarations to have effect, to cease to have effect or to be deemed never to have had effect in such circumstances and for such purposes as may be prescribed by the regulations;

(b) require charities to keep records with respect to declarations given to them by donors; and

(c) make different provision for declarations made in a different manner.”.

(5) After subsection (5) there shall be inserted—

“(5A) The limit imposed by this subsection is—

(a) where the amount of the gift does not exceed £100, 25 per cent of the amount of the gift;

(b) where the amount of the gift exceeds £100 but does not exceed £1,000, £25;

(c) where the amount of the gift exceeds £1,000, 2.5 per cent of the amount of the gift.

(5B) Where a benefit received in consequence of making a gift—

(a) consists of the right to receive benefits at intervals over a period of less than twelve months;

(b) relates to a period of less than twelve months; or

(c) is one of a series of benefits received at intervals in consequence of making a series of gifts at intervals of less than twelve months,

the value of the benefit shall be adjusted for the purposes of subsection (4) above and the amount of the gift shall be adjusted for the purposes of subsection (5A) above.

(5C) Where a benefit, other than a benefit which is one of a series of benefits received at intervals, is received in consequence of making a gift which is one of a series of gifts made at intervals of less than twelve months, the amount of the gift shall be adjusted for the purposes of subsection (5A) above.

(5D) Where the value of a benefit, or the amount of a gift, falls to be adjusted under subsection (5B) or (5C) above, the value or amount shall be multiplied by 365 and the result shall be divided by—

(a) in a case falling within subsection (5B)(a) or (b) above, the number of days in the period of less than twelve months;

(b) in a case falling within subsection (5B)(c) or (5C) above, the average number of days in the intervals of less than twelve months;

and the reference in subsection (5B) above to subsection (4) above is a reference to that subsection as it applies for the purposes of subsection (2)(e) above.

(5E) In determining whether a gift to a charity falling within subsection (5F) below is a qualifying donation, there shall be disregarded the benefit of any right of admission received in consequence of the making of the gift—

(a) to view property the preservation of which is the sole or main purpose of the charity; or

(b) to observe wildlife the conservation of which is the sole or main purpose of the charity;

but this subsection shall not apply unless the opportunity to make gifts which attract such a right is available to members of the public.

(5F) A charity falls within this subsection if its sole or main purpose is the preservation of property, or the conservation of wildlife, for the public benefit.

(5G) In subsection (5E) above “right of admission” refers to admission of the person making the gift (or any member of his family who may be admitted because of the gift) either free of the charges normally payable for admission by members of the public, or on payment of a reduced charge.”.

(6) For subsections (6) to (9) there shall be substituted—

“(6) Where any gift made by the donor in a year of assessment is a qualifying donation, then, for that year—

(a) the Income Tax Acts and the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 shall have effect, in their application to him, as if—

(i) the gift had been made after deduction of income tax at the basic rate; and

(ii) the basic rate limit were increased by an amount equal to the grossed up amount of the gift;

(b) the provisions mentioned in subsection (7) below shall have effect, in their application to him, as if any reference to income tax which he is entitled to charge against any person included a reference to the tax treated as deducted from the gift; and

(c) to the extent, if any, necessary to ensure that he is charged to an amount of income tax and capital gains tax equal to the tax treated as deducted from the gift, he shall not be entitled to relief under Chapter I of Part VII of the Taxes Act 1988;

but paragraph (a)(ii) above shall not apply for the purposes of any computation under section 550(2)(a) or (b) of that Act (relief where gain charged at a higher rate).

(7) The provisions referred to in subsection (6)(b) above are—

(a) section 289A(5)(e) of the Taxes Act 1988 (relief under enterprise investment scheme);

(b) section 796(3) of that Act (credit for foreign tax); and

(c) paragraph 1(6)(f) of Schedule 15B to that Act (venture capital trusts).

(8) Where the tax treated as deducted from a gift by virtue of subsection (6) above exceeds the amount of income tax and capital gains tax with which the donor is charged for the year of assessment, the donor shall be assessable and chargeable with income tax at the basic rate on so much of the gift as is necessary to recover an amount of tax equal to the excess.

(9) In determining for the purposes of subsection (8) above the total amount of income tax and capital gains tax with which the donor is charged for the year of assessment, there shall be disregarded—

(a) any tax charged at the basic rate by virtue of—

(i) section 348 of the Taxes Act 1988 (read with section 3 of that Act); or

(ii) section 349 of that Act (read with section 350 of that Act);

(b) any tax treated as having been paid under—

(i) section 233(1)(a) of that Act (taxation of certain recipients of distributions);

(ii) section 249(4)(a) of that Act (stock dividends treated as income); or

(iii) section 547(5)(a) of that Act (method of charging life policy gain to tax);

(c) any relief to which section 256(2) of that Act applies (relief by way of income tax reduction);

(d) any relief under—

(i) section 347B of that Act (relief for maintenance payments);

(ii) section 788 of that Act (relief by agreement with other countries); or

(iii) section 790(1) of that Act (unilateral relief);

(e) any set off of tax deducted, or treated as deducted, from income other than—

(i) tax treated as deducted from income by virtue of section 421(1)(a) of that Act (taxation of borrower when loan released etc); or

(ii) tax treated as deducted from a relevant amount within the meaning of section 699A of that Act (untaxed sums comprised in the income of an estate) except to the extent that the relevant amount is or would be paid in respect of a distribution chargeable under Schedule F; and

(f) any set off of tax credits.

(9A) For the purposes of sections 257(5) and 257A(5) of the Taxes Act 1988 (age related allowances), the donor’s total income shall be treated as reduced by the aggregate amount of gifts from which tax is treated as deducted by virtue of subsection (6) above.”.

(7) In subsection (12), paragraphs (b) and (e) and the word “and” immediately preceding paragraph (e) shall cease to have effect.

(8) In subsections (1)(b) and (3)(b) of section 257BB of the Taxes Act 1988 (transfer of relief under section 257A where relief exceeds income), after “section 256(2)(b)” there shall be inserted “(read with section 25(6)(c) of the [1990 c. 29.] Finance Act 1990 where applicable)”.

(9) In paragraph 4(1)(b) of Schedule 13B to that Act (children’s tax credit), after “section 256(2)(b)” there shall be inserted “(read with section 25(6)(c) of the [1990 c. 29.] Finance Act 1990 where applicable)”.

(10) This section has effect in relation to—

(a) gifts made on or after 6th April 2000 which are not covenanted payments; and

(b) covenanted payments falling to be made on or after that date;

and any regulations made under subsection (3) of section 25 of the [1990 c. 29.] Finance Act 1990 (as substituted by subsection (4) above) within three months of the passing of this Act may be so made as to apply to any payments in relation to which this section has effect.

40 Gift aid payments by companies

(1) Section 339 of the Taxes Act 1988 (charges on income: donations to charity) shall be amended in accordance with subsections (2) to (8) below.

(2) In subsection (1), for paragraph (a) there shall be substituted—

“(a) a payment which, by reason of any provision of the Taxes Acts (within the meaning of the Management Act) except section 209(4), is to be regarded as a distribution; and”.

(3) Subsections (2), (3), (3A), (3F), (6), (7) and (8) shall cease to have effect.

(4) In subsection (3B)(b), for “two and a half per cent. of the amount given after deducting tax under section 339(3)” there shall be substituted “the limit imposed by subsection (3DA) below”.

(5) After subsection (3D) there shall be inserted—

“(3DA) The limit imposed by this subsection is—

(a) where the amount of the payment does not exceed £100, 25 per cent of the amount of the payment;

(b) where the amount of the payment exceeds £100 but does not exceed £1,000, £25;

(c) where the amount of the payment exceeds £1,000, 2.5 per cent of the amount of the payment.

(3DB) Where a benefit received in consequence of making a payment—

(a) consists of the right to receive benefits at intervals over a period of less than twelve months;

(b) relates to a period of less than twelve months; or

(c) is one of a series of benefits received at intervals in consequence of making a series of payments at intervals of less than twelve months,

the value of the benefit shall be adjusted for the purposes of subsection (3C) above and the amount of the payment shall be adjusted for the purposes of subsection (3DA) above.

(3DC) Where a benefit, other than a benefit which is one of a series of benefits received at intervals, is received in consequence of making a payment which is one of a series of payments made at intervals of less than twelve months, the amount of the payment shall be adjusted for the purposes of subsection (3DA) above.

(3DD) Where the value of a benefit, or the amount of a payment, falls to be adjusted under subsection (3DB) or (3DC) above, the value or amount shall be multiplied by 365 and the result shall be divided by—

(a) in a case falling within subsection (3DB)(a) or (b) above, the number of days in the period of less than twelve months;

(b) in a case falling within subsection (3DB)(c) or (3DC) above, the average number of days in the intervals of less than twelve months;

and the reference in subsection (3DB) to subsection (3C) above is a reference to that subsection as it applies for the purposes of subsection (3B) above.”.

(6) For subsection (4) there shall be substituted—

“(4) Where a company gives a sum of money to a charity, the gift shall in the hands of the charity be treated for the purposes of this Act as if it were an annual payment.”.

(7) For subsection (7AA) there shall be substituted—

“(7AA) Where—

(a) a qualifying donation to a charity is made by a company which is wholly owned by a charity, and

(b) the company makes a claim for the donation, or any part of it, to be deemed for the purposes of section 338 to be a charge on income paid in an accounting period falling wholly or partly within the period of nine months ending with the date of the making of the donation,

the donation or part shall be deemed for those purposes to be a charge on income paid in that accounting period, and not in any later period.

A claim under this subsection must be made within the period of two years immediately following the accounting period in which the donation is made, or such longer period as the Board may allow.”.

(8) In subsection (9), the words “in subsections (1) to (4) above includes” shall cease to have effect.

(9) In subsection (1) of section 209 of the Taxes Act 1988 (meaning of “distribution”), for “section 339(6) and any other express exceptions” there shall be substituted “any express exceptions”.

(10) In subsection (2)(a) of section 338 of that Act (allowance of charges on income and capital), after “company” there shall be inserted “or payments falling within paragraph (b) below”.

(11) This section has effect in relation to payments made on or after 1st April 2000; and—

(a) so much of an accounting period as falls before that date; and

(b) so much of it as falls after 31st March 2000,

shall be treated as separate accounting periods for the purposes of the amendment made by subsection (5) above.

41 Covenanted payments to charities

(1) In subsection (5)(b) of section 338 of the Taxes Act 1988 (allowances of charges on income and capital), for “a covenanted donation to charity” there shall be substituted “a qualifying donation”.

(2) In section 347A of that Act (annual payments and interest: general rule), subsections (2)(b), (7) and (8) shall cease to have effect.

(3) In subsection (3) of section 348 of that Act (payments out of profits or gains brought into charge to income tax: deductions of tax), at the end there shall be inserted “or to any payment which is a qualifying donation for the purposes of section 25 of the [1990 c. 29.] Finance Act 1990”.

(4) In subsection (1) of section 349 of that Act (payments not out of profits or gains brought into charge to income tax, and annual interest), at the end there shall be inserted “or to any payment which is a qualifying donation (within the meaning of section 339) or a qualifying donation for the purposes of section 25 of the [1990 c. 29.] Finance Act 1990”.

(5) In subsection (6) of section 505 of that Act (charities: general), the words “and, for this purpose, all covenanted payments to charity (within the meaning of section 347A(7)) shall be treated as a single item” shall cease to have effect.

(6) In subsection (9) of section 660A of that Act (income arising under a settlement where settlor retains an interest), for paragraph (b) there shall be substituted—

“(b) qualifying donations for the purposes of section 25 of the Finance Act 1990.”.

(7) Section 59 of the [1989 c. 26.] Finance Act 1989 (covenanted subscriptions) shall cease to have effect.

(8) Where a deed of covenant executed by an individual before 6th April 2000 provides for the payment of specified amounts, any amount payable under the deed on or after that date shall be determined as if the individual were entitled to deduct tax from that amount at the basic rate.

(9) This section shall have effect in relation to covenanted payments—

(a) falling to be made by individuals on or after 6th April 2000; or

(b) made by companies on or after 1st April 2000.

