Social Security Administration Act 1992 (c. 5)

186 The Social Security Administration Act 1992 is amended as follows.

187 (1) Amend section 139(11) (definitions used in provisions relating to arrangements for council tax benefit) as follows.

(2) In paragraph (b) of the definition of “war disablement pension” for “subsection (1) of section 315 of the Income and Corporation Taxes Act 1988” substitute “any of paragraphs (a) to (f) of section 641(1) of the Income Tax (Earnings and Pensions) Act 2003”.

(3) In the definition of “war widow’s pension” for “section 315(2)(e) of the Income and Corporation Taxes Act 1988” substitute “section 641(1)(e) or (f) of the Income Tax (Earnings and Pensions) Act 2003”.

188 (1) Amend section 159B(6) (effect of alterations affecting state pension credit) as follows.

(2) In paragraph (b) of the definition of “war disablement pension” for “subsection (1) of section 315 of the Income and Corporation Taxes Act 1988 (c. 1)” substitute “any of paragraphs (a) to (f) of section 641(1) of the Income Tax (Earnings and Pensions) Act 2003”.

(3) In paragraph (b) of the definition of “war widow’s or widower’s pension” for “section 315(2)(e) of the Income and Corporation Taxes Act 1988” substitute “section 641(1)(e) or (f) of the Income Tax (Earnings and Pensions) Act 2003”.

189 (1) Amend section 162(5) (destination of national insurance contributions) as follows.

(2) In paragraph (c) for “emoluments” substitute “general earnings”.

(3) In paragraph (ca) for “emoluments” substitute “general earnings”.

Social Security Contributions and Benefits (Northern Ireland) Act 1992 (c. 7)

190 The Social Security Contributions and Benefits (Northern Ireland) Act 1992 is amended as follows.

191 In section 1 (outline of contributory system), in subsection (2)(bb) for “emoluments” substitute “general earnings”.

192 In section 2 (categories of earners), in subsection (1)(a) for “emoluments chargeable to income tax under Schedule E” substitute “general earnings”.

193 (1) Amend section 4 (payments treated as remuneration and earnings) as follows.

(2) For subsection (4)(a) substitute—

“(a) the amount of any gain calculated under section 479 or 480 of ITEPA 2003 in respect of which an amount counts as employment income of the earner under section 476 or 477 of that Act (charge on exercise, assignment or release of share option);”.

(3) In subsection (4)(b) for “section 313 of the 1988 Act” substitute “section 225 or 226 of ITEPA 2003”.

(4) In subsection (6)(a) for “Schedule E” substitute “the employment income Parts of ITEPA 2003”.

194 In section 7(1)(b) (meaning of “secondary contributor”) for “emoluments” in both places where it occurs substitute “general earnings”.

195 (1) Amend section 10 (Class 1A National Insurance contributions: benefits in kind etc.) as follows.

(2) For subsection (1)(a) substitute—

“(a) for any tax year an earner is chargeable to income tax under ITEPA 2003 on an amount of general earnings received by him from any employment (“the relevant employment”),”.

(3) For subsection (1)(b) substitute—

“(b) the relevant employment is both—

(i) employed earner’s employment, and

(ii) an employment, other than an excluded employment, for the purposes of the benefits code (see Chapter 2 of Part 3 of ITEPA 2003),”.

(4) In subsection (1)(c) for “emolument” substitute “general earnings”.

(5) In subsection (1), in the words after paragraph (c) for “emolument” substitute “general earnings”.

(6) In subsection (2)(b) for “emolument” substitute “general earnings”.

(7) In subsection (4)—

(a) for “emolument” substitute “general earnings”;

(b) for “it” substitute “them”.

(8) In subsection (6) for “emolument” substitute “general earnings”.

(9) For subsection (7) substitute—

“(7) In calculating for the purposes of this section the amount of general earnings received by an earner from an employment, a deduction under any of the excluded provisions is to be disregarded.

This subsection does not apply in relation to a deduction if subsection (7A) applies in relation to it.

(7A) Where—

(a) a deduction in respect of a matter is allowed under an excluded provision, and

(b) the amount deductible is at least equal to the whole of any corresponding amount which would (but for this section) fall by reference to that matter to be included in the general earnings mentioned in subsection (7),

the whole of the corresponding amount shall be treated as not included.

