Income tax shall be charged for the year 2001-02, 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%.
(1) For the year 2001-02 the amount specified in section 1(2)(aa) of the Taxes Act 1988 (the starting rate limit) shall be £1,880.
(2) Accordingly, section 1(4) of that Act (indexation), so far as it relates to the amount so specified, does not apply for that year.
(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 “£4,420” substitute “£5,200”.
(2) This section has effect for the year 2001-02 and subsequent years of assessment.
(1) After section 257AA(2) of the Taxes Act 1988 (which specifies the amount by reference to which the children’s tax credit is calculated) insert—
“(2A) For a year of assessment during the whole or part of which a qualifying baby (or more than one) is resident with the claimant, subsection (2) above has effect as if the amount specified there were increased by £5,200.”.
(2) After subsection (3) of that section (reduction of amount where claimant has income within the higher rate band) insert—
“(3A) Where subsection (2A) above applies, the reference in subsection (3) above to the amount specified in subsection (2) above is to the higher amount applicable by virtue of subsection (2A) above.”.
(3) After subsection (4) of that section (meaning of “qualifying child”) insert—
“(4A) In this section “qualifying baby”, in relation to a year of assessment, means a qualifying child born in that year.”.
(4) In section 257C(1) and (3) of the Taxes Act 1988 (indexation) for “257AA(2)” substitute “257AA(2) and (2A)”.
(5) Schedule 13B to the Taxes Act 1988 (children’s tax credit: provisions applicable where child lives with more than one adult in a year of assessment) is amended in accordance with Schedule 11 to this Act.
(6) Subsections (1) to (3) and (5) above have effect for the year 2002-03 and subsequent years of assessment.
(7) Subsection (4) above has effect for the purposes of the application of section 257AA of the Taxes Act 1988 for the year 2003-04 and subsequent years of assessment.
Corporation tax shall be charged for the financial year 2002 at the rate of 30%.
For the financial year 2001—
(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.
For the financial year 2001—
(a) the corporation tax starting rate shall be 10%, and
(b) the fraction mentioned in section 13AA(3) of the Taxes Act 1988 (marginal relief for small companies) shall be one fortieth.
(1) In Chapter 4 of Part 5 of the Taxes Act 1988 (provisions relating to the Schedule E charge: other exemptions and reliefs), after section 197AC insert—
(1) There is no charge to tax under Schedule E in respect of approved mileage allowance payments for a qualifying vehicle.
(2) Mileage allowance payments are amounts (other than passenger payments within the meaning of section 197AE(2)) paid to an employee in respect of expenses in connection with the use by him for business travel of a qualifying vehicle.
(3) Mileage allowance payments are approved only if, or to the extent that, for a tax year, the total amount of all the mileage allowance payments made to the employee for the kind of vehicle in question does not exceed the approved amount for mileage allowance payments applicable to that kind of vehicle.
(4) Subsection (1) above does not apply if—
(a) the employee is a passenger in the vehicle, or
(b) the vehicle is a company vehicle.
(1) There is no charge to tax under Schedule E in respect of approved passenger payments made to an employee for a car or van (whether or not it is a company vehicle) if—
(a) mileage allowance payments (within the meaning of section 197AD(2)) are made to the employee for the car or van, and
(b) if the car or van is made available to the employee by reason of his employment, he is chargeable to tax in respect of it under section 157 or 159AA (cars and vans made available for private use).
(2) Passenger payments are amounts paid to an employee because, while using a car or van for business travel, he carries one or more qualifying passengers in it.
“Qualifying passenger” means a passenger who is also an employee for whom the travel is business travel.
(3) Passenger payments are approved only if, or to the extent that, for a tax year, the total amount of all the passenger payments made to the employee does not exceed the approved amount for passenger payments.
(4) Section 168(6) (when cars and vans are made available by reason of employment) applies for the purposes of subsection (1)(b) above.
(1) An employee is entitled to mileage allowance relief for a tax year if the employee uses a qualifying vehicle for business travel and—
(a) no mileage allowance payments are made to him for the kind of vehicle in question for the tax year, or
(b) the total amount of all the mileage allowance payments made to him for the kind of vehicle in question for the tax year is less than the approved amount for mileage allowance payments applicable to that kind of vehicle.
(2) Subsection (1) above does not apply if—
(a) the employee is a passenger in the vehicle, or
(b) the vehicle is a company vehicle.
(3) The amount of mileage allowance relief to which an employee is entitled for a tax year is—
(a) if subsection (1)(a) above applies, the approved amount for mileage allowance payments applicable to the kind of vehicle in question;
(b) if subsection (1)(b) above applies, the difference between the total amount of all the mileage allowance payments made to the employee for the kind of vehicle in question and the approved amount for mileage allowance payments applicable to that kind of vehicle.
