Office of Public Sector Information
SCHEDULE 6 continued PART 1 continued
(3) For subsection (3) substitute—
“(3) Any relief under this section by way of the carrying forward of the loss shall be given as far as possible from the first subsequent assessment in respect of—
(a) any profits or gains arising from any transaction in respect of which he is assessed under Case VI of Schedule D for any year, or
(b) any qualifying income on which tax is charged under Part 9 of ITEPA 2003 for any year,
and so far as it cannot be so given, then from the next such assessment, and so on.”
(4) After subsection (5) insert—
“(6) For the purposes of subsection (1)(a)(ii) and (b)(ii) and subsection (3)(b) income is “qualifying income” if—
(a) section 583 of ITEPA 2003 applies to it and the paying scheme (see subsection (3) of that section) is a pilots' benefit fund (see section 587 of ITEPA 2003), or
(b) section 623 of ITEPA 2003 applies to it.”
55 (1) Amend section 418 (“distribution” to include certain expenses of close companies) as follows.
(2) In subsection (3)(a)—
(a) for “to which Chapter II of Part V applies” substitute “to which Part 3 of ITEPA 2003 applies (earnings and benefits etc. treated as employment income) without the exclusion in section 216 of that Act (provisions not applicable to lower-paid employment)”; and
(b) for “sections 154 to 165” substitute “Chapters 6 to 10 of Part 3 and section 223 of that Act (cars and vans, loans, shares, other benefits, and payments on account of director’s tax)”.
(3) In subsection (3)(b) for “section 145” substitute “Chapter 5 of Part 3 of ITEPA 2003”.
(4) In subsection (4) for “Chapter II of Part V” substitute “Chapters 6 to 10 of Part 3 of ITEPA 2003”.
56 In section 545(1)(a) (capital redemption policies) after “Schedule D” insert “or under Part 9 of ITEPA 2003 (pension income) because section 609, 610 or 611 applies to them (certain employment-related annuities)”.
57 In section 550(7) (relief where gain charged at a higher rate) for “, 36 or 148” substitute “or 36 of this Act or any amount which counts as employment income under section 403 of ITEPA 2003 (payments and benefits on termination of employment etc.)”.
58 In section 559(1A) (sub-contractors in the construction industry) for “chargeable to income tax under Schedule E by virtue of section 134(1)” substitute “treated as earnings from an employment by virtue of Chapter 7 of Part 2 of ITEPA 2003 (agency workers)”.
59 In section 561(6) (exceptions from section 559), for “the same meaning as in Chapter II of Part V” substitute “the meaning given by section 67 of ITEPA 2003”.
60 In section 565(2C)(a) (conditions to be satisfied by companies), for “the meaning of Chapter II of Part V” substitute “the meaning given by section 67 of ITEPA 2003”.
61 In section 566(1) (general powers to make regulations under Chapter 4) for “regulations may be made under section 203” substitute “PAYE regulations may be made”.
62 (1) Section 577 (business entertaining expenses) is amended as follows.
(2) Omit subsection (1)(b) and the word “and” preceding it.
(3) In subsection (3) omit the words from “but where-” to the end of the subsection.
63 Omit section 579(1) (statutory redundancy payments).
64 Omit section 580(3) (provisions supplementary to section 579(1)).
65 In section 580A(7)(b) (relief from tax on annual payments under certain insurance policies) for “Schedule E” substitute “Parts 3 to 7 (employment income) or Part 9 (pension income) of ITEPA 2003”.
66 (1) Amend section 585 (relief from tax on delayed remittances) as follows.
(2) In subsection (1) omit the words “, or under Case III of Schedule E,”.
(3) Omit subsection (9)(b) and the word “and” preceding it.
67 (1) Amend section 588 (training courses for employees) as follows.
(2) For subsections (1) and (2) substitute—
“(1) This section applies where a person (“the employer”) incurs retraining course expenses within the meaning of section 311 of ITEPA 2003 (exemptions: retraining courses).”
(3) For paragraphs (a) and (b) of subsection (3) substitute—
“(a) an employer incurs expenditure in paying or reimbursing retraining course expenses as mentioned in subsection (1) above; and
(b) by virtue of section 311 of ITEPA 2003, no liability to income tax arises in respect of the payment or reimbursement,”.