42 Millennium gift aid

(1) In section 48 of the [1998 c. 36.] Finance Act 1998 (gifts of money for relief in poor countries), subsections (3), (6) and (7) shall cease to have effect.

(2) In subsection (4) of that section—

(a) in paragraph (a), after “made” there shall be inserted “before 6th April 2000”;

(b) after paragraph (b) there shall be inserted—

“(bb) the subsequent gift, or at least one of the subsequent gifts, is made on or after 6th April 2000;”; and

(c) in paragraph (c), for “appropriate certificate” there shall be substituted “appropriate declaration”.

(3) In subsection (8) of that section, for the definition of “relevant gift” there shall be substituted—

““relevant gift” means a gift to which this section applies—

(a) which satisfies the requirements of subsection (2) of section 25 of the [1990 c. 29.] Finance Act 1990 (as amended by section 39 of the Finance Act 2000); or

(b) which would satisfy those requirements if paragraph (e) of that subsection were disregarded.”.

43 Gifts of shares and securities to charities etc

(1) After section 587A of the Taxes Act 1988 there shall be inserted—

“587B Gifts of shares and securities to charities etc

(1) Subsections (2) and (3) below apply where, otherwise than by way of a bargain made at arm’s length, an individual, or a company which is not itself a charity, disposes of the whole of the beneficial interest in a qualifying investment to a charity.

(2) On a claim made in that behalf to an officer of the Board—

(a) the relevant amount shall be allowed—

(i) in the case of a disposal by an individual, as a deduction in calculating his total income for the purposes of income tax for the year of assessment in which the disposal is made;

(ii) in the case of a disposal by a company, as a charge on income for the purposes of corporation tax for the accounting period in which the disposal is made; and

(b) no relief in respect of the disposal shall be given under section 83A or any other provision of the Income Tax Acts;

but paragraph (a)(i) above shall not apply for the purposes of any computation under section 550(2)(a) or (b).

(3) The consideration for which the charity’s acquisition of the qualifying investment is treated by virtue of section 257(2) of the 1992 Act as having been made—

(a) shall be reduced by the relevant amount; or

(b) where that consideration is less than that amount, shall be reduced to nil.

(4) Subject to subsections (5) to (7) below, the relevant amount is an amount equal to—

(a) where the disposal is a gift, the market value of the qualifying investment at the time when the disposal is made;

(b) where the disposal is at an undervalue, the difference between that market value and the amount or value of the consideration for the disposal.

(5) Where there are one or more benefits received in consequence of making the disposal which are received by the person making the disposal or a person connected with him, the relevant amount shall be reduced by the value of that benefit or, as the case may be, the aggregate value of those benefits; and section 839 applies for the purposes of this subsection.

(6) Where the disposal is a gift, the relevant amount shall be increased by the amount of the incidental costs of making the disposal to the person making it.

(7) Where the disposal is at an undervalue—

(a) to the extent that the consideration for the disposal is less than that for which the disposal is treated as made by virtue of section 257(2)(a) of the 1992 Act, the relevant amount shall be increased by the amount of the incidental costs of making the disposal to the person making it; and

(b) section 48 of that Act (consideration due after time of disposal) shall apply in relation to the computation of the relevant amount as it applies in relation to the computation of a gain.

(8) In the case of a disposal by a company which is carrying on life assurance business—

(a) if the company is charged to tax under Case I of Schedule D in respect of such business, subsections (2) and (3) above shall not apply;

(b) if the company is not so charged to tax in respect of such business—

(i) subsection (2)(a)(ii) above shall have effect as if for “a charge on income” there were substituted “an expense of management”; and

(ii) the relevant amount given by subsection (4) above shall be reduced by so much (if any) of that amount as is not referable to basic life assurance and general annuity business;

and for the purpose of determining how much (if any) of that amount is not so referable, section 432A shall have effect as if that amount were a gain accruing on the disposal of the qualifying investment to the company.

(9) In this section—

• “authorised unit trust” and “open-ended investment company” have the meanings given by section 468;

• “charity” has the same meaning as in section 506 and includes each of the bodies mentioned in section 507(1);

• “the incidental costs of making the disposal to the person making it” shall be construed in accordance with section 38(2) of the 1992 Act;

• “life assurance business” and related expressions have the same meaning as in Chapter I of Part XII;

• “offshore fund” means a collective investment scheme (within the meaning of the [1986 c. 60.] Financial Services Act 1986) which is constituted by any company, unit trust scheme or other arrangement falling within paragraph (a), (b) or (c) of section 759(1);

• “qualifying investment” means any of the following—

  (a)

  shares or securities which are listed or dealt in on a recognised stock exchange;

  (b)

  units in an authorised unit trust;

  (c)

  shares in an open-ended investment company; and

  (d)

  an interest in an offshore fund.

(10) Subject to subsection (11) below, the market value of any qualifying investment shall be determined for the purposes of this section as for the purposes of the 1992 Act.

(11) In the case of an interest in an offshore fund for which there are separate published buying and selling prices, section 272(5) of the 1992 Act (meaning of “market value” in relation to rights of unit holders in a unit trust scheme) shall apply with any necessary modifications for determining the market value of the interest for the purposes of this section.”.

(2) In subsection (2) of section 338 of that Act (allowances of charges on income and capital), immediately before paragraph (a) there shall be inserted—

“(za) amounts allowed as charges on income under section 587B(2)(a)(ii);”.

(3) This section has effect in relation to—

(a) disposals made by individuals on or after 6th April 2000; and

(b) disposals made by companies on or after 1st April 2000.

44 Gifts to charity from certain trusts

(1) Chapter IA of Part XV of the Taxes Act 1988 (liability of settlors) shall not apply to any qualifying income which arises under a trust the trustees of which are resident in the United Kingdom (a “UK trust”) if—

(a) it is given by the trustees to a charity in the year of assessment in which it arises; or

(b) it is income to which a charity is entitled under the terms of the trust.

(2) Subject to subsection (3) below, where in any year of assessment qualifying income arising under a UK trust from different sources exceeds the amount of that income falling within subsection (1) above, that amount shall be rateably apportioned between those sources.

(3) Nothing in subsection (2) above shall affect the operation of any requirement that the whole, or any specified part, of the income from a particular source be given to a charity.

(4) Where in any year of assessment qualifying income arising under a UK trust exceeds the amount of that income falling within subsection (1) above, any management expenses for that year shall be rateably apportioned between—

(a) so much of that income as is equal to that amount; and

(b) so much of that income as exceeds that amount.

(5) In this section—

• “charity” has the same meaning as in section 506 of the Taxes Act 1988 and includes each of the bodies mentioned in section 507 of that Act;

• “qualifying income” means—

  (i)

  income which is to be accumulated;

  (ii)

  income which is payable at the discretion of the trustees or any other person (whether or not the trustees have power to accumulate it); or

  (iii)

  income which (before being distributed) is income of any person other than the trustees;

• “resident”, in relation to the trustees of a trust, shall be construed in accordance with section 110 of the [1989 c. 26.] Finance Act 1989;

and the reference to Chapter IA of Part XV of the Taxes Act 1988 includes a reference to that Chapter as it has effect by virtue of section 660E of that Act (application to settlements by two or more settlors).

(6) This section has effect in relation to qualifying income arising to a UK trust on or after 6th April 2000.

45 Loans to charities

(1) In Chapter IA of Part XV of the Taxes Act 1988 “settlement” does not include any arrangement so far as it consists of a loan of money made by an individual to a charity either—

(a) for no consideration; or

(b) for a consideration which consists only of interest.

(2) In this section “charity” has the same meaning as in section 44 above.

(3) This section has effect in relation to income arising on or after 6th April 2000 on loans made before, as well as loans made on or after, that date.

46 Exemption for small trades etc

(1) Subject to subsection (2) below, exemption from tax under Case I or VI of Schedule D shall be granted, on a claim made in that behalf to the Board, in respect of any income of a charity if the requirements of subsection (3) below are satisfied with respect to the income.

(2) Exemption shall not be granted under subsection (1) above in respect of income which is chargeable to tax under Case VI of Schedule D by virtue of any of the following—

(a) section 30 of the [1970 c. 9.] Taxes Management Act 1970;

(b) sections 214, 412, 547(1)(b) and (6), 553(6), 660C, 677, 703, 776, 788, 790 and 804 of the Taxes Act 1988;

(c) paragraph 14 of Schedule 4 to the [1997 c. 58.] Finance (No. 2) Act 1997;

(d) paragraph 52(4) of Schedule 18, and paragraph 13(7) of Schedule 19, to the [1998 c. 36.] Finance Act 1998; and

(e) any other enactment specified in an order made by the Treasury.

(3) The requirements of this subsection are satisfied with respect to any income for a chargeable period if it is applied solely for the purposes of the charity and either—

(a) the charity’s gross income for the chargeable period does not exceed the requisite limit; or

(b) the charity had, at the beginning of the period, a reasonable expectation that its gross income for the period would not exceed that limit.

(4) Subject to subsection (5) below, the requisite limit is whichever is the greater of—

(a) £5,000; and

(b) whichever is the lesser of £50,000 and 25% of all of the charity’s incoming resources for the chargeable period.

(5) For a chargeable period of less than twelve months, the amounts of £5,000 and £50,000 specified in subsection (4) above shall be proportionally reduced.

(6) In this section—

• “charity” means any body of persons or trust established for charitable purposes only;

• “gross income”, in relation to a charity, means income before deduction of any expenses;

• “income”, in relation to a charity, means any profits or gains or other income which is chargeable to tax under Case I or VI of Schedule D and which is not, apart this section, exempted from tax under that Case.

(7) This section applies for the year 2000-01 and subsequent years of assessment or, in the case of charities which are companies, for accounting periods beginning on or after 1st April 2000.

Employee share ownership

47 Employee share ownership plans

Schedule 8 to this Act (employee share ownership plans) shall have effect.

48 Relief for transfers to employee share ownership plans

(1) In the [1992 c. 12.] Taxation of Chargeable Gains Act 1992, after section 236 insert—

“Employee share ownership plans

236A Relief for transfers to employee share ownership plans

Schedule 7C (which makes provision for roll-over relief where shares are transferred to an approved employee share ownership plan) shall have effect.”.

(2) After Schedule 7B to that Act insert the Schedule 7C set out in Schedule 9 to this Act.

49 Phasing out of approved profit sharing schemes

(1) The Board shall not approve a profit sharing scheme under Schedule 9 to the Taxes Act 1988 (approval of share option schemes and profit sharing schemes) unless the application for approval is received by the Board before 6th April 2001.

(2) For the purposes of subsection (1) an application for approval which is not accompanied by the particulars and evidence referred to in paragraph 1(2) of that Schedule is not regarded as received by the Board until the required particulars and evidence have been received by them.

(3) In section 186 of that Act (approved profit sharing schemes), in subsection (1) (under which the section applies to appropriations of shares made after 5th April 1979) after “5th April 1979” insert “and before 1st January 2003”.

50 Phasing out of relief for payments to trustees of profit sharing schemes

(1) This section has effect to phase out deductions under section 85 of the Taxes Act 1988 (corporation tax relief for payments to trustees of approved profit sharing schemes).

(2) In the case of sums paid to the trustees on or after 21st March 2000 and before 6th April 2002 no deduction may be made by virtue of subsection (2)(a) of that section (sums applied in acquiring shares for appropriation) unless the trustees appropriate the shares acquired, by the application of the sum, as mentioned in that provision—

(a) before the end of the period of nine months beginning on the day following the end of the period of account in which payment to the trustees was made, and

(b) before 1st January 2003.

(3) No deduction may be made by virtue of subsection (2)(a) of that section in respect of any sum paid to the trustees on or after 6th April 2002.

(4) No deduction may be made by virtue of subsection (2)(b) of that section (sums to meet expenses of trustees in administering the scheme) in respect of any sum paid to the trustees more than three years after the date of the last appropriation of shares to individuals which was made—

(a) in accordance with the approved profit sharing scheme, and

(b) before 1st January 2003.

(5) For the purposes of this section references to a deduction under section 85 are to a deduction under subsection (1)(a) or by virtue of subsection (1)(b) of that section.