(7B) For the purposes of subsections (7) and (7A) “excluded provision” means—

(a) any provision of Chapter 2 of Part 5 of ITEPA 2003 (deductions for employee’s expenses) other than section 352 (limited deduction for agency fees paid by entertainers), and

(b) any provision of Chapter 5 of Part 5 of ITEPA 2003 (deductions for earnings representing benefits or reimbursed expenses).”

(10) For subsection (8)(a) substitute—

“(a) modify the effect of subsections (7) and (7A) above by amending subsection (7B) so as to include any enactment contained in the Income Tax Acts within the meaning of “excluded provision”; or”.

(11) In subsection (8)(b)—

(a) for “subsection (7)” substitute “subsections (7) to (7B)”;

(b) for “under Schedule E” substitute “on employment income”.

(12) In subsection (9)(a) for “emoluments” substitute “general earnings”.

(13) Omit subsection (10).

196 (1) Amend section 10ZA (liability of third party provider of benefits in kind) as follows.

(2) In subsection (1)(a) for “an emolument” substitute “general earnings”.

(3) Amend subsection (1)(b) as follows—

(a) for “the emolument, in so far as it is one in respect of which” substitute “the general earnings, in so far as they are ones in respect of which”;

(b) for “consists” substitute “consist”.

(4) In subsection (2), in the words after paragraph (b) for “an emolument” substitute “general earnings”.

(5) In subsection (6) for “section 168(4) of the Income and Corporation Taxes Act 1988” substitute “section 721(5) of ITEPA 2003”.

197 (1) Amend section 10ZB (non-cash vouchers provided by third parties) as follows.

(2) In subsection (2)(a) for the words from “employment” to the end of the paragraph substitute “employment which is an excluded employment for the purposes of the benefits code, and”.

(3) In subsection (2)(b) for “if that Chapter did apply to that employment” substitute “if that employment were not an excluded employment”.

(4) In subsection (2), in the words following paragraph (b) for “as if that employment were employment to which that Chapter applied” substitute “as if that employment were not an excluded employment”.

(5) In subsection (3) for “section 141 of the Income and Corporation Taxes Act 1988” substitute “section 84 of ITEPA 2003”.

198 (1) Amend section 10A (Class 1B National Insurance contributions) as follows.

(2) In subsection (1) for “emoluments” substitute “general earnings”.

(3) In subsection (2)(a) for “the emoluments included” substitute “the general earnings included”.

(4) In subsection (4) for “Emoluments are chargeable emoluments” substitute “General earnings are chargeable emoluments”.

(5) In subsection (5) for “emoluments” in both places where it occurs substitute “general earnings”.

199 (1) Amend section 121(1) (interpretation of Parts 1 to 6 and supplementary provisions) as follows.

(2) Insert the following definitions in the appropriate places—

““the benefits code” has the meaning given by section 63(1) of ITEPA 2003;”

““the employment income Parts of ITEPA 2003” means Parts 2 to 7 of that Act;”

““excluded employment” has the meaning given by section 63(4) of ITEPA 2003;”

““general earnings” has the meaning given by section 7 of ITEPA 2003 and accordingly sections 3 and 112 of this Act do not apply in relation to the word “earnings” when used in the expression “general earnings”;”

““ITEPA 2003” means the Income Tax (Earnings and Pensions) Act 2003;”.

(3) In the definition of “PAYE settlement agreement” for “section 206A of the Income and Corporation Taxes Act 1988” substitute “Chapter 5 of Part 11 of ITEPA 2003”.

200 In section 125(5)(a)(ii) (trade disputes) for “emoluments in pursuance of section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “taxable earnings (as defined by section 10 of the Income Tax (Earnings and Pensions) Act 2003) under PAYE regulations”.

201 (1) Amend section 146(2) (interpretation of Part 10) as follows.

(2) In paragraph (b) of the definition of “unemployability supplement or allowance”—

(a) in sub-paragraph (ii) for “section 315(1) of the Income and Corporation Taxes Act 1988” substitute “section 641 of the Income Tax (Earnings and Pensions) Act 2003”;

(b) omit sub-paragraph (v).