(4) Omit subsection (5)(a).
(5) In subsection (5)(b) for the words from “such a failure” to the end of the paragraph substitute “a failure to meet a condition of the kind mentioned in section 312(1)(b)(i) or (ii) of ITEPA 2003”.
(6) In subsection (6) for “comply with any provision of section 589(3) and (4)” substitute “meet a condition in section 312(1)(b)(i) or (ii) of ITEPA 2003”.
68 Omit section 589 (qualifying courses of training etc.).
69 (1) Section 589A (counselling services for employees) is amended as follows.
(2) For subsection (1) substitute—
“(1) This section applies where expenditure (“relevant expenditure”)—
(a) is incurred in the provision of services to a person (“the employee”) in connection with the cessation of the person’s office or employment, or
(b) is incurred in the payment or reimbursement of—
(i) fees for such provision, or
(ii) travelling expenses incurred in connection with such provision,
and (in either case) the relevant conditions are met.
(1A) In subsection (1) above “the relevant conditions” means—
(a) conditions A to D for the purposes of section 310 of ITEPA 2003 (exemptions: counselling and other outplacement services), and
(b) in the case of travel expenses, condition E for those purposes.”
(3) Omit—
(a) subsections (2) to (6), and
(b) subsection (10).
70 (1) Section 589B (qualifying counselling services etc.) is amended as follows.
(2) Omit subsections (1) to (4A).
(3) In subsection (5) omit “this section or”.
71 In section 591D (provisions supplementary to section 591C) omit subsection (6).
72 For section 592(7) (exempt approved schemes) substitute—
“(7) Any contribution paid under the scheme shall be allowed to be deducted from employment income for the year of assessment in which the contribution is paid.
A deduction under this subsection may only be made once in respect of the same contribution.”
73 In section 594(1) (exempt statutory schemes)—
(a) for the words “shall, in assessing tax under Schedule E, be allowed to be deducted as an expense incurred in” substitute “shall be allowed to be deducted from employment income for”;
(b) at the end insert—
“A deduction under this section may only be made once in respect of the same contribution.”
74 Omit sections 595 and 596 (payments by employer to retirement benefits scheme).
75 Omit sections 596A to 596C (benefits under non-approved retirement benefits schemes).
76 Omit section 597 (charge to tax: pensions).
77 In section 599A (charge to tax: payments out of surplus funds) omit subsections (5), (6) and (8).
78 Omit section 600 (charge to tax: unauthorised payments to or for employees).
79 (1) Amend section 606 (default of administrator of retirement benefits scheme) as follows.
(2) In subsection (9) after “this Chapter” insert “or Chapter 2 of Part 6 of ITEPA 2003 (benefits from non-approved pension schemes)”.
(3) In subsection (11)(b) after “this Chapter” insert “or Chapter 2 of Part 6 of ITEPA 2003 (benefits from non-approved pension schemes)”.
80 (1) Amend section 607 (marine pilots: pilots' benefit fund) as follows.
(2) In subsection (2)(a) for “597 to 600” substitute “598 to 599A”.
(3) In subsection (2)(b) for “under section 600” substitute “in accordance with section 584 of ITEPA 2003 (unauthorised payments)”.
(4) For subsection (3)(a) substitute—
“(a) in section 592—
(i) subsections (4) to (6) shall be omitted; and
(ii) for subsection (7) there shall be substituted—
“(7) Any contribution paid under the scheme by a member of the fund shall, in assessing tax under Schedule D, be allowed to be deducted as an expense.”;”.
(5) In subsection (3)(b) for “sections 597 to 606 (except sections 601 to 603)” substitute “sections 598 to 599A and sections 604 to 606”.
(6) Omit subsection (3)(b)(iv) and the word “and” preceding it.
81 In section 608 (charge to tax on annuities paid out of superannuation funds approved before 6th April 1980) omit subsection (4).