51 Approved profit sharing scheme: other awards of shares

(1) In Schedule 9 to the Taxes Act 1988 (approved share option schemes and profit sharing schemes), in paragraph 3(2) (grounds for withdrawing approval of profit sharing schemes), after “below” in paragraph (e) insert— “,; or

(f) the trustees appropriate shares to participants, one or more of whom have had free shares appropriated to them, at an earlier time in the same year of assessment, under a relevant share plan”.

(2) After paragraph 3(3) of that Schedule insert—

“(4) For the purposes of sub-paragraph (2)(f) above the reference to persons having had free shares appropriated to them includes persons who would have had free shares appropriated to them but for their failure to obtain a performance allowance (within the meaning of paragraph 25 of Schedule 8 to the Finance Act 2000).

(5) In sub-paragraph (2)(f) and (4) above—

• “free shares” has the same meaning as in Schedule 8 to the Finance Act 2000;

• “relevant share plan”, in relation to a profit sharing scheme, means an employee share ownership plan that—

  (a)

  was established by the grantor or a connected company, and

  (b)

  is approved under Schedule 8 to that Act.

(6) For the purposes of sub-paragraph (5) above “connected company” means—

(a) a company which controls or is controlled by the grantor or which is controlled by a company which also controls the grantor, or

(b) a company which is a member of a consortium owning the grantor or which is owned in part by the grantor as a member of a consortium.”.

52 Approved profit sharing schemes: restriction on type of shares

(1) Schedule 9 to the Taxes Act 1988 (share option schemes and profit sharing schemes) is amended in accordance with subsections (2) to (4).

(2) In paragraph 9(1) (requirements to be satisfied by shares in share option schemes), after “below” insert “(disregarding paragraph 11A)”.

(3) After paragraph 11 (requirements as to listing etc.) insert—

“11A (1) In the case of a profit sharing scheme, scheme shares must not be shares—

(a) in an employer company, or

(b) in a company that—

(i) has control of an employer company, and

(ii) is under the control of a person or persons within sub-paragraph (2)(b)(i) below in relation to an employer company.

(2) For the purposes of this paragraph a company is “an employer company” if—

(a) the business carried on by it consists substantially in the provision of the services of the persons employed by it, and

(b) the majority of those services are provided to—

(i) a person who has, or two or more persons who together have, control of the company, or

(ii) a company associated with the company.

(3) For the purposes of sub-paragraph (2)(b)(ii) above a company shall be treated as associated with another company if both companies are under the control of the same person or persons.

(4) For the purposes of sub-paragraphs (1) to (3) above—

(a) references to a person include a partnership, and

(b) where a partner, alone or together with others, has control of a company, the partnership shall be treated as having like control of that company.

(5) For the purposes of this paragraph the question whether a person controls a company shall be determined in accordance with section 416(2) to (6).”.

(4) In paragraph 12—

(a) in sub-paragraph (1), in paragraph (c) for “other than” to the end of that paragraph there shall be substituted “other than those permitted by sub-paragraph (1A) below.”, and

(b) after sub-paragraph (1) insert—

“(1A) Subject to sub-paragraph (1B) below, scheme shares may be subject to—

(a) restrictions which attach to all shares of the same class, or

(b) a restriction authorised by sub-paragraph (2) below.

(1B) In the case of a profit sharing scheme, scheme shares must not be subject to any restrictions affecting the rights attaching to those shares which relate to—

(a) dividends, or

(b) assets on a winding-up of the company,

other than restrictions which attach to all other ordinary shares in the same company.”.

(5) Subsections (1) to (4) shall be deemed to have come into force on 21st March 2000.

(6) Subsections (3) and (4) do not have effect in relation to shares acquired before 21st March 2000 by the trustees of a profit sharing scheme approved under Schedule 9 to the Taxes Act 1988.

53 Approved profit sharing schemes: loan arrangements

(1) In paragraph 2 of Schedule 9 to the Taxes Act 1988 (conditions for approval of share option schemes and profit sharing schemes), after sub-paragraph (2) insert—

“(2A) The Board shall not approve a profit sharing scheme unless they are satisfied—

(a) that the arrangements for the scheme do not make any provision, and are not in any way associated with any provision made, for loans to some or all of the employees of—

(i) the company that established the scheme, or

(ii) in the case of a group scheme, any participating company, and

(b) that the operation of the scheme is not in any way associated with such loans.

(2B) For the purposes of sub-paragraph (2A) above “arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable.”.

(2) In paragraph 3(2) of that Schedule (withdrawal of approval of profit sharing schemes), before paragraph (d) insert—

“(ca) the Board—

(i) cease to be satisfied of the matters mentioned in paragraph 2(2A) above, or

(ii) in the case of a scheme approved before 21st March 2000, are not satisfied of those matters; or”.

(3) This section shall be deemed to have come into force on 21st March 2000.

54 Employee share ownership trusts

No claim for relief under section 229(1) or (3) of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (roll-over relief where disposal made to employee share ownership trust) may be made in relation to a disposal of shares, or an interest in shares, made on or after 6th April 2001.

55 Shares transferred from employee share ownership trust

(1) Section 69 of the [1989 c. 26.] Finance Act 1989 (chargeable events in relation to employee share ownership trusts) is amended in accordance with subsections (2) to (5).

(2) In subsection (1) (definition of “chargeable event”), after paragraph (d) insert—

“(e) where—

(i) the trustees make a qualifying transfer within subsection (3AA) below for a consideration, and

(ii) they do not, during the period specified in subsection (5A) below, expend a sum of not less than the amount of that consideration for one or more qualifying purposes,

the expiry of that period.”.

(3) After subsection (3) insert—

“(3AA) For the purposes of subsection (1)(a) above a transfer is also a qualifying transfer if—

(a) it is a transfer of relevant shares made to the trustees of the plan trust of an employee share ownership plan,

(b) the plan is approved under Schedule 8 to the Finance Act 2000 when the transfer is made, and

(c) the consideration (if any) for which the transfer is made does not exceed the market value of the shares.

(3AB) For the purpose of determining whether a transfer by the trustees is a qualifying transfer within subsection (3AA) above, where on or after 21st March 2000—

(a) the trustees transfer or dispose of part of a holding of shares (whether by way of a qualifying transfer or otherwise), and

(b) the holding includes any relevant shares,

the relevant shares shall be treated as transferred or disposed of before any other shares included in that holding.

For this purpose “holding” means any number of shares of the same class held by the trustees, growing or diminishing as shares of that class are acquired or disposed of.

(3AC) For the purposes of subsections (3AA) and (3AB) above—

• “market value” has the same meaning as in Schedule 8 to the Finance Act 2000; and

• “relevant shares” means—

  (i)

  shares that are held by the trustees of the employee share ownership trust at midnight on 20th March 2000, and

  (ii)

  shares purchased by those trustees with original funds after that time.

(3AD) For the purposes of subsection (3AC) above—

(a) “original funds” means any money held by the trustees of the employee share ownership trust in a bank or building society account at midnight on 20th March 2000, and

(b) any payment made by the trustees after that time (whether to acquire shares or otherwise) shall be treated as made out of original funds (and not out of money received after that time) until those funds are exhausted.”.

(4) In subsection (5) after “(1)(d)” insert “or (e)”.

(5) After that subsection insert—

“(5A) The period referred to in paragraph (e) of subsection (1) above is the period—

(a) beginning with the qualifying transfer mentioned in that paragraph, and

(b) ending nine months after the end of the period of account in which that qualifying transfer took place.

For this purpose the period of account means the period of account of the company that established the employee share ownership trust.”.

(6) In section 70 of the [1989 c. 26.] Finance Act 1989 (chargeable amounts), after subsection (3) insert—

“(4) If the chargeable event falls within section 69(1)(e) above the chargeable amount is an amount equal to—

(a) the amount of the consideration received for the qualifying transfer mentioned in section 69(1)(e) above, less

(b) the amount of any expenditure by the trustees for a qualifying purpose during the period mentioned in section 69(5A) above.”.

56 Further provisions about share options

(1) In Chapter IV of Part V of the Taxes Act 1988 (provisions relating to the Schedule E charge: other exemptions and reliefs), after section 187 insert—

“Contributions in respect of share option gains

187A Relief for contributions in respect of share option gains

(1) Where a person (“the earner”) is chargeable to tax under section 135 on a gain, relief is available under this section if—

(a) an agreement has been entered into allowing the secondary contributor to recover from the earner the whole or part of any secondary Class 1 contributions in respect of the gain, or

(b) an election is in force which has the effect of transferring to the earner the whole or part of the liability to pay secondary Class 1 contributions in respect of the gain.

(2) The amount of the relief is the total of—

(a) any amount that, in pursuance of any such agreement as is mentioned in subsection (1)(a), is recovered in respect of the gain by the secondary contributor not later than 60 days after the end of the year of assessment in which occurred the event giving rise to the charge to tax under section 135; and

(b) the amount of any liability in respect of that gain that, by virtue of any such election as is mentioned in subsection (1)(b), has become the earner’s liability.

(3) Where notice of withdrawal of approval of any such election is given, relief under subsection (2)(b) is limited to so much of the earner’s liability in respect of the gain as is met before the end of the 60th day after the end of the year of assessment in which occurred the event giving rise to the charge under section 135.

(4) Relief under this section shall be given by way of deduction from the amount of the gain on which the earner is chargeable to tax under section 135.

(5) Any such deduction does not affect the amount of the gain for the purposes of—

(a) section 120(4) of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (amount treated as consideration for acquisition of shares), or

(b) section 4(4)(a) of the Contributions and Benefits Act (amount treated as remuneration for contributions purposes).

(6) The agreements and elections referred to in this section are those having effect under paragraph 3A or 3B of Schedule 1 to the Contributions and Benefits Act.

References to approval in relation to an election are to approval by the Inland Revenue under paragraph 3B of that Schedule.

(7) In this section—

• “the Contributions and Benefits Act” means the [1992 c. 4.] Social Security Contributions and Benefits Act 1992 or the [1992 c. 7.] Social Security Contributions and Benefits (Northern Ireland) Act 1992; and

• “secondary Class 1 contributions” and “secondary contributor” have the same meaning as in that Act.”.

Section 187A inserted by this subsection applies to any agreement or election having effect as mentioned in subsection (6) of that section, whether made before or after the passing of this Act.

(2) Section 203FB of the Taxes Act 1988 (PAYE: gains from share options) is amended as follows—

(a) in subsections (2) and (3), for “subsection (7)” substitute “subsection (6A)”;

(b) after subsection (6) insert—

“(6A) Where section 203F has effect in accordance with subsection (2) or (3) above, subsection (3) of section 203F shall apply as if the reference in that subsection to the amount of income likely to be chargeable to tax under Schedule E in respect of the provision of the asset were a reference to the amount on which tax is likely to be chargeable by virtue of section 135 in respect of the event in question, reduced by the amount of any relief likely to be available under section 187A.”;

(c) in subsection (7), for “any of the preceding provisions of this section” substitute “subsection (4) or (5) above” and for “section 135, 140A or 140D” substitute “section 140A or 140D”.

These amendments apply where the event giving rise to the charge to tax occurs after the passing of this Act.

(3) In section 136(6) of the Taxes Act 1988 and section 85(1) of the [1988 c. 39.] Finance Act 1988 (duty to deliver particulars relating to share options, etc. within 30 days after end of year of assessment), for “30 days” substitute “92 days”.

These amendments apply where the event giving rise to the duty to deliver particulars occurs on or after 6th April 2000.

(4) After section 136(6) of the Taxes Act 1988 add—

“(7) A body corporate is not obliged to deliver particulars under subsection (6) above which it has already given in a notice under paragraph 2 of Schedule 14 to the Finance Act 2000 (enterprise management incentives: notice required for option to be qualifying option).

In other respects the obligations imposed by that subsection and that paragraph are independent of each other.

(8) The duty of a body corporate under subsection (6) above to deliver particulars of any matter includes a duty to deliver particulars of any secondary Class 1 contributions payable in connection with that matter that—

(a) are recovered as mentioned in section 187A(2)(a), or

(b) are met as mentioned in section 187A(3).

In this subsection “secondary Class 1 contributions” has the same meaning as in section 187A.”.

