Legalize / United Kingdom / Public General Act

Finance Act 2002

Type Public General Act

Publication 2002-07-24

Last updated 2026-03-18

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

Reform history JSON API

Part 1 — Excise duties

Tobacco products duty

Rates of tobacco products duty

1

(1) For the Table of rates of duty in Schedule 1 to the Tobacco Products Duty Act 1979 (c. 7) substitute—

1. Cigarettes	An amount equal to 22 per cent of the retail price plus £94.24 per thousand cigarettes.
2. Cigars	£137.26 per kilogram.
3. Hand-rolling tobacco	£98.66 per kilogram.
4. Other smoking tobacco and chewing tobacco	£60.34 per kilogram.

(2) This section shall be deemed to have come into force at 6 o’clock in the evening of 17th April 2002.

Alcoholic liquor duties

Cars registered on or after 1st March 2001: rates of duty

2

(1) In section 62(1A) of the Alcoholic Liquor Duties Act 1979 (c. 4) (rates of duty on cider)—

(a) in paragraph (b) (rate of duty per hectolitre in the case of cider of a strength exceeding 7.5 per cent that is not sparkling cider), for “£39.21” substitute “ £38.43 ”;

(b) in paragraph (c) (rate of duty per hectolitre in any other case), for “£26.13” substitute “ £25.61 ”.

(2) This section shall be deemed to have come into force on 28th April 2002.

Invoices

3

(1) Omit section 1(9) of the Alcoholic Liquor Duties Act 1979 (under which alcoholic beverages of a strength between 1.2 and 5.5 per cent made with spirits are treated as not being spirits, unless of a description specified by Treasury order).

(2) This section shall be deemed to have come into force on 28th April 2002.

Shares acquired on same day: election for alternative treatment

4

(1) Schedule 1 to this Act (which makes provision for the excise duty on beer to be charged at reduced rates on beer produced in small breweries) has effect.

(2) Subject to subsection (3), subsection (1) shall be deemed to have come into force on 1st June 2002.

(3) So far as relating to—

(a) the insertion by paragraph 2 of that Schedule of the new section 36H of the Alcoholic Liquor Duties Act 1979, and

(b) paragraph 3 of that Schedule,

subsection (1) comes into force on the day on which this Act is passed.

Hydrocarbon oil duties

Gifts of real property to charity

5

(1) The Hydrocarbon Oil Duties Act 1979 (c. 5) is amended as follows.

(2) After section 2 insert—

(2AA) (1) In this Act “biodiesel” means diesel quality liquid fuel— (a) that is produced from biomass or waste cooking oil, (b) the ester content of which is not less than 96.5% by weight, and (c) the sulphur content of which does not exceed 0.005% by weight or is nil. (2) In subsection (1)— (a) “diesel quality” means capable of being used for the same purposes as heavy oil; (b) “liquid” does not include any substance that is gaseous at a temperature of 15°C and under a pressure of 1013.25 millibars; (c) “biomass” means vegetable and animal substances constituting the biodegradable fraction of— (i) products, wastes and residues from agriculture, forestry and related activities, or (ii) industrial and municipal waste.

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) After section 6 (excise duty on hydrocarbon oil) insert—

