Office of Public Sector Information
Income tax shall be charged for the year 2003-04, and for that year—
(a) the starting rate shall be 10%;
(b) the basic rate shall be 22%;
(c) the higher rate shall be 40%.
For the year 2003-04, section 1(5A) of the Taxes Act 1988 (which provides that statutory inflation-linked changes to income tax rate bands for a year of assessment do not require changes to be made to PAYE deductions or repayments until 18th May in that year) shall have effect as if “14th June” were substituted for “17th May”.
Corporation tax shall be charged for the financial year 2004 at the rate of 30%.
For the financial year 2003—
(a) the small companies' rate shall be 19%, and
(b) the fraction mentioned in section 13(2) of the Taxes Act 1988 (marginal relief for small companies) shall be 11/400ths.
For the financial year 2003—
(a) the corporation tax starting rate shall be 0%, and
(b) the fraction mentioned in section 13AA of the Taxes Act 1988 (marginal relief for small companies) shall be 19/400ths.
(1) Chapter 8 of Part 2 of the Income Tax (Earnings and Pensions) Act 2003 (c. 1) (provision of services through an intermediary) is amended as follows.
(2) In section 49(1)(a) (services to which the Chapter applies), for “for the purposes of a business carried on by another person” substitute “for another person”.
(3) In consequence of the above amendment—
(a) omit section 49(2) of that Act, and
(b) in section 56(7) of that Act—
(i) at the end of paragraph (a) insert “, and”, and
(ii) omit paragraph (c) and the word “and” preceding it.
(4) This section applies in relation to services performed or due to be performed on or after 10th April 2003.
(1) In Part 4 of the Income Tax (Earnings and Pensions) Act 2003 (c. 1) (employment income: exemptions), after section 316 insert—
(1) This section applies where an employer makes a payment to an employee in respect of reasonable additional household expenses which the employee incurs in carrying out duties of the employment at home under homeworking arrangements.
(2) No liability to income tax arises in respect of the payment.
(3) In this section, in relation to an employee—
“homeworking arrangements” means arrangements between the employee and the employer under which the employee regularly performs some or all of the duties of the employment at home; and
“household expenses” means expenses connected with the day to day running of the employee’s home.”.
(2) This section applies to payments which the employer makes on or after 6th April 2003 in respect of expenses which the employee incurs on or after that date.
(1) In section 139 of the Income Tax (Earnings and Pensions) Act 2003 (cash equivalent of the benefit of a car: calculation of the appropriate percentage for a year for cars with a CO2 emissions figure) the table in subsection (4) (which specifies the lower threshold for each year for the purposes of that calculation) is amended as follows.
(2) In the entry relating to 2004-05 and subsequent tax years omit “and subsequent tax years”.
(3) After that entry insert—
| “2005-06 and subsequent tax years | 140”. |
(4) In section 170(3) of that Act (power to provide by order for a lower threshold different from that specified in the table in section 139(4) to apply for tax years beginning on or after 6th April 2005) for “6th April 2005” substitute “6th April 2006”.
Schedule 21 to this Act (which contains amendments relating to share incentive plans, SAYE option schemes and CSOP schemes) has effect.
Schedule 22 to this Act (which makes provision about securities, and options to acquire securities, acquired by reason of employment) has effect.
Schedule 23 to this Act has effect with respect to deductions allowable for corporation tax purposes in respect of employee share acquisitions.
(1) Section 67 of the Finance Act 1989 (c. 26) (tax relief for contributions to trustees of qualifying employee share ownership trust) does not apply in relation to sums expended by a company in an accounting period of the company beginning on or after 1st January 2003.
(2) In section 69 of that Act (chargeable events)—
(a) the definitions in subsections (3AC) and (3AD) (by virtue of which certain transfers of shares by trustees of an employee share ownership trust to a SIP trust are not chargeable events) have effect in relation to 26th November 2002 as they had effect in relation to 20th March 2000;
(b) in relation to shares that are relevant shares by virtue of paragraph (a) above, subsection (3AB) (deemed order of disposal of shares) has effect as if the reference there to 21st March 2000 were to 27th November 2002; and
(c) the other provisions of that section have effect accordingly.