Section 136(8) inserted by this subsection applies to any amounts recovered or met as mentioned in section 187A(2)(a) or (3) of the Taxes Act 1988, whether before or after the passing of this Act.

Other provisions about employment

57 Benefits in kind: deregulatory amendments

(1) Chapter II of Part V of the Taxes Act 1988 (provisions relating to the Schedule E charge: benefits in kind, etc.) is amended in accordance with Schedule 10 to this Act.

(2) The amendments have effect for the year 2000-01 and subsequent years of assessment.

58 Education and Training

(1) After section 200D of the Taxes Act 1988 (work-related training) insert—

“200E Education and training funded by employers

(1) This section applies for the purposes of Schedule E where any person (in this section, and sections 200F and 200G, called “the employer”) incurs expenditure—

(a) by making a payment to a person (“the provider”) in respect of the costs of any qualifying education or training provided by the provider to a fundable employee of the employer (in this section, and sections 200F and 200G, called “the employee”), or

(b) in paying or reimbursing any related costs.

(2) Subject to sections 200F to 200H, the emoluments of the employee from the office or employment shall not be taken to include—

(a) any amount in respect of that expenditure, or

(b) any amount in respect of the benefit of the education or training provided by means of that expenditure.

(3) In subsection (1) above “related costs”, in relation to any qualifying education or training provided to the employee, means—

(a) any costs that are incidental to the employee’s undertaking the education or training and are incurred wholly and exclusively as a result of his doing so;

(b) any expenses incurred in connection with an assessment (whether by examination or otherwise) of what the employee has gained from the education or training; and

(c) the cost of obtaining for the employee any qualification, registration or award to which he has or may become entitled as a result of undertaking the education or training or of undergoing such an assessment.

(4) In this section “qualifying education or training” means education or training of a kind that qualifies for grants whose payment is authorised by—

(a) regulations under section 108 or 109 of the Learning and Skills Act 2000, or

(b) regulations under section 1 of the [2000 c. 21. 2000 asp 8.] Education and Training (Scotland) Act 2000.

(5) For the purposes of this section, a person is a fundable employee of the employer if—

(a) he holds, or has at any time held, an office or employment under the employer, and

(b) he holds an account that qualifies under section 104 of the Learning and Skills Act 2000 or he is a party to qualifying arrangements.

(6) In subsection (5) above “qualifying arrangements” means arrangements which qualify under—

(a) section 105 or 106 of the Learning and Skills Act 2000, or

(b) section 2 of the Education and Training (Scotland) Act 2000.

200F Section 200E: exclusion of expenditure not directly related to training

(1) Section 200E shall not apply in the case of any expenditure to the extent that it is incurred in paying or reimbursing the cost of any facilities or other benefits provided or made available to the employee for either or both of the following purposes, that is to say—

(a) enabling the employee to enjoy the facilities or benefits for entertainment or recreational purposes;

(b) rewarding the employee for the performance of the duties of his office or employment under the employer, or for the manner in which he has performed them.

(2) Section 200E shall not apply in the case of any expenditure incurred in paying or reimbursing any expenses of travelling or subsistence, except to the extent that those expenses would be deductible under section 198 if the employee—

(a) undertook the education or training in question in the performance of the duties of—

(i) his office or employment under the employer, or

(ii) where the employee no longer holds an office or employment under the employer, the last office or employment that he did hold under the employer; and

(b) incurred those expenses out of the emoluments of that office or employment.

(3) Section 200E shall not apply in the case of any expenditure incurred in paying or reimbursing the cost of providing the employee with, or with the use of, any asset except where—

(a) the asset is provided or made available for use only in the course of the education or training;

(b) the asset is provided or made available for use in the course of the education or training and in the performance of the duties of the employee’s office or employment but not to any significant extent for any other use;

(c) the asset consists in training materials provided in the course of the education or training; or

(d) the asset consists in something made by the employee in the course of the education or training or incorporated into something so made.

(4) In subsection (1) above the reference to enjoying facilities or benefits for entertainment or recreational purposes includes a reference to enjoying them in the course of any leisure activity.

(5) In this section—

• “subsistence” includes food and drink and temporary living accommodation; and

• “training materials” means stationery, books or other written material, audio or video tapes, compact disks or floppy disks.

200G Section 200E: exclusion of expenditure if contributions not generally available to staff

(1) Section 200E shall not apply to any expenditure incurred in respect of—

(a) the costs of any education or training provided to the employee, or

(b) any related costs,

unless the expenditure is incurred in giving effect to fair-opportunity arrangements that were in place at the time when the employer agreed to incur the expenditure.

In this subsection “related costs”, in relation to any education or training provided to the employee, has the meaning given by section 200E(3).

(2) For the purposes of subsection (1) above “fair-opportunity arrangements” are in place at any time if at that time arrangements are in place that provide—

(a) for the making of contributions by the employer to costs arising from qualifying education or training being undertaken by persons who hold, or have held, an office or employment under the employer, and

(b) for such contributions to be generally available, on similar terms, to the persons who at that time hold an office or employment under the employer.

In this subsection “qualifying education or training” has the same meaning as in section 200E.

(3) The Treasury may by regulations make provision specifying the persons or other entities under whom Crown servants are to be treated for the purposes of this section as holding office or employment; and such regulations may—

(a) deem a description of Crown servants (or two or more such descriptions taken together) to be an entity for the purposes of the regulations;

(b) make different provision for different descriptions of Crown servants.

In this subsection “Crown servant” means a person holding an office or employment under the Crown.

200H Section 200E: exclusion of expenditure otherwise relieved

Section 200E does not apply to expenditure to the extent that—

(a) section 200B (expenditure on work-related training) applies to it, or

(b) section 588(1) (expenditure on retraining courses) has effect in respect of it.

200J Education or training funded by third parties

(1) This section applies where—

(a) any person (“the employee”) who holds, or has at any time held, an office or employment under another (“the employer”) is provided by reason of that office or employment with any benefit,

(b) that benefit consists in any qualifying education or training or is provided in connection with any such education or training, and

(c) the amount which (apart from this section and sections 200E to 200H) would be included in respect of that benefit in the emoluments of the employee (“the chargeable amount”) is or includes an amount that does not represent expenditure incurred by the employer.

(2) For the purposes of Schedule E, the questions whether and to what extent those emoluments shall be taken to include an amount in respect of that benefit shall be determined in accordance with sections 200E to 200H as if the benefit had been provided by means of a payment by the employer of an amount equal to the whole of the chargeable amount.

(3) In this section “qualifying education or training” has the same meaning as in section 200E.”.

(2) In section 200A(3)(b) of that Act (definition of a qualifying absence from home), at the end of sub-paragraph (iv) insert “, or

(v) expenses the amount of which, having been paid or reimbursed by the person under whom he holds that office or employment, is excluded from his emoluments in pursuance of section 200E, or

(vi) expenses the amount of which would be so excluded if it were so paid or reimbursed.”.

(3) This section applies for the year 2000-01 and subsequent years of assessment.

59 Cars available for private use

Schedule 11 to this Act (which makes provision in relation to the taxation of cars available for private use) has effect for the year 2002-03 and subsequent years of assessment.

60 Provision of services through intermediary

Schedule 12 to this Act has effect with respect to the provision of services through an intermediary.

Pension schemes

61 Occupational and personal pension schemes

Schedule 13 to this Act (which makes provision in relation to occupational and personal pension schemes) has effect.

Enterprise incentives

62 Enterprise management incentives

Schedule 14 to this Act (enterprise management incentives) has effect in relation to any right to acquire shares granted after the passing of this Act.

63 Corporate venturing scheme

(1) Schedule 15 to this Act (which makes provision for the corporate venturing scheme) has effect.

(2) Schedule 16 to this Act (which makes consequential amendments) has effect.

(3) Paragraph 3(2)(a)(i) to (iii) and (3) of Schedule 16 (and paragraph 3(1) so far as it relates to those provisions) have effect—

(a) in relation to claims made under section 573 of the Taxes Act 1988, in respect of disposals on or after 1st April 2000, and

(b) in relation to claims made under section 574 of that Act, in respect of disposals on or after 6th April 2000.

(4) Subject to that, Schedules 15 and 16 apply in relation to shares issued on or after 1st April 2000 but before 1st April 2010.

64 Enterprise investment scheme: amendments

The provisions relating to the enterprise investment scheme are amended in accordance with Schedule 17 to this Act.

In that Schedule—

Part I makes amendments reducing various periods which apply in relation to the provisions which determine the reliefs under the scheme;

Part II makes amendments about qualifying companies;

Part III makes other minor amendments.

65 Venture capital trusts: amendments

The provisions relating to venture capital trusts are amended in accordance with Schedule 18 to this Act.

In that Schedule—

Part I makes amendments reducing various periods which apply in relation to the provisions which determine the reliefs; and

Part II makes amendments about qualifying holdings.

66 Taper relief: taper for business assets

(1) Section 2A of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (taper relief) is amended as follows.

(2) In subsection (5), for the first two columns of the table (which relate to gains on disposals of business assets) substitute—

(3) For subsections (8) and (9) substitute—

“(8) The qualifying holding period of an asset for the purposes of this section is—

(a) in the case of a business asset, the period after 5th April 1998 for which the asset had been held at the time of its disposal;

(b) in the case of a non-business asset where—

(i) the time which, for the purposes of paragraph 2 of Schedule A1, is the time when the asset is taken to have been acquired by the person making the disposal is a time before 17th March 1998, and

(ii) there is no period which by virtue of paragraph 11 or 12 of that Schedule does not count for the purposes of taper relief,

the period mentioned in paragraph (a) plus one year;

(c) in the case of any other non-business asset, the period mentioned in paragraph (a).

This subsection is subject to paragraph 2(4) of Schedule A1 and paragraph 3 of Schedule 5BA.”.

(4) This section applies to disposals on or after 6th April 2000.

67 Taper relief: assets qualifying as business assets

(1) Schedule A1 to the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (application of taper relief) is amended as follows.

(2) In paragraph 4 (conditions for shares to qualify as business assets)—

(a) in sub-paragraph (4) (disposal by personal representatives), for the words following “if at that time” substitute “the relevant company was a qualifying company by reference to the personal representatives”; and

(b) in sub-paragraph (5) (disposal by legatee), for paragraph (b) substitute—

“(b) the relevant company was a qualifying company by reference to the personal representatives.”.

(3) In paragraph 5 (conditions for other assets to qualify as business assets)—

(a) in sub-paragraph (2) (disposal by individual), for paragraphs (d) and (e) substitute—

“(d) the purposes of any office or employment held by that individual with a person carrying on a trade.”;

and

(b) in sub-paragraph (3) (disposal by trustees of settlement), for paragraphs (e) and (f) substitute—

“(e) the purposes of any office or employment held by an eligible beneficiary with a person carrying on a trade.”.

(4) For paragraph 6 (companies which are qualifying companies) substitute—

“6 (1) A company shall be taken to have been a qualifying company by reference to an individual at any time when—

(a) the company was a trading company or the holding company of a trading group, and

(b) one or more of the following conditions was met—

(i) the company was unlisted,

(ii) the individual was an officer or employee of the company, or of a company having a relevant connection with it, or

(iii) the voting rights in the company were exercisable, as to not less than 5%, by the individual.

(2) A company shall be taken to have been a qualifying company by reference to the trustees of a settlement at any time when—

(a) the company was a trading company or the holding company of a trading group, and

(b) one or more of the following conditions was met—

(i) the company was unlisted,

(ii) an eligible beneficiary was an officer or employee of the company, or of a company having a relevant connection with it, or

(iii) the voting rights in the company were exercisable, as to not less than 5%, by the trustees.

(3) A company shall be taken to have been a qualifying company by reference to an individual’s personal representatives at any time when—

(a) the company was a trading company or the holding company of a trading group, and

(b) one or more of the following conditions was met—

(i) the company was unlisted, or

(ii) the voting rights in the company were exercisable, as to not less than 5%, by the personal representatives.”.