(6AA) (1) A duty of excise shall be charged on the setting aside for a chargeable use by any person, or (where it has not already been charged under this section) on the chargeable use by any person, of biodiesel. (2) In subsection (1) “chargeable use” means use— (a) as fuel for any engine, motor or other machinery, or (b) as an additive or extender in any substance so used. (3) The rate of duty under this section shall be £0.2582 a litre. (6AB) (1) A duty of excise shall be charged on bioblend— (a) imported into the United Kingdom, or (b) produced in the United Kingdom and delivered for home use from a refinery or from other premises used for the production of hydrocarbon oil or from any bonded storage for hydrocarbon oil, not being bioblend chargeable with duty under paragraph (a) above. This is subject to subsection (6) below. (2) In this Act “bioblend” means any mixture that is produced by mixing— (a) biodiesel, and (b) heavy oil not charged with the excise duty on hydrocarbon oil. (3) The rate at which the duty shall be charged on any bioblend shall be a composite rate representing— (a) in respect of the proportion of the bioblend that is hydrocarbon oil, the rate that would be applicable to the bioblend if it consisted entirely of heavy oil of the description that went into producing the bioblend, and (b) in respect of the proportion of the bioblend that is biodiesel, the rate that would be applicable to the bioblend if it consisted entirely of biodiesel. (4) The references in subsection (3) above to the proportions of— (a) hydrocarbon oil, and (b) biodiesel, are to the proportions by volume to the nearest 0.001%. (5) If the Commissioners are not satisfied as to the proportion of biodiesel in any bioblend, the rate of duty chargeable shall be the rate that would be applicable to the bioblend if it consisted entirely of heavy oil of the description that went into producing the bioblend. (6) Where imported bioblend is removed to a refinery, the duty chargeable under subsection (1) above shall, instead of being charged at the time of the importation of the bioblend, be charged on the delivery of any goods from the refinery for home use and shall be the same as that which would be payable on the importation of like goods. (6AC) (1) The Commissioners may by regulations provide for— (a) references in this Act, or specified references in this Act, to hydrocarbon oil to be construed as including references to— (i) biodiesel; (ii) bioblend; (b) references in this Act, or specified references in this Act, to duty on hydrocarbon oil to be construed as including references to duty under— (i) section 6AA above; (ii) section 6AB above; (c) biodiesel, or bioblend, to be treated for the purposes of such of the following provisions of this Act as may be specified as if it fell within a specified description of hydrocarbon oil. (2) Where the effect of provision made under subsection (1) above is to extend any power to make regulations, provision made in exercise of the power as extended may be contained in the same statutory instrument as the provision extending the power. (3) In this section “specified” means specified by regulations under this section. (4) Regulations under this section may make different provision for different cases. (5) Paragraph (b) of subsection (1) above shall not be taken as prejudicing the generality of paragraph (a) of that subsection.

(5) Schedule 2 to this Act contains minor and consquential amendments of the Hydrocarbon Oil Duties Act 1979 (c. 5).

(6) Subsection (4), and subsection (5) so far as relating to paragraphs 2 and 4(1) of that Schedule, have effect in relation to biodiesel that—

(a) is set aside for chargeable use (as defined in the section 6AA inserted by subsection (4)) after such date as the Commissioners of Customs and Excise may by order made by statutory instrument appoint, or

(b) not having been so set aside, is the subject of such chargeable use after that date,

and has not been set aside for chargeable use under section 6A of that Act (fuel substitutes) on or before that date.

(7) Subsection (4), and subsection (5) so far as relating to paragraph 2 of that Schedule, have effect in relation to bioblend that—

(a) is imported into the United Kingdom after the date appointed under subsection (6)(a), or

(b) not having been so imported—

(i) is produced in the United Kingdom and delivered for home use after that date, and

(ii) has not been set aside for chargeable use under section 6A of that Act (fuel substitutes) on or before that date.

(8) Subsection (5)—

(a) so far as relating to paragraph 3 of that Schedule, comes into force on the day after the date appointed under subsection (6)(a),

(b) so far as relating to paragraph 5 of that Schedule, applies to mixtures produced after the date appointed under subsection (6)(a), and

(c) so far as relating to paragraph 7 of that Schedule, comes into force on such day as the Commissioners of Customs and Excise may by order made by statutory instrument appoint.

Regulating trade in rebated heavy oil etc

6

(1) Schedule 3 to this Act has effect.

(2) In that Schedule—

Part 1 makes provision for regulating trade in certain heavy oil on which rebate of excise duty has been allowed, and

Part 2 amends provisions of the Hydrocarbon Oil Duties Act 1979 relating to rebates.

(3) Subject to subsection (4), subsection (1) so far as relating to paragraph 1 of that Schedule shall not come into force until such day as the Commissioners of Customs and Excise may appoint by order made by statutory instrument.

(4) For the purpose of the exercise of any power to make regulations, subsection (1) so far as relating to that paragraph comes into force on the day on which this Act is passed.

The Finance Act 1994

7

(1) In section 6A of the Hydrocarbon Oil Duties Act 1979 (c. 5) (fuel substitutes)—

(a) in subsection (5) (power to provide that fuel substitute to be treated as if it were a description of hydrocarbon oil), for the words from “the description of such one or more of the following” to the end substitute “ such description of hydrocarbon oil as may be so specified ”;

(b) in subsection (6)(a) (power to be exercised so that fuel substitute charged with duty and otherwise treated as if it were description of hydrocarbon oil to which it is most closely equivalent), for “the substance falling within the descriptions specified in subsection (5) above” substitute “ hydrocarbon oil of the description ”.