(3) In consequence of subsection (2), in paragraph 78(2)(b) of Schedule 2 to the Income Tax (Earnings and Pensions) Act 2003 (c. 1) (reference to section 69(3AA) of the Finance Act 1989) after “21st March 2000” insert “or, by virtue of section 142(2) of the Finance Act 2003, 27th November 2002”.
Schedule 24 to this Act (which makes provision restricting deductions for contributions by employers to third parties for the benefit of employees) has effect.
(1) In section 222(1)(c) of the Income Tax (Earnings and Pensions) Act 2003 (period within which employee must reimburse employer for amount to be accounted for to Inland Revenue in respect of income tax on notional payment), for “30 days” substitute “90 days”.
(2) This section has effect in relation to payments of income treated as made on or after 9th April 2003.
(1) In the list in subsection (2) of section 684 of the Income Tax (Earnings and Pensions) Act 2003 (c. 1) (PAYE regulations)—
(a) for item 2 substitute—
“1A. Provision—
(a) for deductions to be made, if and to the extent that the payee does not object, with a view to securing that income tax payable in respect of any income of a payee for a tax year which is not PAYE income is deducted from PAYE income of the payee paid during that year; and
(b) as to the circumstances and manner in which a payee may object to the making of deductions.
2. Provision—
(a) for repayments or deductions to be made, if and to the extent that the payee does not object, in respect of any amounts overpaid or remaining unpaid (or treated as overpaid or remaining unpaid) on account of—
(i) income tax in respect of income for a previous tax year, or
(ii) capital gains tax in respect of chargeable gains for such a year; and
(b) as to the circumstances in which repayments or deductions may be made, and the circumstances and manner in which a payee may object to the making of repayments or deductions.”;
(b) after item 4 insert —
“4A. Provision authorising the recovery from the payee rather than the payer of any amount that the Inland Revenue considers should have been deducted by the payer.”;
(c) for item 8 substitute as items 7A and 8—
“7A. Provision for excluding payments of such description as may be specified from the operation of the regulations in such circumstances as may be specified.
8. Provision for the making of decisions by the Board or the Inland Revenue as to any matter required to be decided for the purposes of the regulations and for appeals against such decisions.”.
(2) After subsection (7) of that section insert—
“(7A) Nothing in PAYE regulations may be read—
(a) as preventing the making of arrangements for the collection of tax in such manner as may be agreed by, or on behalf of, the payer and the Inland Revenue, or
(b) as requiring the payer to comply with the regulations in circumstances in which the Inland Revenue is satisfied that it is unnecessary or not appropriate for the payer to do so.
(7B) References in this section and section 685 to income tax in respect of PAYE income are references to income tax in respect of that income if reasonable assumptions are (when necessary) made about other income.
(7C) In this section and section 685—
“payer” means any person paying PAYE income and “payee” means any person in receipt of such income;
“specified” means specified in PAYE regulations.”.
(3) In subsection (2) of section 685 of that Act (tax tables), for paragraph (b) substitute—
“(b) subject to an adjustment in respect of amounts required to be deducted or repaid by PAYE regulations made under item 1A or 2 in the list in section 684(2).”.
(4) After subsection (3) of that section insert—
“(4) PAYE regulations may make provision, where it appears to the Inland Revenue that it is impracticable for a payer to deduct tax by reference to tax tables—
(a) for deductions to be made by the payer in accordance with other arrangements agreed as mentioned in section 684(7A)(a), or
(b) for the payee to be required to keep records and make payments and returns as if he were the payer.”.
(5) In section 707 of that Act (interpretation of Chapter 5 of Part 11), in the definition of “employment”, for “this section” substitute “this Chapter”.
(6) In section 710 of that Act (notional payments: accounting for tax)—
(a) in subsections (1) and (4), after “must” insert “, subject to and in accordance with PAYE regulations,”;
(b) in subsection (5)(b) and (c), for “accounted for” substitute “deducted or accounted for (or required to be deducted or accounted for)”; and
(c) in subsection (6), for “an amount which” substitute “an amount of tax which” and for “is paid by the employee” substitute “is deducted”.
(7) Substitute “PAYE regulations”—
(a) for “the said section 203” in subsection (8) of section 59A of the Taxes Management Act 1970 (c. 9) (payments on account of income tax); and
(b) for “that section” in subsection (10) of that section and subsections (2) and (8) of section 59B of that Act (payments of income tax and capital gains tax).
