PART 2 continued
(2) The company is “the holding company of the property” when—
(a) it owns a relevant interest in the property,
(b) its main or only asset is that interest, and
(c) the only activities undertaken by it are ones that are incidental to its ownership of that interest.
(3) The company is also “the holding company of the property” when—
(a) a company (“the subsidiary”) which is wholly owned by the company meets the conditions in paragraphs (a) to (c) of subsection (2),
(b) the company’s main or only asset is its interest in the subsidiary, and
(c) the only activities undertaken by the company are ones that are incidental to its ownership of that interest.
(4) “Relevant interest in the property” means an interest under the law of any territory that confers (or would but for any inferior interest confer) a right to exclusive possession of the property at all times or at certain times.
(5) “The relevant time” is the time the company first owned a relevant interest in the property; but this is subject to subsection (6).
(6) If—
(a) none of D’s interest in the company was acquired directly or indirectly from a person connected with D, and
(b) the company owned a relevant interest in the property at the time D first acquired an interest in the company,
“the relevant time” is the time D first acquired such an interest.
(1) Section 100A(1) does not apply if subsection (2), (3) or (4) applies.
(2) This subsection applies if—
(a) the company’s interest in the property was acquired directly or indirectly from a connected company at an undervalue, or
(b) the company’s interest in the property derives from an interest that was so acquired.
(3) This subsection applies if, at any time after the relevant time—
(a) expenditure in respect of the property has been incurred directly or indirectly by a connected company, or
(b) any borrowing of the company directly or indirectly from a connected company has been outstanding (but see subsection (7)).
(4) This subsection applies if the living accommodation is provided in pursuance of an arrangement the main purpose, or one of the main purposes, of which is the avoidance of tax or national insurance contributions.
(5) In subsection (2) references to the acquisition of an interest include the grant of an interest.
(6) For the purposes of that subsection, an interest is acquired at an undervalue if the total consideration for it is less than that which might reasonably have been expected to be obtained on a disposal of the interest on the open market; and “consideration” here means consideration provided at any time (and, for example, includes payments by way of rent).
(7) For the purposes of subsection (3)(b), no account is to be taken of—
(a) any borrowing at a commercial rate, or
(b) any borrowing which results in D being treated under Chapter 7 (taxable benefits: loans) as receiving earnings.
(8) In subsection (4) “arrangement” includes any scheme, agreement or understanding, whether or not enforceable.
(9) In this section “connected company” means—
(a) a company connected with D, with a member of D’s family or with an employer of D, or
(b) a company connected with such a company.”
(2) The amendment made by subsection (1) is treated as always having had effect.
(3) Section 145 of ICTA (living accommodation provided for employee) is to be treated as never having applied to living accommodation outside the United Kingdom provided in circumstances in which, had it been provided on or after 6 April 2003, section 100A(1) of ITEPA 2003 would cause Chapter 5 of Part 3 of ITEPA 2003 (taxable benefits: living accommodation) not to apply.
(1) In section 677(1) of ITEPA 2003 (UK social security benefits wholly exempt from tax), in Part 1 of Table B (benefits payable under primary legislation), insert at the appropriate places—
| “In-work credit | ETA 1973 | Section 2 |
| ETA(NI) 1950 | Section 1 | |
| In-work emergency discretion fund payment | ETA 1973 | Section 2 |
| In-work emergency fund payment | ETA(NI) 1950 | Section 1”, and |
| “Return to work credit | ETA 1973 | Section 2 |
| ETA(NI) 1950 | Section 1”. |
(2) In Part 1 of Schedule 1 to that Act (abbreviations of Acts etc), insert at the appropriate places—
| “ETA(NI) 1950 | The Employment and Training Act (Northern Ireland) 1950 (c. 29 (N.I.))”, and |
| “ETA 1973 | The Employment and Training Act 1973 (c. 50)”. |
(3) The amendments made by this section have effect for the tax year 2008-09 and subsequent tax years.
(1) In section 139(4) of ITEPA 2003 (car with a CO2emissions figure: the appropriate percentage), for the table substitute—
| “Tax year | Lower threshold (in g/km) |
|---|---|
| 2008-09 or 2009-10 | 135 |
| 2010-11 and subsequent tax years | 130”. |
(2) In consequence of the amendment made by subsection (1), omit—
(a) in FA 2003, section 138(3), and
(b) in FA 2006, section 59(6).
(3) The amendments made by this section have effect for the tax year 2008-09 and subsequent tax years.
(1) In section 239(3) of ITEPA 2003 (exemption in respect of payments and benefits connected with taxable cars and vans subject to section 149), insert at the end “or section 160 (benefit of van fuel treated as earnings).”