(2) In section 10 of the Finance Act 1993 (c. 34) (mineral oil fuel substitutes)—

(a) in subsection (2) (power to provide that mineral oil fuel substitute to be treated as if it were a particular description of hydrocarbon oil), for the words from “the description of such one or more of the following” to the end substitute “ such description of hydrocarbon oil as may be so specified ”;

(b) in subsection (3) (power to be exercised so that mineral oil fuel substitute treated as if it were description of hydrocarbon oil to which it is most closely equivalent), for “the substance falling within the descriptions specified in subsection (2) above” substitute “ hydrocarbon oil of the description ”.

Betting and gaming duties

Commercial exploitation

8

(1) Section 21 of the Betting and Gaming Duties Act 1981 (c. 63) (amusement machine licences) is amended as follows.

(2) In subsection (3A) (excepted machines), for paragraphs (c) and (d) (certain thirty-five penny machines and video machines) substitute—

(c) a fifty-penny machine that is not a gaming machine.

(3) For subsection (3B) substitute—

(3B) For the purposes of this section an amusement machine is a fifty-penny machine if, and only if— (a) where it is a machine on which a game can be played solo, the price for a solo game does not exceed 50p; and (b) where it is a machine on which a game can be played by more than one person at a time, the price to participate in such a game does not exceed 50p.

(4) In subsection (3C) (definition of the price for a solo game), for “35p”, in both places where it occurs, substitute “ 50p ”.

(5) In section 25 of that Act (definition of different types of machine), in subsections (4) and (6) (treatment of machines capable of being played by more than one person at a time), for “an excepted video machine falling within section 21(3A)(d) above” substitute “ a fifty-penny machine within section 21(3B) above ”.

(6) This section has effect in relation to the provision of an amusement machine at any time on or after 1st May 2002.

Partnerships involving companies

9

(1) In the Table in section 23(2) of the Betting and Gaming Duties Act 1981 (c. 63) (rates of amusement machine licence duty), for column (4) (medium-prize machines other than five-penny machines) and column 6 (machines not in any other category) substitute—

(4)	(6)
Category C	Category E
£	£
80	225
160	435
235	630
305	820
370	990
430	1155
485	1300
535	1440
585	1560
625	1675
665	1775
695	1860

(2) This section applies in relation to any amusement machine licence for which an application is received by the Commissioners of Customs and Excise after 30th April 2002.

Limits on credit: corporation tax

10

(1) For the Table in section 11(2) of the Finance Act 1997 (c. 16) (rates of gaming duty) substitute—

Part of gross gaming yield	Rate
The first £488,000	2.5 per cent.
The next £1,083,500	12.5 per cent.
The next £1,083,500	20 per cent.
The next £1,897,000	30 per cent.
The remainder	40 per cent.

(2) This section has effect in relation to accounting periods beginning on or after 1st April 2002.

Exchange gains and losses where derivative contracts not on arm’s length terms

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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Profits arising from derivative contracts

12

(1) Schedule 4 to this Act has effect.

(2) In that Schedule, Part 1—

makes provision about pool betting duty, and

provides for coupon betting to cease to be subject to pool betting duty but to be subject to general betting duty instead,

and Part 2 contains minor amendments and transitional provisions.

(3) The amendments made by paragraph 2 of that Schedule have effect for the purposes of accounting periods beginning on or after 31st March 2002; but this does not apply to the substitution of the new regulation-making provisions.

(4) The amendments made by paragraphs 3 and 4 of that Schedule apply to bets made on or after 31st March 2002.

(5) Subsections (1) to (4) shall (subject to subsections (6) and (7)) be deemed to have come into force on 31st March 2002.

(6) Subsection (1), so far as relating to paragraphs 5, 6(a) and (c), 7 to 9, 10(1), (2), (5) to (11), (13) and (14), 11, 12(1) and (3), 13 and 14 of Schedule 4 to this Act, shall be deemed to have come into force on 24th April 2002.