(4) In this section “mileage allowance payments” has the meaning given by section 197AD(2).
(1) Mileage allowance relief to which an employee is entitled for a tax year is given effect as follows.
(2) Where any emoluments of the employment fall within Case I or IIof Schedule E, the relief is allowed as a deduction from those emoluments in calculating the amount chargeable to tax for that tax year.
(3) In the case of emoluments chargeable under Case III of Schedule E for a tax year there may be deducted from those emoluments the amount of any mileage allowance relief—
(a) for that tax year, and
(b) for any earlier tax year in which the employee was resident in the United Kingdom,
which might have been deducted from the emoluments of the employment for the tax year for which the employee is entitled to the relief if those emoluments had been chargeable under Case I of Schedule E.
(4) Subsection (3) above applies only to the extent that the mileage allowance relief cannot be deducted under subsection (2) above.
(5) A deduction shall not be made twice, whether under subsection (2) or (3) above, in respect of the same mileage allowance relief.
Schedule 12AA to this Act defines terms used in sections 197AD to 197AG.”.
(2) In the Taxes Act 1988 insert as Schedule 12AA the Schedule set out in Part 1 of Schedule 12 to this Act.
(3) The consequential amendments in Part 2 of Schedule 12 to this Act have effect.
(4) This section has effect for the year 2002-03 and subsequent years of assessment.
(1) This section applies if—
(a) mileage allowance payments are made to an employee or office-holder in respect of the use of a vehicle that is not a company vehicle, or
(b) mileage allowance relief is available in respect of the use by an employee or office-holder of a vehicle.
(2) A nil liability notice in force immediately before 6th April 2002 shall cease to have effect in relation to—
(a) payments made, or
(b) benefits, facilities, non-cash vouchers, credit-tokens or cash vouchers provided,
in respect of expenses incurred in connection with the use of the vehicle by the employee or office-holder for business travel.
(3) In subsection (2) “nil liability notice” means a notice under—
(a) section 144(1) of the Taxes Act 1988 (notice of nil liability in respect of non-cash vouchers, credit-tokens or cash vouchers), or
(b) section 166(1) of that Act (notice of nil liability in respect of payments, benefits or facilities).
(4) In this section—
“business travel” has the meaning given by paragraph 2 of Schedule 12AA to the Taxes Act 1988;
“company vehicle” has the meaning given by paragraph 6 of Schedule 12AA to that Act; and
“mileage allowance payments” has the meaning given by section 197AD(2) of that Act.
(1) In Chapter 3 of Part 2 of the Capital Allowances Act 2001 (c. 2) (plant and machinery: qualifying expenditure), for section 36 (restriction on qualifying expenditure in case of employment or office) substitute—
(1) Where the qualifying activity consists of an employment or office—
(a) expenditure on the provision of a mechanically propelled road vehicle, or a cycle, is not qualifying expenditure, and
(b) other expenditure is qualifying expenditure only if the plant or machinery is necessarily provided for use in the performance of the duties of the employment or office.
(2) In this section “cycle” has the meaning given by section 192(1) of the Road Traffic Act 1988.”.
(2) Section 80 of that Act (vehicles provided for purposes of employment or office) is repealed.
(3) The above amendments apply to expenditure incurred on or after 6th April 2002.
(4) Where immediately before 6th April 2002—
(a) expenditure incurred by an employee on the provision of a mechanically propelled road vehicle, or a cycle, was qualifying expenditure for the purposes of Part 2 of the Capital Allowances Act 2001 (c. 2) , and
(b) the employee is treated for the purposes of that Part as owning an asset as a result of that expenditure having been incurred,
the employee shall be treated for the purposes of that Part of that Act as if he had ceased to own the asset at that time.
(5) In subsection (4)—
“employee” includes an office-holder; and
“cycle” has the meaning given by section 192(1) of the Road Traffic Act 1988 (c. 52).
(1) Section 197AA of the Taxes Act 1988 (works bus services: exemption from charge on benefits) is amended as follows.
(2) In subsection (1) (which confers the exemption), after “section 154 (taxable benefits: general charging provision)” insert “, or under section 157 (charge on provision of car for private use),”.
(3) In subsection (2) (meaning of works bus service), after “by means of a bus” insert “, or a minibus,”.
(4) In subsection (3) after the definition of “bus” insert—
““minibus” means a vehicle constructed or adapted for the carriage of passengers which has a seating capacity of 9 or more, but less than 12;”.
(5) In subsection (6) after “154” insert “or 157”.
(6) After subsection (8) (determination of seating capacity) insert—
“(9) In determining whether a vehicle is a minibus for the purposes of this section, no account shall be taken of seats in relation to which relevant construction and use requirements are not met.