(3) In paragraph (b) of the definition of “war disablement pension”, for “subsection (1) of section 315 of the Income and Corporation Taxes Act 1988” substitute “any of paragraphs (a) to (f) of section 641(1) of the Income Tax (Earnings and Pensions) Act 2003”.

(4) In the definition of “war widow’s pension” for “subsection (2)(e) of the said section 315” substitute “section 641(1)(e) or (f) of the Income Tax (Earnings and Pensions) Act 2003”.

202 In section 159(1) (interpretation of Part 11), in paragraph (a) of the definition of “employee” for “emoluments chargeable to income tax under Schedule E” substitute “general earnings (as defined by section 7 of the Income Tax (Earnings and Pensions) Act 2003)”.

203 In section 167(1) (interpretation of Part 12), in paragraph (a) of the definition of “employee” for “emoluments chargeable to income tax under Schedule E” substitute “general earnings (as defined by section 7 of the Income Tax (Earnings and Pensions) Act 2003)”.

204 In Schedule 1 (supplementary provisions relating to contributions of Classes 1, 1A, 1B, 2 and 3)—

(a) in paragraph 6(1)(a) for “regulations under section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “PAYE regulations”;

(b) in paragraph 6(1)(b) for “regulations under that section” substitute “PAYE regulations”;

(c) in paragraph 6(7) for “regulations made under section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “PAYE regulations”;

(d) in paragraph 7(1)(a) for “regulations made by the Inland Revenue under section 203(2) or” substitute “PAYE regulations or regulations made under section”; and

(e) in paragraph 7B(1) for “regulations under section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “PAYE regulations”.

Social Security Administration (Northern Ireland) Act 1992 (c. 8)

205 (1) Section 139B(6) of the Social Security Administration (Northern Ireland) Act 1992 (effect of alterations affecting state pension credit) is amended as follows.

(2) b) of the definition of “war disablement pension” for “subsection (1) of section 315 of the Income and Corporation Taxes Act 1988 (c. 1)” substitute “any of paragraphs (a) to (f) of section 641(1) of the Income Tax (Earnings and Pensions) Act 2003”.

(3) In paragraph (b) of the definition of “war widow’s or widower’s pension” for “section 315(2)(e) of the Income and Corporation Taxes Act 1988” substitute “section 641(1)(e) or (f) of the Income Tax (Earnings and Pensions) Act 2003”.

206 In section 142(5) of that Act (destination of national insurance contributions)—

(a) in paragraph (c) for “emoluments” substitute “general earnings”;

(b) in paragraph (ca) for “emoluments” substitute “general earnings”.

Taxation of Chargeable Gains Act 1992 (c. 12)

207 The Taxation of Chargeable Gains Act 1992 is amended as follows.

208 In section 9(2) (residence, including temporary residence)—

(a) for “Section 207 of the Taxes Act” substitute “Sections 42 and 43 of ITEPA 2003”;

(b) for “it applies” substitute “they apply”; and

(c) for “that section” substitute “section 42 of that Act”.

209 In section 11(1) (visiting forces, agents-general etc.)—

(a) for “section 323(1) of the Taxes Act” substitute “section 303(1) of ITEPA 2003”; and

(b) for “subsection (2) of section 323 and subsections (4) to (8) of that section shall apply accordingly” substitute “section 303(2) to (6) of that Act and section 323(2) of the Taxes Act”.

210 (1) Amend section 120 (increased expenditure by reference to tax charged in relation to shares etc.) as follows.

(2) For subsection (1) substitute—

“(1) Subsection (1A) applies where—

(a) a person (“the employee”) has acquired shares or an interest in shares as mentioned in section 447(1) of ITEPA 2003, and

(b) an amount counts as employment income of the employee under Chapter 4 of Part 7 of that Act in respect of the shares.

(1A) On the first disposal of the shares after the acquisition occurs, the employment income amount shall be treated for the purposes of section 38(1)(a) as consideration given by the person making the disposal for the acquisition of the shares.

(1B) For the purposes of subsections (1) and (1A)—

(a) the “employment income amount” means the amount counting as employment income of the employee under that Chapter in respect of the shares, and

(b) it is immaterial whether the disposal of the shares mentioned in subsection (1A) is made by the employee or another person.”