(7) Subsection (1), so far as relating to—

(a) the substitution of the new regulation-making provisions by paragraph 2 of that Schedule, and

(b) paragraphs 10(3), (4) and (12) and 12(2) of that Schedule,

comes into force on the day on which this Act is passed; but the powers conferred by the new regulation-making provisions are exercisable only as respects accounting periods beginning after that day.

(8) In this section “the new regulation-making provisions” means the following new provisions of the Betting and Gaming Duties Act 1981 (c. 63)—

section 7D(6) to (8),

section 7E(4) and (5),

section 7F(6) and (7),

section 8(3) and (4), and

section 8B(1)(b) and (2).

Carry back of net losses on derivative contracts to which paragraph 45A applies

13

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Contracts becoming held for purposes of trade

14

(1) In Part 1 of the Betting and Gaming Duties Act 1981 (betting duties), after section 9 (prohibitions for protection of revenue) insert—

(9A) (1) A person shall be guilty of an offence if— (a) he knowingly issues, circulates or distributes in the United Kingdom, or has in his possession for that purpose, any advertisement or other document inviting the use of or otherwise relating to bet-broking services, and (b) any person providing any of the bet-broking services concerned— (i) is outside the United Kingdom, and (ii) provides them in the course of a business. (2) In this section “bet-broking services” means— (a) facilities provided by a person that may be used by other persons in making bets with third persons, or (b) a person’s services of acting as agent for other persons in making bets on their behalf with third parties (whether the persons on whose behalf the bets are made are disclosed principals or undisclosed principals). (3) In subsection (2) “bet” means a bet other than one made by way of pool betting. (4) A person who gets or tries to get any advertisement or other document given or sent to him shall not be guilty of an offence by reason of his thereby procuring or inciting some other person to commit, or aiding or abetting the commission of, an offence under this section.

(2) After section 9A of that Act (inserted by subsection (1) above) insert—

(9B) (1) This section applies where a person is guilty of an offence under section 9 or 9A (a “relevant offence”). (2) In the case of the person’s first conviction for a relevant offence, he is liable— (a) on summary conviction to a penalty of the prescribed sum, or (b) on conviction on indictment to a penalty of any amount. (3) In the case of a second or subsequent conviction of the person for a relevant offence, he is liable— (a) on summary conviction to a penalty of the prescribed sum or to imprisonment for a term not exceeding three months or to both, or (b) on conviction on indictment to a penalty of any amount or to imprisonment for a term not exceeding one year or to both.

(3) Omit section 9(4) of that Act (penalties for offences under section 9).

(4) In paragraph 5 of Schedule 6 to that Act (convictions under predecessors of section 9 to be treated as convictions under section 9), for “For the purposes of section 9(4)” substitute “ For the purposes of section 9B ”.

(5) Subsection (1) comes into force on the day after that on which this Act is passed.

(6) The amendments made by subsections (2) to (4) apply for the purposes of punishing offences committed after the day on which this Act is passed.

Vehicle excise duty

Derivative contracts and relevant contracts

15

(1) For the Table in paragraph 1B of Schedule 1 to the Vehicle Excise and Registration Act 1994 (c. 22) (rates of duty applicable to light passenger vehicles registered on or after 1st March 2001 on basis of certificate specifying CO₂ emissions figure) substitute—

CO₂ emissions figure	CO₂ emissions figure	Rate	Rate	Rate
(1)	(2)	(3)	(4)	(5)
Exceeding	Not exceeding	Reduced rate	Standard Rate	Premium rate
g/km	g/km	£	£	£
–	120	60	70	80
120	150	90	100	110
150	165	110	120	130
165	185	130	140	150
185	–	150	155	160

(2) This section applies to any licence taken out on or after 18th April 2002 for a period beginning on or after 1st May 2002.

Vans registered on or after 1st March 2001: rates of duty

16

(1) For paragraph 1J of Schedule 1 to the Vehicle Excise and Registration Act 1994 (c. 22) (rate of duty applicable to light goods vehicles first registered on or after 1st March 2001) substitute—

(1J) The annual rate of vehicle excise duty applicable to a vehicle to which this Part of this Schedule applies is— (a) if the vehicle is not a lower-emission van, £160; (b) if the vehicle is a lower-emission van, £105. (1K) (a) the vehicle is first registered on or after 1st March 2003, and (b) the limit values given for the vehicle by the Table (which is extracted from the new table inserted in section 5.3.1.4 of Annex I of Council Directive 70/220/EEC by Directive 98/69/EC of the European Parliament and of the Council) are not exceeded during a Type I test.