82 In section 612(1) (interpretation etc. of Chapter) in the definition of “remuneration”—
(a) in paragraph (a) for “in respect of which tax is chargeable under Schedule E and which” substitute “which is chargeable to tax as employment income and”; and
(b) in paragraph (b) for “section 148” substitute “Chapter 3 of Part 6 of ITEPA 2003 (payments and benefits on termination of employment etc.)”.
83 In section 613 (Parliamentary pension funds) omit subsections (1) to (3).
84 In section 614(3) (exemptions and reliefs in respect of income tax from investments etc. of certain pension schemes) for “paragraph (b), (c), (d) or (f) of subsection (2) of section 615” substitute “section 648, 649, 650 or 651 of ITEPA 2003”.
85 In section 615 (exemption from tax in respect of certain pensions) omit subsections (1), (2), (4), (5) and (8).
86 Omit section 616 (other overseas pensions).
87 (1) Amend section 617 (social security benefits and contributions) as follows.
(2) Omit subsections (1) and (2).
(3) For subsection (4)(d) and (e) substitute—
“(d) as a deduction under section 336 of ITEPA 2003 (deductions for expenses) from the taxable earnings from an office or employment; or
(e) as a deduction under section 332(3)(a) from the profits or fees of the profession or vocation of a minister of religion, or a deduction under section 351(1) of ITEPA 2003 from the taxable earnings from an employment as such a minister.”
88 Omit section 617A (tax credits under Part 1 of Tax Credits Act 2002 (c. 21)).
89 In section 624(2) (sponsored superannuation schemes and controlling directors) for “Case I of Schedule E in respect of his emoluments” substitute “section 15 of ITEPA 2003 in respect of his general earnings”.
90 (1) Amend section 638 (other restrictions on approval of a personal pension scheme) as follows.
(2) In subsection (7) for “emoluments” substitute “general earnings”.
(3) In subsection (11)—
(a) for “a savings-related share option scheme” substitute “an SAYE option scheme”, and
(b) for “an employee share ownership plan” substitute “a share incentive plan”.
(4) In subsection (12)—
(a) in paragraph (a), for “a savings-related share option scheme” substitute “an SAYE option scheme”, and
(b) in paragraph (b)—
(i) for “an employee share ownership plan” substitute “a share incentive plan”, and
(ii) for “employee share ownership plan”, in the second place in which it appears, substitute “share incentive plan”.
(5) In subsection (13)—
(a) omit the definition of “employee share ownership plan”, and
(b) for the definition of “savings-related share option scheme” substitute—
““SAYE option scheme” has the same meaning as in the SAYE code (see section 516 of ITEPA 2003 (approved SAYE option schemes)), and
“share incentive plan” has the same meaning as in the SIP code (see section 488 of that Act (approved share incentive plans)).”
91 (1) Section 643 (employer’s contributions and personal pension income etc.) is amended as follows.
(2) Omit subsection (1).
(3) In subsection (5) omit “shall be assessable to tax under Schedule E (and section 203 shall apply accordingly) and”.
92 (1) Amend section 644 (meaning of “relevant earnings”) as follows.
(2) In subsection (2)(a) for “emoluments chargeable under Schedule E” substitute “general earnings”.
(3) In subsection (2)(b) for “emoluments of” substitute “earnings from”.
(4) In subsection (3) for “emoluments”, in both places where it occurs, substitute “general earnings”.
(5) In subsection (4)(a) for “Schedule E” substitute “ITEPA 2003”.
(6) In subsection (4)(b) for “section 148” substitute “Chapter 3 of Part 6 of ITEPA 2003 (payments and benefits on termination of employment etc.)”.
(7) In each of the following provisions for “emoluments” substitute “general earnings”—
(a) subsection (5);
(b) subsection (6A);
(c) subsection (6D)(c);
(d) subsection (6E)(d).
93 (1) Amend section 645 (earnings from pensionable employment) as follows.
(2) In subsection (3)(c) for “section 596(1)(a), (b) or (c)” substitute “section 387(2) of ITEPA 2003 (meaning of non-approved retirement benefits scheme)”.