(2) In section 269(2) of that Act (exemption in respect of non-cash vouchers and credit-tokens where benefits or money obtained in connection with taxable car or subject to section 149)—
(a) for “, but see section 149(3)” substitute “or van, but see section 149(3) or section 160(3)”, and
(b) after “earnings)” insert “or section 160 (benefit of van fuel treated as earnings)”.
(1) In section 149AA of TCGA 1992 (restricted and convertible employment-related securities), after subsection (6) insert—
“(7) In subsection (1) the reference to any amount that constituted earnings under Chapter 1 of Part 3 of ITEPA 2003 does not include any amount of exempt income (within the meaning of section 8 of that Act).”
(2) ITEPA 2003 is amended as follows.
(3) In section 428(2)(b) as originally enacted (conditional interests in shares: amount of charge), insert at the end “(other than an amount of exempt income)”.
(4) In section 428(7)(b) (restricted securities: amount of charge), insert at the end “(other than an amount of exempt income)”.
(5) In section 446T(3)(b) (securities acquired for less than market value: amount of charge), insert at the end “(other than an amount of exempt income)”.
(6) In section 480(5)(a) (securities options: deductible amounts), insert at the end “(other than an amount of exempt income)”.
(7) In paragraph 21(3) of Schedule 23 to FA 2003 (corporation tax relief for employee share acquisition: amount of relief in case of restricted shares), insert at the end—
“For this purpose the amount that constitutes such earnings does not include any amount of exempt income (within the meaning of section 8 of that Act).”
(8) In paragraph 22C(3) of that Schedule (corporation tax relief for employee share acquisition: amount of relief in case of convertible shares), insert at the end—
“For this purpose the amount that constitutes such earnings does not include any amount of exempt income (within the meaning of section 8 of that Act).”
(9) The amendment made by subsection (1) has effect in relation to disposals made on or after 12 March 2008.
(10) The amendment made by subsection (3) has effect in relation to events within section 427(1)(a) or (b) of ITEPA 2003 (as originally enacted) occurring on or after that date.
(11) The amendments made by subsections (4) and (6) have effect in relation to chargeable events occurring on or after that date.
(12) The amendment made by subsection (5) has effect in relation to employment-related securities acquired (or treated as acquired) on or after that date.
(13) The amendments made by subsections (7) and (8) have effect in relation to awards of shares made on or after that date.
(1) In ICTA, omit sections 138 and 139 (share acquisitions by directors and employees: shares acquired before 26 October 1987).
(2) In ITEPA 2003—
(a) in section 418 (other related provisions), omit subsection (4), and
(b) in Schedule 7 (transitionals and savings), omit paragraph 57.
(3) The amendments made by this section have effect for the tax year 2008-09 and subsequent tax years.
(1) In ITEPA 2003, after section 297A insert—
(1) No liability to income tax arises in respect of payments of the Council Tax Relief to members of the armed forces of the Crown.
(2) Payments of the Council Tax Relief are payments designated as such by the Secretary of State.”
(2) The amendment made by subsection (1) has effect in relation to payments made on or after 1 April 2008.
(1) Section 291(2) of ITEPA 2003 (termination payments to MPs and others ceasing to hold office) is amended as follows.
(2) In paragraph (ea), omit “or”.
(3) At the end of paragraph (f) insert “, or
(g) made under section 26A of the Greater London Authority Act 1999 (payments on ceasing to hold office as Mayor of London or as a member of the London Assembly).”
(4) The amendments made by this section have effect in relation to payments made on or after 6 April 2008.
Schedule 19 contains provision for the Commissioners for Her Majesty’s Revenue and Customs to make payments to charities which receive donations under the gift aid scheme.
(1) Paragraph 35 of Schedule 16 to FA 2002 (community investment tax relief) is amended as follows.
(2) After sub-paragraph (1) insert—
“(1A) But if the investor is a bank, the investor does not receive value from the CDFI when the CDFI makes a deposit with the investor in the course of its ordinary banking arrangements.”
(3) In subsection (5), after “paragraph—” insert—
““bank” has the meaning given by section 840A of the Taxes Act 1988;”.
(4) The amendments made by this section are treated as always having had effect.
Schedule 20 contains provision about leases of plant or machinery.
(1) Schedule 10 to FA 2006 (sale etc of lessor companies etc) is amended as follows.
(2) In paragraph 23 (leasing business carried on in partnership: change in company’s interest in the business), after sub-paragraph (4) insert—
“(4A) But if at the end of the relevant day the other company is the only person carrying on the business, the expense—
(a) is treated as an expense incurred by the other company in its carrying on of the business (at a time when it is the only person carrying it on), and
(b) is allowed as a deduction in calculating for corporation tax purposes the profits of the business for the accounting period in which it is treated as incurred.”