(5) In paragraph 22(1) (interpretation), at the appropriate place insert—

““unlisted company” means a company—

(a) none of whose shares is listed on a recognised stock exchange, and

(b) which is not a 51 per cent subsidiary of a company whose shares, or any class of whose shares, is so listed;”;

and omit the definitions of “full-time working officer or employee” and “qualifying office or employment”.

(6) After paragraph 22 insert—

“Qualifying shareholdings in joint venture companies

23 (1) This Schedule has effect subject to the following provisions where a company (“the investing company”) has a qualifying shareholding in a joint venture company.

(2) For the purposes of this paragraph a company is a “joint venture company” if, and only if—

(a) it is a trading company or the holding company of a trading group, and

(b) 75% or more of its ordinary share capital (in aggregate) is held by not more than five companies.

For the purposes of paragraph (b) above the shareholdings of members of a group of companies shall be treated as held by a single company.

(3) For the purposes of this paragraph a company has a “qualifying shareholding” in a joint venture company if—

(a) it holds more than 30% of the ordinary share capital of the joint venture company, or

(b) it is a member of a group of companies, it holds ordinary share capital of the joint venture company and the members of the group between them hold more than 30% of that share capital.

(4) For the purpose of determining whether the investing company is a trading company—

(a) any holding by it of shares in the joint venture company shall be disregarded, and

(b) it shall be treated as carrying on an appropriate proportion—

(i) of the activities of the joint venture company, or

(ii) where the joint venture company is the holding company of a trading group, of the activities of that group.

This sub-paragraph does not apply if the investing company is a holding company.

(5) For the purpose of determining whether the investing company is a holding company—

(a) any holding by it of shares in the joint venture company shall be disregarded, and

(b) it shall be treated as carrying on an appropriate proportion of the activities—

(i) of the joint venture company, or

(ii) where the joint venture company is the holding company of a trading group, of that group.

This sub-paragraph does not apply if the joint venture company is a 51 per cent subsidiary of the investing company.

(6) For the purpose of determining whether a group of companies is a trading group—

(a) every holding of shares in the joint venture company by a member of the group having a qualifying shareholding in that company shall be disregarded, and

(b) each member of the group having such a qualifying shareholding shall be treated as carrying on an appropriate proportion of the activities—

(i) of the joint venture company, or

(ii) where the joint venture company is the holding company of a trading group, of that group.

This sub-paragraph does not apply if the joint venture company is a member of the group.

(7) In sub-paragraphs (4)(b), (5)(b) and (6)(b) above “an appropriate proportion” means a proportion corresponding to the percentage of the ordinary share capital of the joint venture company held by the investing company or, as the case may be, by the group member concerned.

(8) The following shall be treated as having a relevant connection with each other—

(a) the investing company;

(b) the joint venture company;

(c) any company having a relevant connection with the investing company;

(d) any company having a relevant connection with the joint venture company by virtue of being—

(i) a 51 per cent subsidiary of that company, or

(ii) a member of the same commercial association of companies.

(9) The acquisition by the investing company of the qualifying shareholding shall not be treated as a relevant change of activity for the purposes of paragraph 11 above.

(10) For the purposes of this paragraph “ordinary share capital” has the meaning given by section 832(1) of the Taxes Act.”.

(7) This section has effect for determining whether an asset is a business asset at any time on or after 6th April 2000.

It does not affect the determination on or after that date whether an asset was a business asset at a time before that date.

Research and development

68 Meaning of “research and development”

(1) Schedule 19 to this Act (meaning of “research and development”) has effect.

In that Schedule—

Part I contains a new definition of “research and development” for the purposes of the Tax Acts, and

Part II contains consequential amendments.

(2) The amendments in Part II of that Schedule have effect—

(a) for the purposes of income tax and capital gains tax, in relation to the year 2000-01 and subsequent years of assessment, and

(b) for the purposes of corporation tax, for accounting periods ending on or after 1st April 2000.

69 Tax relief for expenditure on research and development

(1) Schedule 20 to this Act (tax relief for expenditure on research and development) has effect for accounting periods ending on or after 1st April 2000.

In that Schedule—

Part I provides for entitlement to relief,

Part II provides for the manner of giving effect to the relief, and

Part III contains supplementary provisions.

(2) Schedule 21 to this Act (which contains consequential amendments) has effect accordingly.

Capital allowances

70 First year allowances for small or medium-sized enterprises

(1) In section 22(3D) of the [1990 c. 1.] Capital Allowances Act 1990 (expenditure qualifying for 40% first year allowances), for “in the period beginning with 2nd July 1998 and ending with 1st July 2000” substitute “on or after 2nd July 1998”.

(2) In that Act—

(a) in section 22(3C)(a), (3CA)(a) and (3D)(a), for “a small company or a small business” substitute “a small or medium-sized enterprise”;

(b) in section 22A—

(i) in the sidenote, for “small company or small business”,

(ii) in subsection (1) for “small company”, and

(iii) in subsection (2) for “small business”,

substitute “small or medium-sized enterprise”.

The amendments in this subsection are of nomenclature only.

71 First year allowances for ICT expenditure by small enterprises

(1) In section 22 of the Capital Allowances Act 1990 (first-year allowances), after subsection (3D) insert—

“(3E) This section applies to—

(a) any expenditure on information and communications technology which, disregarding any effect of section 83(2) on the time at which it is to be treated as incurred, is incurred by a small enterprise in the period beginning with 1st April 2000 and ending with 31st March 2003; and

(b) any additional VAT liability incurred in respect of expenditure to which this section applies by virtue of paragraph (a) above.

(3F) For the purposes of subsection (3E) above expenditure on information and communications technology means expenditure on items within any of the classes set out in subsection (3G) below.

(3G) The classes referred to in subsection (3F) above are as follows:

A. Computers and associated equipment

This class covers—

(a) computers,

(b) peripheral devices designed to be used by being connected to or inserted in a computer,

(c) equipment (including cabling) for use primarily to provide a data connection—

(i) between one computer and another, or

(ii) between a computer and a data communications network,

(d) dedicated electrical systems for computers.

For this purpose “computer” does not include computerised control or management systems or other systems that are part of a larger system whose principal function is not processing or storing information.

B. Other qualifying equipment

This class covers—

(a) wireless application protocol telephones,

(b) third generation mobile telephones,

(c) devices designed to be used by being connected to a television set that are capable of receiving and transmitting information from and to data networks, and

(d) other devices substantially similar to those within paragraphs (a), (b) and (c) that are capable of receiving and transmitting information from and to data networks.

This is subject to any order under subsection (3H) below.

C. Software

This class covers the right to use or otherwise deal with software for the purposes of any equipment within Class A or B above.

(3H) The Treasury may make provision by order—

(a) further defining the descriptions of equipment within Class B in subsection (3G), or

(b) adding further descriptions of equipment to that class.”.

(2) In sections 22(4), (6B) and (6C), 23(6), 42(9) and 50(3) and (4A) of that Act, for “and (3D)” substitute “, (3D) and (3E)”.

(3) In sections 43(5), 44(5), 46(8) and 48(7) of that Act, for “or (3D)” substitute “, (3D) or (3E)”.

(4) In section 39(2)(a) of that Act for “to (3D)” substitute “to (3E)”.

72 Expenditure of a small enterprise

After section 22A of the [1990 c. 1.] Capital Allowances Act 1990, insert—

“22AA Expenditure of a small enterprise

(1) For the purposes of section 22 capital expenditure incurred by a company is capital expenditure incurred by a small enterprise if the company—

(a) qualifies as small in relation to the financial year of the company in which the expenditure is incurred, and

(b) is not a member of a large or medium-sized group at the time when the expenditure is incurred.

(2) For the purposes of section 22, capital expenditure is capital expenditure incurred by a small enterprise if—

(a) it is incurred by a business for the purposes of a trade (the “first trade”) carried on by that business, and

(b) were the first trade carried on by a company (the “hypothetical company”) in the circumstances set out in subsection (3) below, that company would qualify as small in relation to the financial year of that company in which the expenditure would be treated as incurred.

(3) Those circumstances are—

(a) that every trade, profession or vocation carried on by the business concerned is carried on by the business as a part of the first trade,

(b) that the financial years of the hypothetical company coincide with the chargeable periods of the business concerned, and

(c) that accounts of the hypothetical company for any relevant chargeable period were prepared in accordance with the requirements of the Companies Act 1985 as if that period were a financial year of the company.

(4) Subject to subsection (5) below, a company is a member of a large or medium-sized group at the time when any expenditure is incurred if —

(a) it is at that time the parent undertaking of a group which does not qualify as small in relation to the financial year of the parent company in which that time falls; or

(b) it is at that time a subsidiary undertaking in relation to the parent undertaking of such a group.

(5) If, at the time when any expenditure is incurred by any company any arrangements exist which are such that, had effect been given to them immediately before that time, the company or a successor of the company would, at that time, have been a member of a large or medium-sized group, this section shall have effect as if the company concerned was a member of a large or medium-sized group at that time.

(6) In this section the following expressions have the same meaning as in section 22A above: “arrangements”, “business”, “company”, “financial year”, “group”, “parent undertaking” and “subsidiary undertaking”.

(7) References in this section, in relation to a company, to its qualifying as small—

(a) except in the case of a company formed and registered in Northern Ireland, are references to its so qualifying, or being treated as so qualifying, for the purposes of section 247 of the [1985 c. 6.] Companies Act 1985; and

(b) in the case of a company so formed and registered, are references to a company so qualifying, or being treated as so qualifying, for the purposes of Article 255 of the Companies (Northern Ireland) Order 1986.

(8) In relation to a company with respect to which the question arises whether it is or would be a member of a large or medium-sized group, references to a group’s qualifying as small—

(a) except in the case of a company formed and registered in Northern Ireland, are references to its so qualifying, or being treated as so qualifying, for the purposes of section 249 of the [1985 c. 6.] Companies Act 1985; and

(b) in the case of a company so formed and registered, are references to its so qualifying, or being treated as so qualifying, for the purposes of Article 257 of the Companies (Northern Ireland) Order 1986;

but for the purposes of this section each of those provisions shall be construed as if references, in relation to a group, to the parent company were references to the parent undertaking.

(9) For the purposes of this section a company is the successor of another if—

(a) it carries on a trade which, in whole or in part, the other company has ceased to carry on, and

(b) the circumstances are such that section 343 of the principal Act applies in relation to the two companies as the predecessor and the successor within the meaning of that section.”.

73 Repeal of notification requirements

(1) In section 118 of the [1994 c. 9.] Finance Act 1994 (notification requirements)—

(a) subsections (1) to (5) and (7) to (9) shall cease to have effect; and

(b) in subsection (6), for “the provisions mentioned in subsection (2) above” there shall be substituted—

“(a) section 25(1) of the Capital Allowances Act 1990 (meaning of qualifying expenditure for the purposes of writing-down allowances for expenditure on machinery or plant); and

(b) section 44(4) of the Finance Act 1971 (provision corresponding to section 25(1) applicable to earlier chargeable periods),”.

(2) This section has effect for chargeable periods as respects which the period specified in subsection (3A) of that section ends on or after 1st April 2000.

74 Pool for certain leased assets and inexpensive cars

(1) In section 41 of the [1990 c. 1.] Capital Allowances Act 1990 (writing-down allowances etc for leased assets and inexpensive cars)—

(a) in subsection (1), paragraphs (b) and (c) and the word “or” at the end of paragraph (a); and

(b) in subsection (4), paragraph (a) and, in paragraph (b), the words from “or within (1)(b) or (c)” to “subsection (1)(c)” and the words “or subsection (1)(b) or (c)”,

shall cease to have effect for chargeable periods ending on or after the relevant date.

(2) Subsection (3) below applies where—

(a) immediately before the end of the relevant chargeable period, a person was treated for the purposes of sections 24, 25 and 26 of the [1990 c. 1.] Capital Allowances Act 1990 as having incurred expenditure on the provision of machinery or plant wholly and exclusively for the purposes of a separate trade carried on by him;

(b) the expenditure fell within subsection (1)(b) or (c) of section 41 of that Act; and

(c) qualifying expenditure in respect of the separate trade for the relevant chargeable period exceeded any disposal value brought into account in respect of that trade for that period.