In section 38 of the Finance Act 2000 (c. 17) (which provides for a 10% supplement on donations under the payroll deduction scheme), in subsection (6) (which limits the provision by reference to sums withheld by employers before 6th April 2003, and requires claims for reimbursement to be made before 6th April 2004)—
(a) for “6th April 2003” substitute “6th April 2004”, and
(b) for “6th April 2004” substitute “6th April 2005”.
(1) In section 566 of the Taxes Act 1988 (construction industry scheme: powers to make regulations) after subsection (1) insert—
“(1A) Interest required to be paid by regulations under subsection (1) above shall be paid without any deduction of income tax and shall not be taken into account in computing any income, profits or losses for any tax purposes.”.
(2) In the Social Security Contributions and Benefits Act 1992 (c. 4) and the Social Security Contributions and Benefits (Northern Ireland) Act 1992 (c. 7), in paragraph 6 of Schedule 1 (power to combine collection of national insurance contributions with tax) after sub-paragraph (4A) insert—
“(4B) Interest required to be paid, by virtue of sub-paragraph (2)(a) or (b) above, by regulations under sub-paragraph (1) above shall be paid without any deduction of income tax and shall not be taken into account in computing any income, profits or losses for any tax purposes.”.
(3) In section 22 of the Teaching and Higher Education Act 1998 (c. 30) (student loans), after subsection (9) insert—
“(10) Interest required to be paid, by virtue of subsection (5)(d), by regulations under this section shall be paid without any deduction of income tax and shall not be taken into account in computing any income, profits or losses for any tax purposes.”.
(4) In Article 3 of the Education (Student Support) (Northern Ireland) Order 1998 (S.I. 1998/1760 (N.I. 14)) (student loans), after paragraph (9) insert—
“(10) Interest required to be paid, by virtue of paragraph (5)(d), by regulations under this Article shall be paid without any deduction of income tax and shall not be taken into account in computing any income, profits or losses for any tax purposes.”.
(5) In its application to the computation of income, profits or losses for an accounting period (in the case of a company) or a year of assessment (in the case of a person who is not a company), this section has effect in relation to—
(a) accounting periods ending on or after 9th April 2003, or
(b) 2003-04 and subsequent years of assessment.
(1) For the purposes of the Tax Acts a company has a permanent establishment in a territory if, and only if—
(a) it has a fixed place of business there through which the business of the company is wholly or partly carried on, or
(b) an agent acting on behalf of the company has and habitually exercises there authority to do business on behalf of the company.
This general definition is subject to the following provisions.
(2) For this purpose a “fixed place of business” includes (without prejudice to the generality of that expression)—
(a) a place of management;
(b) a branch;
(c) an office;
(d) a factory;
(e) a workshop;
(f) an installation or structure for the exploration of natural resources;
(g) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources;
(h) a building site or construction or installation project.
(3) A company is not regarded as having a permanent establishment in a territory by reason of the fact that it carries on business there through an agent of independent status acting in the ordinary course of his business.
(4) A company is not regarded as having a permanent establishment in a territory by reason of the fact that—
(a) a fixed place of business is maintained there for the purpose of carrying on activities for the company, or
(b) an agent carries on activities there for and on behalf of the company,
if, in relation to the business of the company as a whole, the activities carried on are only of a preparatory or auxiliary character.
(5) For this purpose “activities of a preparatory or auxiliary character” include (without prejudice to the generality of that expression)—
(a) the use of facilities for the purpose of storage, display or delivery of goods or merchandise belonging to the company;
(b) the maintenance of a stock of goods or merchandise belonging to the company for the purpose of storage, display or delivery;
(c) the maintenance of a stock of goods or merchandise belonging to the company for the purpose of processing by another person;
(d) purchasing goods or merchandise, or collecting information, for the company.
(6) In section 832(1) of the Taxes Act 1988 (interpretation of the Tax Acts), at the appropriate place insert—
““permanent establishment”, in relation to a company, has the meaning given by section 148 of the Finance Act 2003;”.
(7) In section 288(1) of the Taxation of Chargeable Gains Act 1992 (c. 12) (interpretation), at the appropriate place insert—
““permanent establishment”, in relation to a company, has the meaning given by section 148 of the Finance Act 2003;”.