(3) In subsection (3)—

(a) for “is chargeable to tax by virtue of section 162(5) of the Taxes Act” substitute “is treated as earnings under section 195(2) of ITEPA 2003”, and

(b) for “so chargeable” substitute “so treated as earnings”.

(4) In subsection (4)—

(a) for “chargeable to tax under section 135(1) or (6) of the Taxes Act” substitute “counting as employment income under section 476 or 477 of ITEPA 2003”, and

(b) for “so chargeable to tax” substitute “so counting as employment income”.

(5) In subsection (5A)—

(a) for “is chargeable to tax under section 140A of the Taxes Act” substitute “counts as employment income under Chapter 2 of Part 7 of ITEPA 2003”, and

(b) for “so chargeable” substitute “so counting as employment income”.

(6) In subsection (5B)—

(a) for “is chargeable to tax under section 140D of the Taxes Act” substitute “counts as employment income under Chapter 3 of Part 7 of ITEPA 2003”, and

(b) for “so chargeable” substitute “so counting as employment income”.

(7) Omit subsection (6).

(8) For subsection (7) substitute—

“(7) Each of the provisions of this section mentioned in the first column of the following table is to be construed as if it were contained in the Chapter of ITEPA 2003 specified in the corresponding entry in the second column—

and subsection (5) of this section is to be construed as one with section 138 of the Taxes Act.”

(9) After subsection (7) insert—

“(7A) In relation to events that gave rise to amounts chargeable to income tax before 6th April 2003, this section is to be read as if any reference to an amount mentioned in the first column of the following table included a reference to an amount mentioned in the corresponding entry in the second column—

(10) In subsection (8) for “section 140A of the Taxes Act” substitute “Chapter 2 of Part 7 of ITEPA 2003”.

211 (1) Amend section 149B (employee incentive schemes: conditional interests in shares) as follows.

(2) In subsection (1) for “section 140A of the Taxes Act” substitute “Chapter 2 of Part 7 of ITEPA 2003 (conditional interests in shares)”.

(3) In subsection (2) for “section 140B of the Taxes Act” substitute “section 429 of ITEPA 2003”.

(4) In subsection (4)—

(a) for “section 140A of the Taxes Act” substitute “Chapter 2 of Part 7 of ITEPA 2003”, and

(b) for “that section” substitute “that Chapter”.

212 After section 149B insert—

“149C Priority share allocations

Section 17(1) shall not apply to an acquisition of shares if section 542 or 544 of ITEPA 2003 applies in relation to it.”

213 In section 222(8D)(b) (relief on disposal of private residence), for “the same meanings as they have for the purposes of Chapter II of Part V of the Taxes Act” substitute “the meanings given by Chapter 2 of Part 3 of ITEPA 2003”.

214 In section 236A (employee share ownership plans), and in the sidenote and in the italic heading immediately before the section, for “employee share ownership” wherever it occurs substitute “share incentive”.

215 In section 238(2)(a) (approved profit sharing and share option schemes), for “is chargeable to income tax” substitute “counts as employment income (or was chargeable to income tax for the year 2002-03 or an earlier year of assessment)”.

216 After section 238 insert—

“238A Approved share schemes and share incentives

(1) Schedule 7D (approved share schemes and share incentives) shall have effect.

(2) Schedule 7D relates—

(a) in Part 1, to approved share incentive plans (SIPs) (see section 488 of ITEPA 2003),

(b) in Part 2, to approved SAYE option schemes (see section 516 of that Act),

(c) in Part 3, to approved CSOP schemes (CSOPs) (see section 521 of that Act), and

(d) in Part 4, to enterprise management incentives (see section 527 of that Act).”

217 After section 263 insert—

“263ZA Former employees: employment-related liabilities

(1) This section applies if—

(a) a deduction of the amount of one or more deductible payments may be made under section 555 of ITEPA 2003 (former employee entitled to deduction from total income in respect of liabilities related to the former employment) when computing a former employee’s total income for a tax year, and

(b) the total amount which may be deducted exceeds the total income for that year.

(2) In this section “excess relief” means the amount of the difference between—

(a) the total amount which may be deducted, and

(b) the total income.