(3) The balance of the excess (after the deduction of any writing-down allowances made by reference to it) shall be treated for the purposes of sections 24, 25 and 26 of the [1990 c. 1.] Capital Allowances Act 1990 as capital expenditure which—

(a) was incurred by that person in the relevant chargeable period on the provision of the machinery or plant for the purposes of the trade which is the actual trade for the purposes of section 41 of that Act; and

(b) does not form part of his qualifying expenditure for that period.

(4) In this section—

• “the relevant chargeable period” means the chargeable period immediately preceding that which begins on or before and ends on or after the relevant date;

• “the relevant date” means, subject to subsection (5) below, 6th April 2000 for the purposes of income tax and 1st April 2000 for the purposes of corporation tax.

(5) A person may, by a notice given to an officer of the Board, elect that this section shall have effect in relation to any trade carried on by him as if the relevant date were 6th April 2001 or, as the case may be, 1st April 2001.

75 Machinery and plant allowances for non-residents etc

(1) In section 83 of the [1990 c. 1.] Capital Allowances Act 1990 (interpretation of Part II), after subsection (2) there shall be inserted—

“(2A) In this Part (except in Chapter V and sections 64A and 75 to 78), references—

(a) to a trade, or

(b) to activities falling in accordance with section 28A, 29 or 61 to be treated as a trade,

shall be construed as if activities were capable of being comprised in a trade, or of being treated as a trade, to the extent only that they are activities the profits or gains from which are, or (if there were any) would be, chargeable to income tax or corporation tax.”.

(2) After section 79 of that Act there shall be inserted—

“79A Reduction in qualifying use

(1) This section applies where—

(a) any expenditure falls, for the purposes of making allowances or charges, to be treated in accordance with section 79 as incurred on the provision of machinery or plant for the purposes of a notional trade;

(b) there is such a change of circumstances as would make it appropriate for any reduction falling to be made under subsection (5) of that section—

(i) for the chargeable period in which the change takes place (“the relevant chargeable period”), or

(ii) for any subsequent chargeable period,

to represent a larger proportion of the amount reduced than would have been appropriate apart from the change;

(c) no disposal value in respect of the machinery or plant would, apart from this section, fall to be brought into account for the relevant chargeable period; and

(d) the open market value of the machinery or plant at the end of the relevant chargeable period exceeds the qualifying expenditure in respect of the notional trade for that period by more than £1 million.

(2) It shall be assumed that the notional trade is permanently discontinued immediately before the end of the relevant chargeable period.

(3) Section 79(3) shall have effect as if immediately after the beginning of the following chargeable period expenditure had been incurred on the provision of the machinery or plant of an amount equal to the disposal value brought into account by virtue of subsection (2) above.

(4) In this section “open market value” has the same meaning as in section 76.”.

(3) In section 81 of that Act (effect of bringing an asset into use for the purposes of a trade after it has been used for a purpose that does not attract capital allowances), after subsection (2) there shall be inserted—

“(2AA) Where—

(a) a person is treated by virtue of subsection (1)(a) above as having incurred capital expenditure on the provision of machinery or plant, and

(b) the sum which (apart from this subsection) would be taken to be the amount of that expenditure is more than the amount of capital expenditure actually incurred by that person on the provision of the machinery or plant,

the amount of the capital expenditure treated by virtue of subsection (1)(a) above as incurred on the provision of the machinery or plant shall be deemed (subject to subsection (2AB) below) to be equal to the amount actually so incurred by that person.

(2AB) Where any of the amount of capital expenditure actually incurred on the provision of the machinery or plant by the person in question would have fallen by virtue of section 75, 76 or 76A to be disregarded for the purposes of sections 24, 25 and 26 had it been in consequence of that expenditure that the machinery or plant was provided for the purposes of a trade, the references in subsection (2AA) above to that amount shall be construed as references to only so much of that expenditure as would not have fallen to be so disregarded.”.

(4) In Schedule 19AC to the Taxes Act 1988 (overseas life insurance companies), in paragraph 10B (modifications of section 440), after sub-paragraph (2) there shall be inserted—

“(2A) The following subsection shall be treated as inserted after subsection (4)—

Section 81 of the 1990 Act (as it has effect by virtue of section 83(2A) of that Act) shall apply in relation to any case in which an asset or part of an asset held by an overseas life insurance company—

(a) ceases to be within the category set out in paragraph (h) of subsection (4) above; and

(b) at the same time comes within another of the categories set out in that subsection.”.”.

(5) In section 53 of the [1990 c. 1.] Capital Allowances Act 1990—

(a) in subsection (1), paragraph (bb) (which, for the purposes of making allowances in respect of machinery or plant subject to equipment leasing, requires the equipment lessee to be within the charge to tax) shall cease to have effect; and

(b) in subsection (1B)(b), for “paragraphs (bb) and” there shall be substituted “paragraph”.

(6) In this section—

(a) subsections (1), (4) and (5) have effect for chargeable periods ending on or after 21st March 2000;

(b) subsection (2) has effect where the change of circumstances occurs on or after that date; and

(c) subsection (3) has effect where the condition mentioned in section 81(1)(a) of that Act is fulfilled on or after that date.

76 Production animals

(1) Section 82 of the [1990 c. 1.] Capital Allowances Act 1990 (capital expenditure to which Part II does not apply) shall be renumbered as subsection (1) of that section; and after that provision as so renumbered there shall be inserted—

“(2) This Part shall not apply to capital expenditure—

(a) on animals or other creatures to which Schedule 5 to the principal Act (treatment of farm animals etc for purposes of Case I of Schedule D) applies; or

(b) on shares in such animals or creatures.”.

(2) In paragraph 9(4) of Schedule 5 to the Taxes Act 1988 (treatment of farm animals etc for purposes of Case I of Schedule D), for the words from “in relation to animals” to the end there shall be substituted—

“(a) in relation to animals or other creatures kept singly as they apply in relation to herds; and

(b) in relation to shares in animals or other creatures as they apply in relation to animals or other creatures themselves.”.

(3) The enactments amended by subsections (1) and (2) above shall be deemed always to have had effect with the amendments made by those subsections.

77 Sale and leaseback

(1) After section 76A of the [1990 c. 1.] Capital Allowances Act 1990 insert—

“76B Special provision for sale and leaseback cases

(1) This section applies where—

(a) subsection (1), (2) or (3) of section 75 applies by virtue of paragraph (b) (and not by virtue of paragraph (a) or (c)) of that subsection, or is treated (under one or both of sections 76(1) and 76A(1)) as so applying;

(b) the conditions set out in subsection (2) below are fulfilled; and

(c) the seller and the buyer elect that this section should apply.

(2) The conditions are—

(a) that the seller incurred capital expenditure on the provision of the machinery or plant;

(b) that the machinery or plant was new at or after the time when it was acquired by the seller;

(c) that the machinery or plant was acquired by the seller otherwise than as a result of a transaction to which section 75(1), (2) or (3) applies, or is treated (under one or both of sections 76(1) and 76A(1)) as applying;

(d) that the sale is effected not more than four months after the first occasion on which the machinery or plant is brought into use by any person for any purpose;

(e) that the seller has not—

(i) made a claim for an allowance in respect of capital expenditure incurred on the provision of the machinery or plant;

(ii) made a return in which such expenditure is taken into account in determining his qualifying expenditure for the purposes of section 24; or

(iii) given notice of any such amendment of a return as provides for such expenditure to be so taken into account.

(3) In a case where this section applies—

(a) no allowance shall be made to the seller under this Act in respect of the capital expenditure incurred on the provision of the machinery or plant, or any additional VAT liability incurred in respect of it;

(b) the whole amount of that expenditure, and any such liability, shall be left out of account in determining the amount for any period of the seller’s qualifying expenditure under section 25;

(c) section 76(2) shall have effect as if paragraph (a) were omitted; and

(d) section 76A shall have effect as if subsection (5) were omitted.

(4) An election under this section shall be made by notice to an officer of the Board not more than two years after the time of the sale.

(5) An election under this section shall be irrevocable once made; and nothing in—

(a) section 42 of, or Schedule 1A to, the [1970 c. 9.] Taxes Management Act 1970 (claims and elections for income tax purposes); or

(b) paragraphs 54 to 60 of Schedule 18 to the [1988 c. 36.] Finance Act 1998 (claims and elections for corporation tax purposes),

shall apply to such an election.

(6) In this section, in a case where section 75(2) applies or is treated as applying, “the seller” means the owner of the machinery or plant, “the buyer” means the person entering into the contract and “the sale” means the making of the contract.

(7) In this section, in a case where section 75(3) applies or is treated as applying—

(a) “the seller” means the assignor, “the buyer” means the assignee and “the sale” means the assignment; and

(b) references to the machinery or plant being acquired by the seller shall be construed as references to the contract being entered into by the assignor.

(8) In this section “return” means any return required to be made under the [1970 c. 9.] Taxes Management Act 1970 for income tax or corporation tax purposes.”.

(2) In subsections (1), (2) and (3) of section 75 of that Act, after “76A” there shall be inserted “, 76B”.

78 Meaning of “fixture”

(1) Section 51 of the [1990 c. 1.] Capital Allowances Act 1990 (application and interpretation of Chapter VI: plant and machinery: fixtures) is amended as follows.

(2) In subsection (1) for the words from the beginning to “other land” substitute—

“(1) This Chapter applies to determine entitlement to allowances under this Part in respect of expenditure on the provision of machinery or plant that is, or becomes, a fixture;”.

(3) In subsection (2) (definitions), for the definition of “fixture” substitute—

““fixture”, subject to subsection (2A) below, means machinery or plant that is so installed or otherwise fixed in or to a building or other description of land as to become, in law, part of that building or other land;”.

(4) After subsection (2), insert—

“(2A) In this Chapter—

• “fixture” includes any boiler, or water-filled radiator, installed in a building as part of a space or water heating system; and

• “relevant land”, in relation to such a fixture, means the building in which it is so installed.”.

(5) For subsection (8) substitute—

“(8) Nothing in this Chapter affects the entitlement of any person to an allowance by virtue of section 154 (allowances in respect of contributions to capital expenditure).”.

(6) The amendments in this section shall be deemed always to have had effect.

79 Leased assets under the Affordable Warmth Programme

(1) In section 53 of the [1990 c. 1.] Capital Allowances Act 1990 (fixtures: expenditure incurred by equipment lessor), after subsection (1C) insert—

“(1D) Where the conditions in subsection (1E) below are satisfied in any case, subsection (1) above shall have effect as if the following were omitted, that is to say—

(a) in paragraph (b), the words from “for the purposes of” to “by the equipment lessee”, and

(b) paragraphs (ba), (bb) and (d).

(1E) Those conditions are—

(a) that the machinery or plant consists of a boiler, heat exchanger, radiator or heating control that is installed in a building as part of a space or water heating system; and

(b) that the agreement for the lease is approved for the purposes of this section as entered into as part of the Affordable Warmth Programme.

(1F) The approval mentioned in subsection (1E)(b) above may be given, with the consent of the Treasury—

(a) by the Secretary of State;

(b) in the case of buildings in Scotland, by the Scottish Ministers;

(c) in the case of buildings in Wales, by the National Assembly for Wales;

(d) in the case of buildings in Northern Ireland, by the Department for Social Development in Northern Ireland.

(1G) Where any such approval is withdrawn—

(a) the approval shall be treated for the purposes of subsection (1E)(b) above as never having had effect, and

(b) all such assessments and adjustments of assessments shall be made as are necessary in consequence of the withdrawal of the approval.

(1H) Where a person who has made a return becomes aware that anything contained in the return has, after being made, become incorrect by reason of the withdrawal of any such approval, he shall, within three months of first becoming so aware, give notice to an officer of the Board of the amendments required to his return in consequence of the withdrawal of approval.”.

(2) In the second column of the table in section 98 of the [1970 c. 9.] Taxes Management Act 1970 (penalty for failure to provide information etc.), in the entry relating to requirements imposed by provisions of the [1990 c. 1.] Capital Allowances Act 1990, for “and 51(6A)” substitute “51(6A) and 53(1H)”.

(3) This section has effect in relation to expenditure incurred after the passing of this Act and before 1st January 2008.