(1) In section 11 of the Taxes Act 1988 (corporation tax: companies not resident in the United Kingdom), for subsections (1) and (2) (basis of taxation) substitute—
“(1) A company not resident in the United Kingdom is within the charge to corporation tax if, and only if, it carries on a trade in the United Kingdom through a permanent establishment in the United Kingdom.
(2) If it does so, it is chargeable to corporation tax, subject to any exceptions provided for by the Corporation Tax Acts, on all profits, wherever arising, that are attributable to its permanent establishment in the United Kingdom.
These profits, and these only, are the company’s “chargeable profits” for the purposes of corporation tax.
(2A) The profits attributable to a permanent establishment for the purposes of corporation tax are—
(a) trading income arising directly or indirectly through or from the establishment,
(b) income from property or rights used by, or held by or for, the establishment, and
(c) chargeable gains falling within section 10B of the 1992 Act—
(i) by virtue of assets being used in or for the purposes of the trade carried on by the company through the establishment, or
(ii) by virtue of assets being used or held for the purposes of the establishment or being acquired for use by or for the purposes of the establishment.”.
(2) After that section insert—
(1) This section provides for determining for the purposes of corporation tax the amount of the profits attributable to a permanent establishment in the United Kingdom of a company that is not resident in the United Kingdom (“the non-resident company”).
(2) There shall be attributed to the permanent establishment the profits it would have made if it were a distinct and separate enterprise, engaged in the same or similar activities under the same or similar conditions, dealing wholly independently with the non-resident company.
(3) In applying subsection (2)—
(a) it shall be assumed that the permanent establishment has the same credit rating as the non-resident company, and
(b) it shall also be assumed that the permanent establishment has such equity and loan capital as it could reasonably be expected to have in the circumstances specified in that subsection.
No deduction may be made in respect of costs in excess of those that would have been incurred on those assumptions.
(4) There shall be allowed as deductions any allowable expenses incurred for the purposes of the permanent establishment, including executive and general administrative expenses so incurred, whether in the United Kingdom or elsewhere.
“Allowable expenses” means expenses of a kind in respect of which a deduction would be allowed for corporation tax purposes if incurred by a company resident in the United Kingdom.
(5) The Board may by regulations make provision as to the application of subsection (2) in relation to insurance companies.
The regulations may, in particular, make provision in place of subsection (3)(b) as to the basis on which, in the case of insurance companies, capital is to be attributed to a permanent establishment in the United Kingdom.
In this subsection “insurance company” has the meaning given by section 431(2).
(6) Schedule A1 to this Act contains provisions supplementing the provisions of this section.”.
(3) At the beginning of the Schedules to the Taxes Act 1988 insert as Schedule A1 the Schedule set out in Schedule 25 to this Act.
(4) After section 10A of the Taxation of Chargeable Gains Act 1992 (c. 12) insert—
(1) Subject to any exceptions provided by this Act, the chargeable profits for the purposes of corporation tax of a company not resident in the United Kingdom but carrying on a trade in the United Kingdom through a permanent establishment there include chargeable gains accruing to the company on the disposal of—
(a) assets situated in the United Kingdom and used in or for the purposes of the trade at or before the time the gain accrued, or
(b) assets situated in the United Kingdom and used or held for the purposes of the permanent establishment at or before the time the gain accrued or acquired for use by or for the purposes of the permanent establishment.
(2) Subsection (1) does not apply unless the disposal is made at a time when the company is carrying on a trade in the United Kingdom through a permanent establishment there.
(3) This section does not apply to a company that, by virtue of Part 18 of the Taxes Act (double taxation relief arrangements), is exempt from corporation tax for the chargeable period in respect of the profits of the permanent establishment.
(4) In this section “trade” has the meaning given by section 6(4)(b) of the Taxes Act.”.
(5) In section 834(1) of the Taxes Act 1988 (interpretation of the Corporation Tax Acts), at the appropriate place insert—
““chargeable profits”, in relation to a company that is not resident in the United Kingdom—
(a) for corporation tax purposes generally, has the meaning given by section 11(2), and
(b) for the purposes of Chapter 4 of Part 17 (controlled foreign companies), has the meaning given by section 747(6);”.