(3) In paragraph 32 (amount of expense)—
(a) in sub-paragraph (2), for “The” substitute “Except in a case where sub-paragraph (3A) applies, the”, and
(b) after sub-paragraph (3) insert—
“(3A) If paragraph 23(4A) applies (business carried on by the other company alone), the amount of the expense of the other company is equal to the amount of the income.”
(4) In paragraph 39 (relief for certain expenses otherwise giving rise to carried forward loss)—
(a) after sub-paragraph (1) insert—
“(1A) This paragraph also applies if—
(a) a company is treated under paragraph 23(4A) as incurring an expense of a business in an accounting period,
(b) the company makes a loss in that accounting period, and
(c) some or all of that loss would otherwise be carried forward to the next accounting period of the company (“the subsequent accounting period”).”,
(b) in sub-paragraph (2), after “3” insert “, 23(4A)”, and
(c) in sub-paragraph (4), after “3” insert “, 23(4A)”,
and, accordingly, in the heading before that paragraph, after “3” insert “, 23(4A)”.
(5) The amendments made by this section are treated as always having had effect.
(1) Section 798 of ICTA (limits on foreign tax credit: trade income) is amended as follows.
(2) After subsection (1) insert—
“(1A) The references in section 796 and this section to income in respect of which a credit for foreign tax is to be allowed are to be treated as referring only to income arising out of the transaction, arrangement or asset in connection with which the credit for foreign tax arises.”
(3) In subsection (3), after “income” insert “in respect of which the credit is to be allowed”.
(4) The amendments made by this section have effect in relation to a credit for foreign tax which relates to—
(a) a payment of foreign tax on or after 6 April 2008, or
(b) income received on or after that date in respect of which foreign tax has been deducted at source.
(1) In section 115 of ICTA (partnerships involving companies: supplementary), after subsection (5B) insert—
“(5C) For the purposes of subsections (5) to (5B) the members of a partnership include any company which is entitled to a share of income or capital gains of the partnership.”
(2) In section 59 of TCGA 1992 (partnerships), insert at the end—
“(4) For the purposes of subsections (2) and (3) the members of a partnership include any person entitled to a share of capital gains of the partnership.”
(3) In section 858 of ITTOIA 2005 (resident partners and double taxation agreements), insert at the end—
“(4) For the purposes of this section the members of a firm include any person entitled to a share of income of the firm.”
(4) The amendments made by subsections (1) to (3) are treated as always having had effect.
(5) For the purposes of the predecessor provisions, the members of a partnership are to be treated as having included, at all times to which those provisions applied, a person entitled to a share of income or capital gains of the partnership.
(6) “The predecessor provisions” means—
(a) section 153(4) and (5) of the Income and Corporation Taxes Act 1970 (c. 10) (as it had effect under section 62(2) of F(No.2)A 1987), and
(b) sections 112(4) to (6) and 115(5) of ICTA.
(1) In ICTA, after section 815A insert—
(1) Where arrangements having effect under section 788 make the provision mentioned in subsection (2) (however expressed), that provision does not prevent income of a person resident in the United Kingdom being chargeable to income tax or corporation tax.
(2) The provision is that the profits of an enterprise which is resident outside the United Kingdom, or carries on a trade, profession or business the control or management of which is situated outside the United Kingdom, are not to be subject to United Kingdom tax except in so far as they are attributable to a permanent establishment of the enterprise in the United Kingdom.
(3) A person is resident in the United Kingdom for the purposes of this section if the person is so resident for the purposes of the arrangements having effect under section 788.
(4) This section does not apply in relation to—
(a) income of a company resident in the United Kingdom to which section 115(5A) applies, or
(b) income of a person resident in the United Kingdom to which section 858 of ITTOIA 2005 applies.”
(2) The amendment made by subsection (1) has effect in relation to income arising on or after 12 March 2008.
Schedule 21 contains provision restricting relief for losses made by individuals who, otherwise than in partnership, carry on trades in a non-active capacity.
(1) In section 103B(2) of ITA 2007 (meaning of “non-active partner” for purposes of provisions restricting trade loss relief), for “carried on for the purposes of the trade” substitute “of the trade and those activities are carried on—
(a) on a commercial basis, and
(b) with a view to the realisation of profits as a result of the activities.”
(2) The amendment made by subsection (1) has effect in relation to relevant periods ending on or after 12 March 2008.
Schedule 22 contains provision about avoidance involving financial arrangements.
(1) Schedule 23 contains anti-avoidance provisions about manufactured payments.
(2) The amendments made by that Schedule have effect in relation to manufactured payments (including deemed manufactured payments) made (or treated as made) on or after 31 January 2008.
(1) Chapter 4 of Part 17 of ICTA (controlled foreign companies) is amended as follows.