80 Fixtures and machinery and plant on hire-purchase etc

(1) In section 60 of the [1990 c. 1.] Capital Allowances Act 1990 (machinery and plant on hire-purchase etc.), after subsection (3) insert—

“(4) This section has effect subject to section 60A below.”.

(2) After that section insert—

“60A Machinery and plant on hire-purchase etc.: fixtures

(1) Section 60 does not—

(a) apply to expenditure incurred on machinery or plant that is a fixture, or

(b) prevent Chapter VI of this Part (fixtures) applying in relation to expenditure on machinery or plant incurred under such a contract as is mentioned in subsection (1) of that section.

(2) If machinery or plant that is treated as belonging to a person under section 60 becomes a fixture, then, unless it is treated under Chapter VI of this Part as belonging to that person, it shall be treated for the purposes of this Part as ceasing to belong to him at the time when it becomes a fixture.

(3) In this section “fixture” has the same meaning as in Chapter VI of this Part.”.

(3) In section 60A of that Act (as inserted by subsection (2) above)—

(a) subsection (1) shall be deemed always to have had effect, and

(b) subsection (2) does not apply where the machinery or plant concerned became a fixture (within the meaning of that section) before the passing of this Act.

81 Production sharing contracts

(1) After section 64 of the [1990 c. 1.] Capital Allowances Act 1990 insert—

“64A Production sharing contracts

(1) Subsection (2) below applies where—

(a) a person (“the contractor”) is entitled to an interest in a contract made with, or with the authorised representative of, the government of a country or territory in which oil is or may be produced;

(b) the contract provides (among other things) that any machinery or plant of a description specified in the contract which—

(i) is provided by the contractor; and

(ii) is used for qualifying purposes under the contract,

shall (whether immediately or at some later time) be transferred to the government or representative;

(c) the contractor incurs capital expenditure on the provision of machinery or plant of a description so specified which, for the purposes of a trade of oil extraction carried on by him, is to be used for qualifying purposes under the contract;

(d) the amount of that expenditure is commensurate with the value of the contractor’s interest under the contract; and

(e) in accordance with the provision mentioned in paragraph (b) above, the machinery or plant is transferred to the government or representative.

(2) The machinery or plant shall, notwithstanding the transfer and subject to subsection (6) below, be deemed for the purposes of this Part to belong to the contractor (and not to any other person) until such time as it—

(a) ceases to belong to the government or representative; or

(b) ceases to be used, or held for use, by any person under the contract.

(3) Subsection (4) below applies where, in a case falling within subsection (1)(a) and (b) above—

(a) a person (“the participator”) acquires an interest in the contract, whether from the contractor or from another person who has acquired it (directly or indirectly) from the contractor;

(b) the participator incurs capital expenditure on the provision of machinery or plant which, for the purposes of a trade of oil extraction carried on by him, is to be used for qualifying purposes under the contract;

(c) the amount of that expenditure is commensurate with the value of the participator’s interest under the contract; and

(d) in accordance with the provision mentioned in subsection (1)(b) above, the machinery or plant is transferred to the government or representative.

(4) The machinery or plant shall, notwithstanding the transfer and subject to subsection (6) below, be deemed for the purposes of this Part to belong to the participator (and not to any other person) until such time as it—

(a) ceases to belong to the government or representative; or

(b) ceases to be used, or held for use, by any person under the contract.

(5) Subsections (6) to (9) below apply where, in a case falling within subsection (1)(a) and (b) above—

(a) a person (“the participator”) acquires an interest in the contract, whether from the contractor or from another person who has acquired it (directly or indirectly) from the contractor; and

(b) some of the expenditure incurred by the participator to acquire his interest in the contract is attributable to machinery or plant which—

(i) is deemed by subsection (2) above to belong to the contractor; or

(ii) is deemed by subsection (4) above or subsection (6) below to belong to another person (“the other participator”).

(6) The machinery or plant shall, subject to any subsequent application of this subsection, be deemed for the purposes of this Part to belong to the participator (and not to any other person) until such time as it—

(a) ceases to belong to the government or representative; or

(b) ceases to be used, or held for use, by any person under the contract.

(7) The contractor or, as the case may be, the other participator shall be deemed for the purposes of this Part to have disposed of the machinery or plant for a consideration equal to the expenditure attributable as mentioned in subsection (5)(b) above.

(8) The participator shall be deemed for the purposes of this Part to have incurred, on the provision of the machinery or plant, capital expenditure of an amount which, subject to subsection (9) below, is equal to the expenditure so attributable.

(9) There shall be disregarded for the purposes of this Part so much (if any) of the expenditure deemed to be incurred by the participator on the provision of the machinery or plant as exceeds any disposal value which falls to be brought into account by the contractor or, as the case may be, the other participator by reason of his deemed disposal of the machinery or plant.

(10) In determining for the purposes of this Part the expenditure which is attributable as mentioned in subsection (5)(b) above, regard shall be had to what is just and reasonable in all the circumstances.

(11) For the purposes of this section machinery or plant is used for qualifying purposes if it is used—

(a) to explore for, win access to or extract oil;

(b) for the initial storage or treatment of oil; or

(c) for other purposes ancillary to the extraction of oil.

(12) In this section “oil” has the same meaning as in section 196 of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992.”.

(2) In section 26(1) of the [1990 c. 1.] Capital Allowances Act 1990 (disposal value), for the word “and” at the end of paragraph (ee) there shall be substituted—

“(ef) if that event is a deemed disposal of the machinery or plant which arises solely by virtue of subsection (2), (4) or (6) of section 64A and capital compensation is received by the contractor or participator (within the meaning of that subsection), equals the amount of that compensation;

(eg) if that event is such a deemed disposal and no such compensation is so received, equals nil; and”.

(3) This section has effect where the capital expenditure—

(a) is incurred on or after 21st March 2000; or

(b) is treated as incurred by virtue of section 81(1)(a) of the [1990 c. 1.] Capital Allowances Act 1990 and the condition mentioned in that provision is fulfilled on or after that date.

Tonnage tax

82 Tonnage tax

Schedule 22 to this Act (tonnage tax) has effect.

Other relieving provisions

83 Relief for interest on loans to buy annuities

(1) In section 365(3) of the Taxes Act 1988 (loans to buy annuities)—

(a) for the words “the qualifying maximum for the year of assessment”, in the first place where they occur, there shall be substituted the words “the sum of £30,000”; and

(b) for those words, in the second place where they occur, there shall be substituted the words “that sum”.

(2) In section 353(1G) of that Act (percentage of interest eligible for relief), for the words from “the percentage” to the end there shall be substituted “23 per cent.”.

(3) In section 369(1A) of that Act (deductible percentage where interest payable under deduction of tax), for the words from “the percentage” to the end there shall be substituted “23 per cent.”.

(4) This section has effect in relation to payments of interest made on or after 6th April 2000.

84 Exemption of payments under New Deal 50plus

(1) This section applies to—

(a) the scheme under section 2(2) of the [1973 c. 50.] Employment and Training Act 1973 known as “New Deal 50plus”, and

(b) the corresponding scheme under section 1 of the [1950 c. 29 (N.I.).] Employment and Training Act (Northern Ireland) 1950.

(2) A payment to a person as a participant in the scheme by way of an employment credit or training grant under the scheme is exempt from income tax and, accordingly, shall be disregarded in computing the amount of any receipts brought into account for income tax purposes.

(3) This section applies to any such payment made on or after 25th October 1999.

85 Exemption of payments under Employment Zones programme

(1) A payment to a person as a participant in an employment zone programme is exempt from income tax and, accordingly, shall be disregarded in computing the amount of any receipts brought into account for income tax purposes.

(2) An “employment zone programme” means an employment zone programme established for an area or areas designated under section 60 of the [1999 c. 30.] Welfare Reform and Pensions Act 1999.

(3) This section applies to any such payment made on or after 6th April 2000.

86 Loan where return bears inverse relationship to results

(1) In section 209 of the Taxes Act 1988 (meaning of “distribution”), after subsection (3A) insert—

“(3B) For the purposes of subsection (2)(e)(iii) above the consideration given by the company for the use of the principal secured shall not be treated as being to any extent dependent on the results of the company’s business or any part of it by reason only of the fact that the terms of the security provide—

(a) for the consideration to be reduced in the event of the results improving, or

(b) for the consideration to be increased in the event of the results deteriorating.”.

This subsection applies to payments made on or after 21st March 2000.

(2) In Schedule 18 to the Taxes Act 1988 (group relief: equity holders and profits available for distribution), in paragraph 1(5E)—

(a) in paragraph (a), after “improving” insert “, or for the rate of interest to be increased in the event of the results of the company’s business or any part of it deteriorating”; and

(b) in paragraph (b), after “increasing” insert “, or for the rate of interest to be increased in the event of the value of any of the company’s assets diminishing”.

This subsection applies for the purposes of determining whether, at any time on or after 21st March 2000, a loan is a normal commercial loan for the purposes of paragraph 1(1)(b) of Schedule 18 to the Taxes Act 1988.

87 Tax treatment of acquisition, disposal or revaluation of certain rights

Schedule 23 to this Act has effect with respect to the treatment of amounts relating to the acquisition, disposal or revaluation of—

(a) licences granted under section 1 of the [1949 c. 54.] Wireless Telegraphy Act 1949 in accordance with regulations made under section 3 of the [1998 c. 6.] Wireless Telegraphy Act 1998 (bidding for licences),

(b) indefeasible rights to use a telecommunications cable system, or

(c) rights derived, directly or indirectly, from a right within paragraph (a) or (b).

88 Contributions to local enterprise agencies, etc

In sections 79(11) and 79A(7) of the Taxes Act 1988 (relief for contributions to local enterprise agencies, business links and similar organisations: time limits), the words “and before 1st April 2000” shall cease to have effect.

89 Waste disposal: entitlement of successor to allowances

In Chapter V of Part IV of the Taxes Act 1988 (provisions relating to the Schedule D charge: deductions), after section 91B (waste disposal: site preparation), insert—

“91BA Waste disposal: entitlement of successor to allowances

(1) This section applies where—

(a) site preparation expenditure has been incurred in relation to a waste disposal site,

(b) that expenditure was incurred by a person in the course of carrying on a trade, and

(c) on or after 21st March 2000—

(i) that person (“the predecessor”) ceases to carry on that trade, or ceases to carry it on so far as it relates to that site, and

(ii) another person (“the successor”) begins to carry on that trade, or to carry on in the course of a trade the activities formerly carried on by the predecessor in relation to that site.

(2) If the conditions specified in the following provisions of this section are met, then, for the purposes of section 91B above—

(a) the trade carried on by the successor shall be treated as the same trade as that carried on by the predecessor, and

(b) allowances shall be made to the successor (and not to the predecessor) as if everything done to or by the predecessor had been done to or by the successor.

(3) The first condition is that the whole of the site in question is transferred to the successor.

Provided the successor holds an estate or interest in the whole of the site, it need not be the same as that held by the predecessor.

(4) The second condition is that the successor, at the time he first deposits waste material at the site, holds a relevant licence in respect of the site which is then in force.

(5) Expressions used in this section have the same meaning as in section 91B.”.

Capital gains tax: gifts and trusts

90 Restriction of gifts relief

(1) In section 165(1) of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (relief for gifts of business assets), in the closing words (which list the provisions restricting relief), for “sections 166 and 167” substitute “sections 166, 167 and 169”.

(2) In section 260(1) of that Act (gifts on which inheritance tax is chargeable etc.), in the closing words (which list the provisions restricting relief), for “section 261” substitute “sections 169 and 261”.

(3) In section 165(2)(b)(i) of, and paragraph 2(2)(b)(i) of Schedule 7 to, that Act (shares or securities in respect of which gifts relief may be claimed), for “neither listed on a recognised stock exchange nor dealt in on the Unlisted Securities Market” substitute “not listed on a recognised stock exchange”.

(4) In section 165(3)(b) of that Act (disposals of shares or securities excepted from gifts relief), after “shares or securities,” insert “the transferee is a company or”.

(5) This section has effect in relation to disposals made on or after 9th November 1999.