(3) The amount of the excess relief may be treated as an allowable loss accruing to the former employee for that tax year.

This subsection applies only if the former employee makes a claim for the purpose.

(4) But no relief is available under subsection (3) in respect of any amount of the excess relief that exceeds the maximum amount.

(5) For the purposes of this section the “maximum amount”, in relation to the excess relief for a tax year, means the amount on which the former employee would be chargeable to capital gains tax for that year if the following were disregarded—

(a) any relief available under this section,

(b) any allowable losses falling to be carried forward to that year from a previous year for the purposes of section 2(2),

(c) section 3(1) (the annual exempt amount),

(d) any relief against capital gains tax under section 72 of the Finance Act 1991 (deduction of trading losses), and

(e) any relief against capital gains tax under section 90(4) of the Finance Act 1995 (relief for post-cessation expenditure).

(6) A former employee may make a claim under subsection (3) and a claim under section 555(3) of ITEPA 2003 in the same notice.”

218 In section 271 (other miscellaneous exemptions), for subsection (1)(c) substitute—

“(c) any gain accruing to a person from his acquisition and disposal of assets held by him as part of a fund—

(i) mentioned in section 614(2) of the Taxes Act,

(ii) to which section 615(3) of the Taxes Act applies, or

(iii) mentioned in section 648, 649, 650, 651 or 653 of ITEPA 2003;”.

219 (1) Amend section 288(1) (interpretation) as follows.

(2) In the entry relating to “allowable loss” for “and 16” substitute “, 16 and 263ZA”.

(3) After the entry relating to “investment trust” insert—

““ITEPA 2003” means the Income Tax (Earnings and Pensions) Act 2003;”.

220 (1) Amend Schedule 7C (relief for transfers to approved share plans) as follows.

(2) In paragraph 1(1) (introductory) for “an employee share ownership” substitute “a share incentive”.

(3) In paragraph 2 (conditions relating to the disposal)—

(a) in sub-paragraph (1) for “Schedule 8 to the Finance Act 2000” substitute “Schedule 2 to ITEPA 2003”,

(b) in sub-paragraph (2)—

(i) for “Part VIII” substitute “Part 4”,

(ii) for “used in plan” substitute “awarded”, and

(iii) for “61(a) and (c)” substitute “27(1)(a) and (c) and (2)”,

(c) in sub-paragraph (4) for “of Schedule 8 to the Finance Act 2000” substitute “given by paragraph 97 of Schedule 2 to ITEPA 2003”.

221 After Schedule 7C insert—

Section 238A

“SCHEDULE 7D Approved share schemes and share incentives

Part 1 Approved share incentive plans

Introductory

1 (1) The provisions of this Part of this Schedule apply for capital gains tax purposes in relation to an approved share incentive plan (“the plan”).

(2) This Part of this Schedule forms part of the SIP code (see section 488 of ITEPA 2003 (approved share incentive plans)).

(3) Accordingly, expressions used in this Part of this Schedule and contained in the index at the end of Schedule 2 to that Act (approved share incentive plans) have the meaning indicated by the index.

(4) In particular, for the purposes of paragraphs 5 and 7 of this Schedule “market value” has the meaning given by paragraph 92 of Schedule 2 to that Act (determination of market value); and Part 8 of this Act has effect subject to this paragraph.

Gains accruing to trustees

2 (1) Any gain accruing to the trustees is not a chargeable gain if the shares—

(a) are shares in relation to which the requirements of Part 4 of Schedule 2 to ITEPA 2003 (approved share incentive plans: types of shares that may be awarded) are met, and

(b) are awarded to employees, or acquired on their behalf as dividend shares, in accordance with the plan within the relevant period.

(2) If any of the shares in the company in question are readily convertible assets at the time the shares are acquired by the trustees, the relevant period is the period of two years beginning with the date on which the shares were acquired by the trustees.

This is subject to sub-paragraph (4).

(3) If at the time of the acquisition of the shares by the trustees none of the shares in the company in question are readily convertible assets, the relevant period is—

(a) the period of five years beginning with the date on which the shares were acquired by the trustees, or

(b) if within that period any of the shares in that company become readily convertible assets, the period of two years beginning with the date on which they did so,

whichever ends first.

This is subject to sub-paragraph (4).