(2) In section 747 (imputation of chargeable profits of controlled foreign companies)—
(a) in subsection (6), before “and” at the end of paragraph (a) insert—
“(aa) any reference in this Chapter to its chargeable profits for an accounting period includes (subject to subsections (7) to (9)) income which accrues during that accounting period to the trustees of a settlement in relation to which the company is a settlor or a beneficiary;”, and
(b) after that subsection insert—
“(7) Where there is more than one settlor or beneficiary in relation to the settlement mentioned in subsection (6)(aa), the income is to be apportioned between the company and the other settlors or beneficiaries on a just and reasonable basis.
(8) Where income within subsection (6)(aa) is included in the chargeable profits of a company, any dividend or other distribution received by the company which derives from that income is not included in the chargeable profits of the company to the extent that it is so derived.
(9) Any income within subsection (6)(aa) which would (apart from this subsection)—
(a) be included in the chargeable profits of a company which is a beneficiary in relation to a settlement and apportioned under subsection (3), and
(b) be included in the chargeable profits of a company which is a settlor in relation to the settlement and apportioned under that subsection,
is not to be included in the chargeable profits of the company which is a settlor.”
(3) In section 755D (meaning of control)—
(a) after subsection (1) insert—
“(1A) For the purposes of this Chapter a person also controls a company if the person possesses, or is entitled to acquire, such rights as would—
(a) if the whole of the income of the company were distributed, entitle the person to receive the greater part of the amount so distributed,
(b) if the whole of the company’s share capital were disposed of, entitle the person to receive the greater part of the proceeds of the disposal, or
(c) in the event of the winding-up of the company or in any other circumstances, entitle the person to receive the greater part of the assets of the company which would then be available for distribution.”, and
(b) in subsection (2), after “above” insert “or satisfy subsection (1A) above”.
(4) In paragraph 2A of Schedule 25 (acceptable distribution policy)—
(a) in sub-paragraph (2), for “sub-paragraph (4)” substitute “sub-paragraphs (4) and (4A)”, and
(b) after sub-paragraph (4) insert—
“(4A) Sub-paragraph (2) does not apply where the distribution condition is satisfied in relation to the relevant accounting period, but—
(a) the relevant profits for that period do not include income within sub-paragraph (4B), and
(b) if that income were included, the distribution condition would not be satisfied in relation to that period.
(4B) The income within this sub-paragraph is—
(a) any income which accrues during the relevant accounting period to the trustees of a settlement in relation to which the company is a settlor or a beneficiary, and
(b) any income which accrues during that period to a partnership of which the company is a partner, apportioned between the company and the other partners on a just and reasonable basis.
(4C) Where there is more than one settlor or beneficiary in relation to the settlement mentioned in sub-paragraph (4B)(a), the income is to be apportioned between the company and the other settlors or beneficiaries on a just and reasonable basis.
(4D) In sub-paragraph (4B)(b) “partnership” includes an entity established under the law of a country or territory outside the United Kingdom of a similar character to a partnership; and “partner” is to be read accordingly.”
(5) In paragraph 6 of Schedule 25 (definition of exempt activities), after sub-paragraph (5B) insert—
“(5C) For the purposes of this paragraph, the gross income of a holding company or a superior holding company during an accounting period includes—
(a) any income which accrues during that period to the trustees of a settlement in relation to which the company is a settlor or a beneficiary, and
(b) any income which accrues during that period to a partnership of which the company is a partner, apportioned between the company and the other partners on a just and reasonable basis.
(5D) Where there is more than one settlor or beneficiary in relation to the settlement mentioned in sub-paragraph (5C)(a), the income is to be apportioned between the company and the other settlors or beneficiaries on a just and reasonable basis.
(5E) In sub-paragraph (5C)(b) “partnership” includes an entity established under the law of a country or territory outside the United Kingdom of a similar character to a partnership; and “partner” is to be read accordingly.”
(6) The amendments made by subsections (2) and (5) have effect in relation to income accruing on or after 12 March 2008.
(7) The amendments made by subsection (3) have effect for determining whether, at any time on or after 12 March 2008, a company is controlled by persons resident in the United Kingdom for the purposes of Chapter 4 of Part 17 of ICTA.
(8) The amendments made by subsection (4) have effect in relation to any dividend paid on or after 12 March 2008.
(9) In relation to an accounting period of a company beginning before, and ending on or after, 12 March 2008 (“the straddling period”), the amendments made by this section have effect as if, for the purposes of Chapter 4 of Part 17 of ICTA, so much of the period as falls before that date, and so much of the period as falls on or after that date, were separate accounting periods.
(10) The company’s chargeable profits for the straddling period, and its creditable tax (if any) for that period, are to be apportioned to the two separate accounting periods on a just and reasonable basis.
(11) In this section “accounting period”, “chargeable profits” and “creditable tax” have the same meaning as in Chapter 4 of Part 17 of ICTA.