(3) In subsection (4A)—
(a) for “emoluments” substitute “earnings”;
(b) for “foreign emoluments within the meaning of section 192” substitute “earnings and amounts treated as earnings to which subsection (4B) applies”;
(c) for “section 596(1)(a), (b) or (c)” substitute “section 387(2) of ITEPA 2003 (meaning of non-approved retirement benefits scheme)”.
(4) After subsection (4A) insert—
“(4B) This subsection applies to earnings and amounts treated as earnings for a year of assessment if—
(a) the employee or office-holder is not domiciled in the United Kingdom in that year, and
(b) the employment is with a foreign employer.
(4C) If there is a dispute as to whether the employee or office-holder is not domiciled in the United Kingdom, sections 42 and 43 of ITEPA 2003 (Board to determine dispute as to domicile) apply to the dispute as they apply to a dispute mentioned in section 42(1) of that Act.
(4D) In this section—
“earnings and amounts treated as earnings” means earnings and amounts treated as earnings which constitute employment income (see section 7(2)(a) or (b) of ITEPA 2003);
“foreign employer” has the meaning given by section 721 of ITEPA 2003.”
94 In section 646(2) (meaning of “net relevant earnings”) for paragraph (b) substitute—
“(b) deductions made by virtue of section 232, 336, 343, 344 or 351 of ITEPA 2003 (mileage allowance, expenses, professional membership fees, annual subscriptions, ministers of religion);
(ba) travelling or subsistence expenses deducted by virtue of Part 5 of that Act;
(bb) deductions made by virtue of section 332(3) of this Act;”.
95 (1) Amend section 646A (earnings from associated employments) as follows.
(2) In subsection (2) for “emoluments” substitute “general earnings”.
(3) In subsection (3) for “emoluments” substitute “general earnings”.
96 Omit sections 647 to 648A (personal pensions: unauthorised payments, contributions under unapproved arrangements and annuities).
97 In section 657(2)(f)(i) (purchased life annuities to which section 656 applies) for “section 596(1)” substitute “section 387(2) of ITEPA 2003 (meaning of non-approved retirement benefits scheme)”.
98 In section 658A(1) (charges and assessments on administrators) after “this Part” insert “or under section 394(2) of ITEPA 2003 (benefits from non-approved pension schemes)”.
99 (1) Amend section 659B (definition of insurance company) as follows.
(2) For subsection (9)(a) substitute—
“(a) any duty to pay under PAYE regulations tax charged under Part 9 of ITEPA 2003 (pension income) because section 580 of that Act applies (approved retirement benefits schemes: pensions and annuities);”.
(3) In subsection (9)(c) after “section 605” insert “of this Act or section 589 of ITEPA 2003”.
(4) For subsection (9)(d) substitute—
“(d) any duty to pay under PAYE regulations tax charged under Part 9 of ITEPA 2003 (pension income) because section 595 of that Act applies (approved personal pension schemes: annuities).”
100 After section 686A insert—
(1) This section applies to income of the trustees of an approved share incentive plan consisting of dividends or other distributions in respect of shares held by them 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.
(2) Income to which this section applies is income to which section 686 applies only if and when—
(a) the period applicable to the shares under the following provisions of this section comes to an end without the shares being awarded to a participant in accordance with the plan, or
(b) if earlier, the shares are disposed of by the trustees.
(3) 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 period applicable to the shares is the period of two years beginning with the date on which the shares were acquired by the trustees.
This is subject to subsection (5).
(4) 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 period applicable to the shares 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 subsection (5).
(5) If the shares are acquired by the trustees by virtue of a payment in respect of which a deduction is allowed under paragraph 9 of Schedule 4AA (deduction for contribution to plan trust), the period applicable to the shares is the period of ten years beginning with the date of acquisition.
(6) For the purposes of determining whether shares are awarded to a participant within the period applicable under the above provisions, shares acquired by the trustees at an earlier time are taken to be awarded to a participant before shares of the same class acquired by the trustees at a later time.
(7) For the purposes of this section shares which are subject to provision for forfeiture are treated as acquired by the trustees if and when the forfeiture occurs.
(8) In relation to shares acquired by the trustees before 11th May 2001 this section has effect with the substitution—
(a) in subsection (3), of “Subject to subsection (4)” for the words before “the period applicable”, and
(b) in subsection (4)(b), of “the shares in question” for “any of the shares in that company”.