(6) This section has effect in relation to accounting periods (of the non-resident company) beginning on or after 1st January 2003, and regulations under section 11AA(5) of the Taxes Act 1988 (inserted by subsection (2) above) may be made so as to have effect from that date.
(1) The enactments relating to corporation tax, so far as they make provision for or in connection with the assessment, collection and recovery of tax, or of interest on tax, have effect, in accordance with this section, as if the obligations and liabilities of a non-resident company were also obligations and liabilities of its UK representative.
(2) For this purpose a permanent establishment in the United Kingdom through which a non-resident company carries on a trade—
(a) is the UK representative of the company in relation to chargeable profits of the company attributable to that establishment,
(b) continues to be the company’s UK representative in relation to those profits even after ceasing to be a permanent establishment through which the company carries on a trade, and
(c) shall be treated, if it would not otherwise be so treated, as a distinct and separate person from the non-resident company.
As to the chargeable profits attributable to a permanent establishment, see section 11(2A) of the Taxes Act 1988.
(3) Subject to the following provisions of this section—
(a) the discharge by the UK representative of a non-resident company, or by the company itself, of an obligation or liability that corresponds to one to which the other is subject discharges the corresponding obligation or liability of the other, and
(b) a non-resident company is bound, as if they were its own, by acts or omissions of its UK representative in the discharge of the obligations and liabilities imposed on the representative by this section.
(4) An obligation or liability attaching to a non-resident company—
(a) by reason of its having been given or served with a notice or other document, or
(b) by reason of its having received a request or demand,
does not also attach to its UK representative unless the notice or document, or a copy of it, has been given to or served on the representative or, as the case may be, unless the representative has been notified of the request or demand.
(5) A non-resident company is not bound by mistakes in information provided by its UK representative in pursuance of an obligation imposed on the representative by this section, unless the mistake is the result of an act or omission of the company itself, or to which the company consented or in which it connived.
(6) The UK representative of a non-resident company is not by virtue of this section liable to be proceeded against for a criminal offence unless the representative committed the offence itself, or consented to or connived in its commission.
(7) In this section—
“enactment” includes an enactment contained in subordinate legislation within the meaning of the Interpretation Act 1978 (c. 30);
“information” includes anything contained in a return, self-assessment, account, statement or report required to be provided to the Board or any officer of the Board;
“non-resident company” means a company that is not resident in the United Kingdom; and
“trade” has the meaning given by section 6(4)(b) of the Taxes Act 1988.
(8) This section has effect for accounting periods (of the non-resident company) beginning on or after 1st January 2003.
(1) The income tax chargeable for a year of assessment on the total income of a company that is not resident in the United Kingdom is limited to the sum of the following amounts—
(a) the amount of tax that, apart from this section, would be chargeable on that total income if—
(i) the amount of that income were reduced by the amount of any income to which this section applies, and
(ii) there were disregarded any relief to which that company is entitled by virtue of arrangements having effect under section 788 of the Taxes Act 1988 (double taxation relief), and
(b) the amount of tax deducted from so much of any income to which this section applies as is income the tax on which is deducted at source.
(2) The income to which this section applies is—
(a) income chargeable to tax under Case III of Schedule D or Schedule F;
(b) income chargeable to tax under Case VI of Schedule D by virtue of section 56 of the Taxes Act 1988 (transactions in deposits);
(c) income arising from a transaction carried out through a broker or investment manager in the United Kingdom acting as an agent of independent status in the ordinary course of his business; or
(d) income of such other description as the Treasury may by regulations designate for the purposes of this subsection.
Regulations under paragraph (d) shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of the House of Commons.
(3) In subsection (1)(b) above—
(a) the reference to tax deducted at source is to tax that is or is treated as deducted, or is treated as paid, or in respect of which there is a tax credit, and
(b) the reference to the amount of tax deducted at source is to the amount that is or is treated as deducted, or is treated as paid, or, as the case may be, to the amount of that credit.
(4) This section does not apply to the income tax chargeable for a year of assessment on income of a company as a trustee.
(5) This section applies—
(a) in relation to the year 2002-03, as regards income arising on or after 1st January 2003, and
(b) in relation to the year 2003-04 and subsequent years of assessment.
Finance Act 2003