Office of Public Sector Information
Section 44
1 Chapter 2 of Part 12 of ICTA (friendly societies etc) is amended as follows.
2 (1) In section 466(1) (“life or endowment business”), for paragraph (b) substitute—
“(b) any PHI business (as defined in section 431) if—
(i) the contract is one made before 1 September 1996, or
(ii) the contract is one made on or after that date and the effecting and carrying out of the business also constitutes business within paragraphs I, II or III of Part II of Schedule 1 to the Financial Services and Markets Act (Regulated Activities) Order 2001.”
(2) The amendment made by sub-paragraph (1) has effect for periods of account beginning on or after 1 January 2007.
3 (1) After section 461C insert—
(1) Where—
(a) at any time a friendly society (“the transferee”) acquires by way of transfer of engagements or amalgamation from another friendly society (“the transferor”) any business, other than life or endowment business, consisting of business which relates to contracts made before that time, and
(b) immediately before that time the transferor was exempt from corporation tax on profits arising from that business,
the transferee is so exempt after that time.
(2) But if during an accounting period of the transferee there is an increase in the scale of benefits which it undertakes to provide in the course of carrying on that business, the transferee shall not be exempt from corporation tax by virtue of subsection (1) above for that or any subsequent accounting period.
(3) Where—
(a) at any time a friendly society (“the transferee”) acquires by way of transfer of engagements or amalgamation from another friendly society (“the transferor”) any business, other than life or endowment business, consisting of business which relates to contracts made before that time, and
(b) immediately before that time the transferor was not exempt from corporation tax on profits arising from that business,
the transferee is not so exempt after that time.
(4) The Treasury may by regulations provide that, where any business of a friendly society is exempt from corporation tax by virtue of subsection (1) above, or not so exempt by virtue of subsection (3) above, the Corporation Tax Acts have effect subject to such modifications (or exceptions) as the Treasury consider appropriate.
(5) Regulations under subsection (4) above—
(a) may make different provision for different cases,
(b) may include any incidental, supplementary, consequential or transitional provisions which the Treasury consider appropriate, and
(c) may include retrospective provision.”
(2) The amendment made by sub-paragraph (1) has effect in relation to transfers of engagements and amalgamations taking place on or after the day on which this Act is passed.
4 In subsection (1) of section 463 (application of Corporation Tax Acts to life or endowment business carried on by friendly societies), for “the life or endowment” substitute “long-term”; and, accordingly, in the heading of that section, for “Life or endowment” substitute “Long-term”.
5 (1) Omit—
(a) section 462(3) and (4) (tax exempt business: insurances made in 1984-85), and
(b) section 462A (election relating to profits attributable to pre-1991 contracts expressed not to be part of tax exempt business).
(2) In section 462(1), for “subsections (2) to (4)” substitute “subsection (2)”.
(3) In consequence of sub-paragraph (1), omit—
(a) paragraph 2 of Schedule 9 to FA 1991,
(b) paragraph 9 of Schedule 9 to F(No.2)A 1992, and
(c) section 45(4) and (5) of FA 2007.
Section 53
1 (1) A charity is entitled to be paid an amount by the Commissioners (referred to in this Schedule as a payment of “gift aid supplement”) if the following conditions are met.
(2) Condition A is that a gift aid donation is made to the charity in a transitional tax year.
(3) Condition B is that the charity makes a claim for the donation to be exempt from tax by virtue of—
(a) section 505(1)(c)(ii) of ICTA (charitable companies),
(b) section 521(4) of ITA 2007 (charitable trusts), or
(c) paragraph 5(1)(c) of Schedule 18 to FA 2002 (community amateur sports clubs).
(4) Condition C is that the claim is made within the period of two years beginning immediately after the end of—
(a) the accounting period to which the claim relates (in a case falling within sub-paragraph (3)(a) or (c)), or
(b) the tax year to which the claim relates (in a case falling within sub-paragraph (3)(b)).
(5) Condition D is that the claim is allowed.
2 (1) The amount of gift aid supplement that a charity is entitled to be paid in respect of a gift aid donation is—
DGN - DGA
where—
DGN is the amount of the gift aid donation grossed up by reference to the notional basic rate for the transitional tax year, and
DGA the amount of the gift aid donation grossed up by reference to the actual basic rate of income tax for the transitional tax year.
(2) A charity is not entitled to be paid gift aid supplement in respect of a gift aid donation if the amount determined in accordance with sub-paragraph (1) is a negative amount.
3 (1) The “notional basic rate” for a transitional tax year is calculated by adding together—
(a) the actual basic rate of income tax for that year, and
(b) the transitional supplement for that year.
(2) But if the rate calculated for a transitional tax year by adding those two things together is more than 22%, the notional basic rate for that year is 22%.
(3) The “transitional supplement” for each transitional tax year is 2%.
(4) Section 998 of ITA 2007 applies to the grossing up of an amount by reference to a notional basic rate as if the notional basic rate were an actual rate of tax.
4 (1) This paragraph applies if an officer of Revenue and Customs discovers that payment or set-off of an amount of gift aid supplement—
(a) ought not to have been made, or
(b) is or has become excessive.
(2) The relevant amount of gift aid supplement may be recovered as if it were an amount of income tax wrongly repaid to the charity (and, in particular, section 30 of TMA 1970 and paragraph 52 of Schedule 18 to FA 1998 apply accordingly).
(3) An amount to be recovered in accordance with sub-paragraph (2) is liable to interest as if it were an amount of income tax wrongly repaid to the charity.
(4) In this paragraph “relevant amount of gift aid supplement” means the payment or set-off of the amount of gift aid supplement, to the extent that it—
(a) ought not to have been made, or
(b) is or has become excessive.
(5) For the purposes of this paragraph income tax is “wrongly repaid” to a charity if it is an amount repaid to the charity which ought not to have been repaid.
(6) For the purposes of this paragraph it does not matter if a charity is within the charge to income tax or the charge to corporation tax.
5 Gift aid supplement is not—
(a) income for the purposes of income tax, or
(b) profits for the purposes of corporation tax.
6 Any expenditure incurred by the Commissioners under this Schedule is to be paid out of money provided by Parliament.
7 In this Schedule—
“charity” has the same meaning as in Chapter 2 of Part 8 of ITA 2007 (gift aid);
“the Commissioners” means the Commissioners for Her Majesty’s Revenue and Customs;
“gift aid donation” means a gift which is a qualifying donation for the purposes of Chapter 2 of Part 8 of ITA 2007;
“gift aid supplement” has the meaning given in paragraph 1(1);
“transitional tax year” means each of the tax years 2008-09, 2009-10 and 2010-11.
8 In section 25 of FA 1990 (donations to charities by individuals), after subsection (10) insert—
“(10A) Schedule 19 to the Finance Act 2008 contains provision for transitional payments to charitable companies in respect of gifts made in the tax years 2008-09 to 2010-11.”
9 In section 521 of ITA 2007 (gifts entitling donor to gift aid relief: income tax liability and exemption of charity), after subsection (6) insert—
“(7) Schedule 19 to FA 2008 contains provision for transitional payments to charitable trusts in respect of gifts made in the tax years 2008-09 to 2010-11.”
Finance Act 2008