(1) Section 686B and this section form part of the SIP code (see section 488 of ITEPA 2003 (approved share incentive plans)).
(2) Accordingly, expressions used in section 686B or this section and contained in the index at the end of Schedule 2 to that Act (approved share incentive plans) have the meaning indicated by that index.
(3) References in section 686B to shares being awarded to a participant include references to the shares being acquired on behalf of the participant as dividend shares.
(4) In section 686B, “readily convertible assets” has the meaning given by sections 701 and 702 of ITEPA 2003, but this is subject to subsection (5).
(5) In determining for the purposes of section 686B whether shares are readily convertible assets, any market for the shares that—
(a) is created by virtue of the trustees acquiring shares for the purposes of the plan, and
(b) exists solely for the purposes of the plan,
shall be disregarded.”
101 In section 779(13)(e) (sale and lease-back: limitation on tax reliefs), for “a deduction from emoluments to be assessed under Schedule E made in pursuance of section 198(1)” substitute “a deduction from earnings allowed under section 336 of ITEPA 2003 (expenses)”.
102 In section 781(4)(d) (assets leased to traders and others), for “a deduction from emoluments to be assessed under Schedule E made in pursuance of section 198(1)” substitute “a deduction from earnings allowed under section 336 of ITEPA 2003 (expenses)”.
103 In section 794(2)(b) (requirements as to residence) for “income tax chargeable under Schedule E” substitute “income tax on employment income”.
104 In section 824(4A) (repayment supplement: individuals and others) for “section 203” substitute “PAYE regulations”.
105 (1) Amend section 828 (orders and regulations made by the Treasury or the Board) as follows.
(2) In subsection (1), for “subsection (2)” substitute “subsections (2) and (5)”.
(3) In subsection (3), for “subsection (4)” substitute “subsections (4) and (5)”.
(4) At the end add—
“(5) Nothing in this section applies in relation to any of the following (in relation to which section 717 of ITEPA 2003 applies)—
(a) any power of the Treasury or the Board to make any order or regulations under ITEPA 2003;
(b) any statutory instrument containing any order or regulations made by the Treasury or the Board under that Act.”
106 In section 830 (territorial sea and designated areas) omit subsection (5).
107 In section 831(3) (interpretation of ICTA) before the entry relating to “the Management Act” insert—
““ITEPA 2003” means the Income Tax (Earnings and Pensions) Act 2003;”.
108 (1) Amend section 833 (interpretation of Income Tax Acts) as follows.
(2) For subsection (3)(a) substitute—
“(a) any payment or other benefit charged to tax under Chapter 3 of Part 6 of ITEPA 2003 (payments and other benefits on termination of employment);”.
(3) For subsection (4)(a) and (b) substitute—
“(a) any income charged to tax under ITEPA 2003 except—
(i) payments that meet the conditions in section 623 of that Act (return of surplus employee additional voluntary contributions); and
(ii) jobseeker’s allowance (to which Chapter 3 of Part 10 of that Act applies);
(b) any income from any property which is attached to or forms part of the general earnings from any employment;”.
(4) For paragraphs (a) to (e) of subsection (5) substitute “income which is earned income by virtue of section 529”.
109 After Schedule 4 insert—
Section 85B
1 (1) This Schedule forms part of the SIP code (see section 488 of ITEPA 2003 (approved share incentive plans)).
(2) Accordingly, expressions used in 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 that index.
(3) References in this Schedule to deductions are to deductions by a company in calculating for the purposes of corporation tax the profits of a trade carried on by it.
(4) Sub-paragraph (3) is subject to paragraph 13 (application of provisions to expenses of management of investment companies etc.).
2 (1) Where, under an approved share incentive plan, shares are awarded to employees as free or matching shares by reason of their employment with a company, a deduction is allowed under this paragraph to that company.
(2) Any such deduction—
(a) is of an amount equal to the market value of the shares at the time they are acquired by the trustees, and
(b) must be made for the period of account in which the shares are awarded to employees in accordance with the plan.
Income Tax (Earnings and Pensions) Act 2003