In this subsection “construction and use requirements” has the same meaning as in Part 2 of the Road Traffic Act 1988 or, in Northern Ireland, Part III of the Road Traffic (Northern Ireland) Order 1995.”.
(7) This section has effect for the year 2002-03 and subsequent years of assessment.
The provisions relating to employee share ownership plans are amended in accordance with Schedule 13 to this Act.
Schedule 14 to this Act (which amends Schedule 14 to the Finance Act 2000 (c. 17) (enterprise management incentives)) has effect.
Schedule 15 to this Act (which makes amendments relating to the enterprise investment scheme) has effect.
(1) Schedule 16 to this Act has effect.
(2) In that Schedule—
Part 1 makes amendments relating to venture capital trusts; and
Part 2 makes amendments relating to the corporate venturing scheme.
Schedule 17 to this Act (first-year allowances in respect of expenditure on energy-saving plant and machinery) has effect—
(a) for income tax purposes, as respects allowances and charges falling to be made for chargeable periods ending on or after 6th April 2001, and
(b) for corporation tax purposes, as respects allowances and charges falling to be made for chargeable periods ending on or after 1st April 2001.
(1) Schedule 18 to this Act (fixtures provided in connection with provision of energy management services) has effect in relation to expenditure incurred on or after 1st April 2001.
(2) The Schedule has effect—
(a) for income tax purposes, as respects allowances and charges falling to be made for chargeable periods ending on or after 6th April 2001, and
(b) for corporation tax purposes, as respects allowances and charges falling to be made for chargeable periods ending on or after 1st April 2001.
Schedule 19 to this Act (capital allowances in respect of expenditure on the conversion of parts of business premises into flats) has effect in relation to expenditure incurred on or after the day on which this Act is passed.
Schedule 20 to this Act (capital allowances in respect of expenditure incurred on decommissioning offshore infrastructure) has effect.
(1) Schedule 21 (which makes minor amendments to the Capital Allowances Act 2001 (c. 2) ) has effect.
(2) The amendments made by the Schedule have effect—
(a) for income tax purposes, as respects allowances and charges falling to be made for chargeable periods ending on or after 6th April 2001, and
(b) for corporation tax purposes, as respects allowances and charges falling to be made for chargeable periods ending on or after 1st April 2001.
(1) Schedule 22 to this Act (tax relief for expenditure on land remediation) has effect for accounting periods ending on or after 1st April 2001.
(2) In that Schedule—
Part 1 provides for a deduction for certain capital expenditure in computing the profits of a Schedule A business or the profits of a trade for the purposes of Case I of Schedule D,
Part 2 provides for entitlement to relief,
Part 3 provides for the manner of giving effect to the relief,
Part 4 makes special provision for companies carrying on life assurance business, and
Part 5 contains supplementary provisions.
(3) Schedule 23 to this Act (which contains consequential amendments) has effect accordingly.
(1) In Chapter 5 of Part 4 of the Taxes Act 1988 (computational provisions relating to the Schedule D charge), before section 96 and after the cross-heading “Special provisions” insert—
Schedule 4A (which enables individuals to make an averaging claim in respect of profits derived wholly or mainly from creative works) shall have effect.
The provisions of that Schedule apply for the year 2000-01 and subsequent years of assessment (so that the first years which may be the subject of an averaging claim are 2000-01 and 2001-02).”.
(2) After Schedule 4 to that Act insert the Schedule 4A set out in Part 1 of Schedule 24 to this Act.
(3) The following provisions of the Taxes Act 1988 are repealed—
section 534 (relief for copyright payments etc.);
section 535 (relief where copyright sold after ten years or more);
section 537A (relief for payments in respect of designs);
section 538 (relief for painters, sculptors and other artists).
The repeals have effect in relation to payments actually receivable on or after 6th April 2001.
(4) Part 2 of Schedule 24 to this Act contains amendments consequential on the preceding provisions of this section.
In section 48(2)(a) of the Finance (No.2) Act 1997 (c. 58) (favourable tax treatment for certain expenditure on film production, etc. incurred before 2nd July 2002) for “2nd July 2002” substitute “2nd July 2005”.
(1) Section 577 of the Taxes Act 1988 (prohibition on deduction of expenses in providing business entertainment or gifts) is amended as follows.
(2) In subsection (8)(b) (under which gifts not amounting to more than £10 in any year are disregarded)—
(a) for “year” substitute “relevant tax period”, and
(b) for “£10” substitute “£50”.
(3) After that subsection insert—
“(8A) In subsection (8)(b) “relevant tax period” means—
(a) for the purposes of corporation tax, an accounting period;
(b) for the purposes of income tax—
(i) for a year of assessment in relation to which sections 60 to 63 apply and give a basis period, that basis period;
(ii) in any other case, a year of assessment.”.