91 Disposal of interest in settled property: deemed disposal of underlying assets

(1) After section 76 of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992, insert—

“76A Disposal of interest in settled property: deemed disposal of underlying assets

Schedule 4A to this Act has effect with respect to disposals for consideration of an interest in settled property.”.

(2) After Schedule 4 to that Act insert the Schedule 4A set out in Schedule 24 to this Act.

(3) This section applies to any disposal of an interest in settled property made, or the effective completion of which falls, on or after 21st March 2000.

Expressions used in this subsection have the same meaning as in Schedule 4A to the [1992 c. 12.] Taxation of Chargeable Gains Act 1992.

92 Transfers of value by trustees linked with trustee borrowing

(1) After section 76A of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (inserted by section 91(1) above), insert—

“76B Transfers of value by trustees linked with trustee borrowing

Schedule 4B to this Act has effect with respect to transfers of value by trustees that are, in accordance with the Schedule, treated as linked with trustee borrowing.”.

(2) After Schedule 4A to that Act (inserted by section 91(2) above), insert the Schedule 4B set out in Schedule 25 to this Act.

(3) After section 85 of that Act, insert—

“85A Transfers of value: attribution of gains to beneficiaries

Schedule 4C to this Act has effect with respect to the attribution to beneficiaries of gains accruing under Schedule 4B.”.

(4) After Schedule 4B to the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (inserted by subsection (2) above), insert the Schedule 4C set out in Part I of Schedule 26 to this Act.

The consequential amendments in Part II of Schedule 26 to this Act have effect.

(5) The provisions of this section have effect in relation to any transfer of value in relation to which the material time is on or after 21st March 2000.

The expressions “transfer of value” and “material time” have the same meaning in this subsection as in Schedule 4B to the [1992 c. 12.] Taxation of Chargeable Gains Act 1992.

93 Restriction on set-off of trust losses

(1) After section 79 of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992, insert—

“79A Restriction on set-off of trust losses

(1) This section applies to a chargeable gain accruing to the trustees of a settlement where—

(a) in computing the gain, the allowable expenditure is reduced in consequence, directly or indirectly, of a claim to gifts relief in relation to an earlier disposal to the trustees;

(b) the transferor on that earlier disposal, or any person connected with the transferor, has at any time—

(i) acquired an interest in the settled property, or

(ii) entered into an arrangement to acquire such an interest; and

(c) in connection with that acquisition or arrangement any person has at any time received, or become entitled to receive, any consideration.

(2) Where this section applies to a chargeable gain, no allowable losses accruing to the trustees (in the year in which the gain accrues or any earlier year) may be set against the gain.

This applies to the whole of the chargeable gain (and not just the element deferred as a result of the claim to gifts relief).

(3) In this section—

(a) “gifts relief” means relief under section 165 or 260; and

(b) references to losses not being allowed to be set against a chargeable gain are to the losses not being allowed as a deduction against chargeable gains to the extent that they include that gain.

(4) The references in subsection (1)(b) above to an interest in settled property have the same meaning as in Schedule 4A.”.

(2) This section applies to gains accruing on or after 21st March 2000.

94 Attribution to trustees of gains of non-resident companies

(1) After section 79A of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (inserted by section 93 above), insert—

“79B Attribution to trustees of gains of non-resident companies

(1) This section applies where trustees of a settlement are participators—

(a) in a close company, or

(b) in a company that is not resident in the United Kingdom but would be a close company if it were resident in the United Kingdom.

For this purpose “participator” has the same meaning as in section 13.

(2) Where this section applies, nothing in any double taxation relief arrangements shall be read as preventing a charge to tax arising by virtue of the attribution to the trustees under section 13, by reason of their participation in the company mentioned in subsection (1) above, of any part of a chargeable gain accruing to a company that is not resident in the United Kingdom.

(3) Where this section applies and—

(a) a chargeable gain accrues to a company that is not resident in the United Kingdom but would be a close company if it were resident in the United Kingdom, and

(b) all or part of the chargeable gain is treated under section 13(2) as accruing to a close company which is not chargeable to corporation tax in respect of the gain by reason of double taxation relief arrangements, and

(c) had the company mentioned in paragraph (b) (and any other relevant company) not been resident in the United Kingdom, all or part of the chargeable gain would have been attributed to the trustees by reason of their participation in the company mentioned in subsection (1) above,

section 13(9) shall apply as if the company mentioned in paragraph (b) above (and any other relevant company) were not resident in the United Kingdom.

(4) The references in subsection (3) above to “any other relevant company” are to any other company which if it were not resident in the United Kingdom would be a company in relation to which section 13(9) applied with the result that all or part of the chargeable gain was attributed to the trustees as mentioned in that subsection.”.

(2) This section applies where a chargeable gain accrues on or after 21st March 2000 to a company that is not resident in the United Kingdom.

95 Disposal of interest in non-resident settlement

(1) Section 85 of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (disposal of interest in non-resident settlements) is amended as follows.

(2) In subsection (2) (market value uplift for interest where trustees become non-resident) for “Subject to subsections (4) and (9) below,” substitute “Subject to subsections (4), (9) and (10) below,”.

(3) In subsection (5) (market value uplift for interest where trustees become treaty non-resident), at the beginning insert “Subject to subsection (10) below,”.

(4) After subsection (9) add—

“(10) Subsection (3) or (7) above does not apply to the disposal of an interest created by or arising under a settlement which has relevant offshore gains at the material time.

The material time is—

(a) in relation to subsection (3) above, the relevant time within the meaning of section 80;

(b) in relation to subsection (7) above, the time found under subsection (8) above.

(11) For the purposes of subsection (10) above, a settlement has relevant offshore gains at any time if, were the year of assessment to end at that time, there would be an amount of trust gains which by virtue of section 89(2) or paragraph 8(3) of Schedule 4C would be available to be treated as chargeable gains accruing to any beneficiaries of the settlement receiving capital payments in the following year of assessment.”.

(5) This section applies where the material time (within the meaning of section 85(10) of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992, inserted by subsection (4) above) falls on or after 21st March 2000.

96 Payments by trustees to non-resident companies

(1) In section 96(5) of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (capital payments by trustees to non-resident company), in the opening words (which refer to the persons by whom the company is controlled), omit “and each of them is then resident or ordinarily resident in the United Kingdom”.

(2) This section applies to payments received on or after 21st March 2000.

Groups and group relief

97 Group relief for non-resident companies etc

Schedule 27 to this Act has effect.

In that Schedule—

Part I makes amendments of Chapter IV of Part X of the Taxes Act 1988 (group relief), and

Part II contains consequential amendments.

98 Recovery of tax payable by non-resident company

(1) Schedule 28 to this Act has effect with respect to the recovery of unpaid corporation tax payable by a company not resident in the United Kingdom.

(2) The provisions of that Schedule have effect in relation to corporation tax for accounting periods ending on or after 1st April 2000.

99 Joint arrangements for claims

In paragraph 77 of Schedule 18 to the [1998 c. 36.] Finance Act 1998 (power to make provision by regulations about joint arrangements for group relief), in sub-paragraph (1)(a) (arrangements permitting claim for relief without copy of notice of consent to surrender), after “the surrendering company” insert “, provided authority for the claim being so made is given by a company which is authorised in relation to the claimant company as mentioned in paragraph (b)”.

100 Limit on amount of group relief in case of consortium claim

(1) For section 403C of the Taxes Act 1988 (special rules for consortium cases) substitute—

“403C Amount of relief in consortium cases

(1) In the case of a consortium claim the amount that may be set off against the total profits of the claimant company is limited by this section.

(2) Where the claimant company is a member of the consortium, the amount that may be set off against the total profits of that company for the overlapping period is limited to the relevant fraction of the surrenderable amount.

That fraction is whichever is the lowest in that period of the following percentages—

(a) the percentage of the ordinary share capital of the surrendering company that is beneficially owned by the claimant company;

(b) the percentage to which the claimant company is beneficially entitled of any profits available for distribution to equity holders of the surrendering company; and

(c) the percentage to which the claimant company would be beneficially entitled of any assets of the surrendering company available for distribution to its equity holders on a winding-up.

If any of those percentages have fluctuated in that period, the average percentage over the period shall be taken.

(3) Where the surrendering company is a member of the consortium, the amount that may be set off against the total profits of the claimant company for the overlapping period is limited to the relevant fraction of the claimant company’s total profits for the overlapping period.

That fraction is whichever is the lowest in that period of the following percentages—

(a) the percentage of the ordinary share capital of the claimant company that is beneficially owned by the surrendering company;

(b) the percentage to which the surrendering company is beneficially entitled of any profits available for distribution to equity holders of the claimant company; and

(c) the percentage to which the surrendering company would be beneficially entitled of any assets of the claimant company available for distribution to its equity holders on a winding-up.

If any of those percentages have fluctuated in that period, the average percentage over the period shall be taken.

(4) In any case where the claimant or surrendering company is a subsidiary of a holding company which is owned by a consortium, for the references in subsection (2) or (3) above to the claimant or surrendering company there shall be substituted references to the holding company.

(5) Expressions used in this section and in section 403A have the same meanings in this section as in that section.

(6) Schedule 18 has effect for supplementing this section.”.

(2) In section 406(6) of the Taxes Act 1988 (claims relating to losses etc. of consortium company or group member), for “accounting period in respect of which the member’s share in the consortium” substitute “overlapping period in respect of which the relevant fraction”.

(3) The following provisions shall cease to have effect—

(a) in section 402(4) of the Taxes Act 1988, the words from “if the share in the consortium” to “is nil or”; and

(b) in section 413 of that Act, subsections (8) and (9).

(4) In Schedule 18 to the Taxes Act 1988—

(a) in paragraphs 1(1), 2(1), 3(1), 4(3) and (4), 5A(3) and (4), 5C(3) and (4), 5D(3) and (4), 5E(3) and (4) and 6, for “section 413(7) to (9)” substitute “sections 403C and 413(7)”; and

(b) in paragraph 7(1)(b), for “subsection (8) of that section” substitute “section 403C”.

(5) The amendments in this section shall be deemed always to have had effect.

101 Notional transfers within groups of companies

(1) After section 171 of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 insert—

“171A Notional transfers within a group

(1) This section applies where—

(a) two companies (“A” and “B”) are members of a group of companies; and

(b) A disposes of an asset to a person who is not a member of the group (“C”).

(2) Subject to subsections (3) and (4) below, A and B may, by notice in writing to an officer of the Board, jointly elect that, for the purposes of corporation tax on chargeable gains—

(a) the asset, or any part of it, shall be deemed to have been transferred by A to B immediately before the disposal to C;

(b) section 171(1) shall be deemed to have applied to that transfer; and

(c) the disposal of the asset or part to C shall be deemed to have been made by B.

(3) No election may be made under subsection (2) above unless section 171(1) would have applied to an actual transfer of the asset or part from A to B.

(4) An election under that subsection must be made before the second anniversary of the end of the accounting period of A in which the disposal to C was made.

(5) Any payment by A to B, or by B to A, in pursuance of an agreement between them in connection with the election—

(a) shall not be taken into account in computing profits or losses of either company for corporation tax purposes, and

(b) shall not for any purposes of the Corporation Tax Acts be regarded as a distribution or a charge on income,

provided it does not exceed the amount of the chargeable gain or allowable loss that is treated, as a result of the disposal, as accruing to B.”.

(2) This section has effect in relation to disposals made on or after 1st April 2000.

102 Chargeable gains: non-resident companies and groups etc

Schedule 29 to this Act has effect.

In that Schedule—

Part I makes provision with respect to the application of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 to companies not resident in the United Kingdom and groups of companies etc,

Part II contains minor and consequential amendments, and

Part III contains transitional provisions.

International matters

103 Double taxation relief

Schedule 30 to this Act (double taxation relief) shall have effect.

104 Controlled foreign companies

Schedule 31 to this Act (which makes provision in relation to controlled foreign companies) shall have effect.

105 Corporation tax: use of currencies other than sterling

(1) For sections 92 to 95 of the [1993 c. 34.] Finance Act 1993 there shall be substituted—

“92 The basic rule: sterling to be used

(1) Where a company carries on a business, the profits or losses of the business for an accounting period shall for the purposes of corporation tax be computed and expressed in sterling; but this is subject to sec