Reference mass of vehicle	Reference mass of vehicle	Limit values for types of emissions by reference to vehicle type	Limit values for types of emissions by reference to vehicle type	Limit values for types of emissions by reference to vehicle type	Limit values for types of emissions by reference to vehicle type	Limit values for types of emissions by reference to vehicle type	Limit values for types of emissions by reference to vehicle type	Limit values for types of emissions by reference to vehicle type
		CO	CO	HC	NOx	NOx	HC + NOx	PM
Exceeding	Not exceeding	Petrol	Diesel	Petrol	Petrol	Diesel	Diesel	Diesel
kg	kg	g/km	g/km	g/km	g/km	g/km	g/km	g/km
–	1,305	1.0	0.5	0.1	0.08	0.25	0.3	0.025
1,305	1760	1.81	0.63	0.13	0.1	0.33	0.39	0.04
1,760	3,500	2.27	0.74	0.16	0.11	0.39	0.46	0.06

(1L) In paragraph 1K— - “Type I test” means a test as described in section 5.3 of Annex I to Council Directive 70/220/EEC as amended (test for simulating/verifying the average tailpipe emissions after a cold start and carried out using the procedure described in Annex III of that Directive as amended); - “the reference mass” of a vehicle means the mass of the vehicle with bodywork and, in the case of a towing vehicle, with coupling device, if fitted by the manufacturer, in running order, or mass of the chassis or chassis with cab, without bodywork and/or coupling device if the manufacturer does not fit the bodywork and/or coupling device (including liquids and tools, and spare wheel if fitted, and with the fuel tank filled to 90% and the other liquid containing systems, except those for used water, to 100% of the capacity specified by the manufacturer), increased by a uniform mass of 100 kilograms; - “CO” means mass of carbon monoxide; - “HC” means mass of hydrocarbons; - “NOx” means mass of oxides of nitrogen; - “PM” means mass of particulates (for compression ignition engines).

(2) Subsection (1) applies to any licence taken out for a period beginning on or after 1st March 2003.

Introduction

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In the Vehicle Excise and Registration Act 1994 (c. 22), after section 22 insert—

(22ZA) (1) This section applies to information that— (a) is held for the purposes of functions relating to social security or war pensions— (i) by the Secretary of State, or (ii) by a person providing services to the Secretary of State, in connection with the provision of those services, and (b) is of a description prescribed by regulations made by the Secretary of State. (2) Information to which this section applies may, if the consent condition is satisfied, be supplied— (a) to the Secretary of State, or (b) to a person providing services to the Secretary of State, for use for the purposes of relevant nil licence functions. (3) The “consent condition”, in relation to any information, is that— (a) if the information was provided by a person other than the person to whom the information relates, the person who provided the information, or (b) in any other case, the person to whom the information relates, has consented to the supply of the information and has not withdrawn that consent. (4) Information supplied under subsection (2) shall not— (a) be supplied by the recipient to any other person unless— (i) it could be supplied to that person under subsection (2), or (ii) it is supplied for the purposes of any civil or criminal proceedings relating to this Act; (b) be used otherwise than for the purposes of relevant nil licence functions or any such proceedings. (5) In this section “relevant nil licence functions” means functions relating to applications for, and the issue of, nil licences in respect of vehicles that are exempt vehicles under— (a) paragraph 19 of Schedule 2, or (b) paragraph 7 of Schedule 4.

Motorcycles (and motorcycle trade licences): rates of duty

18

(1) For paragraph 2(1) to (1B) of Schedule 1 to the Vehicle Excise and Registration Act 1994 (c. 22) (rates of duty applicable to motorcycles not exceeding 450 kilograms in weight unladen) substitute—

(2) (1) The annual rate of vehicle excise duty applicable to a motorcycle that does not exceed 450 kilograms in weight unladen is— (a) if the cylinder capacity of the engine does not exceed 150 cubic centimetres, £15; (b) if the vehicle is a motorbicycle and the cylinder capacity of the engine exceeds 150 cubic centimetres but does not exceed 400 cubic centimetres, £30; (c) if the vehicle is a motorbicycle and the cylinder capacity of the engine exceeds 400 cubic centimetres but does not exceed 600 cubic centimetres, £45; (d) in any other case, £60.