(4) This section applies in relation to the year 2001-02 and subsequent years of assessment or, in the case of companies, in relation to accounting periods beginning on or after 1st April 2001.
(1) Section 601 of the Taxes Act 1988 (charge on payment to employer out of funds held for purposes of exempt approved scheme) is amended as follows.
(2) In subsection (2) (amount recoverable by Board from employer) for “40 per cent. of the payment” substitute “the relevant percentage of the payment”.
(3) After that subsection insert—
“(2A) The relevant percentage is 35% or such other percentage (whether higher or lower) as may be prescribed.”.
(4) This section applies to payments made to employers after the passing of this Act.
(1) For section 118ZA of the Taxes Act 1988 (treatment of limited liability partnerships) substitute—
(1) For the purposes of the Tax Acts, where a limited liability partnership carries on a trade, profession or other business with a view to profit—
(a) all the activities of the partnership are treated as carried on in partnership by its members (and not by the partnership as such),
(b) anything done by, to or in relation to the partnership for the purposes of, or in connection with, any of its activities is treated as done by, to or in relation to the members as partners, and
(c) the property of the partnership is treated as held by the members as partnership property.
References in this subsection to the activities of the limited liability partnership are to anything that it does, whether or not in the course of carrying on a trade, profession or other business with a view to profit.
(2) For all purposes, except as otherwise provided, in the Tax Acts—
(a) references to a partnership include a limited liability partnership in relation to which subsection (1) above applies,
(b) references to members of a partnership include members of such a limited liability partnership,
(c) references to a company do not include such a limited liability partnership, and
(d) references to members of a company do not include members of such a limited liability partnership.
(3) Subsection (1) above continues to apply in relation to a limited liability partnership which no longer carries on any trade, profession or other business with a view to profit—
(a) if the cessation is only temporary, or
(b) during a period of winding up following a permanent cessation, provided—
(i) the winding up is not for reasons connected in whole or in part with the avoidance of tax, and
(ii) the period of winding up is not unreasonably prolonged,
but subject to subsection (4) below.
(4) Subsection (1) above ceases to apply in relation to a limited liability partnership—
(a) on the appointment of a liquidator or (if earlier) the making of a winding-up order by the court, or
(b) on the occurrence of any event under the law of a country or territory outside the United Kingdom corresponding to an event specified in paragraph (a) above.”
(2) In the Taxation of Chargeable Gains Act 1992 (c. 12), for section 59A (limited liability partnerships) substitute—
(1) Where a limited liability partnership carries on a trade or business with a view to profit—
(a) assets held by the limited liability partnership are treated for the purposes of tax in respect of chargeable gains as held by its members as partners, and
(b) any dealings by the limited liability partnership are treated for those purposes as dealings by its members in partnership (and not by the limited liability partnership as such);
and tax in respect of chargeable gains accruing to the members of the limited liability partnership on the disposal of any of its assets shall be assessed and charged on them separately.
(2) For all purposes, except as otherwise provided, in the enactments relating to tax in respect of chargeable gains—
(a) references to a partnership include a limited liability partnership in relation to which subsection (1) above applies,
(b) references to members of a partnership include members of such a limited liability partnership,
(c) references to a company do not include such a limited liability partnership, and
(d) references to members of a company do not include members of such a limited liability partnership.
(3) Subsection (1) above continues to apply in relation to a limited liability partnership which no longer carries on any trade or business with a view to profit—
(a) if the cessation is only temporary, or
(b) during a period of winding up following a permanent cessation, provided—
(i) the winding up is not for reasons connected in whole or in part with the avoidance of tax, and
(ii) the period of winding up is not unreasonably prolonged,
but subject to subsection (4) below.
(4) Subsection (1) above ceases to apply in relation to a limited liability partnership—
(a) on the appointment of a liquidator or (if earlier) the making of a winding-up order by the court, or
(b) on the occurrence of any event under the law of a country or territory outside the United Kingdom corresponding to an event specified in paragraph (a) above.
(5) Where subsection (1) above ceases to apply in relation to a limited liability partnership with the effect that tax is assessed and charged—
(a) on the limited liability partnership (as a company) in respect of chargeable gains accruing on the disposal of any of its assets, and
(b) on the members in respect of chargeable gains accruing on the disposal of any of their capital interests in the limited liability partnership,
it shall be assessed and charged on the limited liability partnership as if subsection (1) above had never applied in relation to it.
(6) Neither the commencement of the application of subsection (1) above nor the cessation of its application in relation to a limited liability partnership shall be taken as giving rise to the disposal of any assets by it or any of its members.”.
(3) In Chapter 2 of Part 5 of the Taxation of Chargeable Gains Act 1992 (c. 12) (relief for gifts of business assets), after section 169 insert—