(2) In sections 13(3)(a), 35A(5)(b) and 36(3)(b) of that Act, and in section 13(4)(a) of that Act as substituted under paragraph 8 of Schedule 4 to that Act (references to paragraph 2(1)(c) of Schedule 1 in connection with motorcycle trade licences), for “(1)(c)” substitute “ (1)(d) ”.

(3) Subsection (1), and the amendments in section 13 of that Act, apply to any licence taken out on or after 18th April 2002 for a period beginning on or after 1st May 2002.

(4) The amendments in sections 35A and 36 of that Act apply where the relevant period begins on or after 1st May 2002.

Registered vehicles etc

19

(1) Schedule 5 to this Act, which provides—

for vehicle excise duty to be charged in respect of vehicles registered under the Vehicle Excise and Registration Act 1994 that are neither used nor kept on a public road,

for vehicle excise duty to be charged in respect of things that have been but have ceased to be mechanically propelled vehicles,

for supplements to be payable where vehicle licences are renewed late, and

for it to be an offence to be the person in whose name an unlicensed vehicle is registered under that Act,

has effect.

(2) Subject to subsection (3), subsection (1) shall not come into force until such day as the Secretary of State may appoint by order made by statutory instrument; and an order under this subsection may appoint different days for different purposes.

(3) For the purpose of the exercise of any power to make regulations, subsection (1) comes into force on the day on which this Act is passed.

(4) The Secretary of State may by order made by statutory instrument make—

(a) such transitional provision as he considers necessary or expedient in connection with the coming into force of subsection (1);

(b) such provision consequential upon, or incidental or supplementary to, the amendments made by Schedule 5 to this Act (including provision further amending the Vehicle Excise and Registration Act 1994) as he considers necessary or expedient.

(5) A statutory instrument containing an order under subsection (4)(b) is subject to annulment in pursuance of a resolution of either House of Parliament.

Calculating cylinder capacity of vehicles

20

(1) In paragraph 1 of Schedule 1 to the Vehicle Excise and Registration Act 1994 (c. 22) (annual rates of duty: general), after sub-paragraph (2A) insert—

(2B) For the purposes of this Schedule the cylinder capacity of an engine shall be calculated in accordance with regulations made by the Secretary of State.

(2) Omit—

(a) paragraph 2(4) of that Schedule (power to make regulations as to calculation of cylinder capacity of motorcycle engines), and

(b) section 57(8) of that Act (regulations under paragraph 2(4) of Schedule 1 not subject to annulment).

(3) Any regulations—

(a) made under paragraph 2(4) of that Schedule or having effect as if so made, and

(b) in force or effective immediately before the passing of this Act,

shall have effect after the passing of this Act as if made under the paragraph 1(2B) inserted in that Schedule by this section.

(4) Subsection (3) has effect in place of section 17(2)(b) of the Interpretation Act 1978 (c. 30) (but is without prejudice to any other provision of that Act) and, in particular, the fact that the instrument containing any such regulations was not subject to annulment in pursuance of a resolution of either House of Parliament shall not prevent them being revoked, amended or re-enacted by regulations under that paragraph 1(2B).

General

Drawback of excise duty

21

(1) In section 133 of the Customs and Excise Management Act 1979 (c. 2) (claims for drawback of excise duty)—

(a) in subsection (2), for “subsections (3) to (6)” substitute “ subsections (4) to (6) ”;

(b) omit subsection (3) (Commissioners to be satisfied that the duty in question has been duly paid, and not already drawn back, before drawback is payable).

(2) In section 14(1) of the Finance Act 1994 (c. 9) (reviewable decisions) after paragraph (bb) insert—

(bc) any decision by the Commissioners as to whether or not any person is entitled to any drawback of excise duty by virtue of regulations under section 2 of the Finance (No. 2) Act 1992, or the amount of the drawback to which any person is so entitled;

(3) The amendment made by subsection (2) does not apply in relation to decisions made before the day on which this Act comes into force.

Part 2 — Value added tax

Disallowance of input tax where consideration not paid

22

(1) In Part 1 of the Value Added Tax Act 1994 (c. 23) (the charge to tax), after section 26 insert—

(26A) (1) Where— (a) a person has become entitled to credit for any input tax, and (b) the consideration for the supply to which that input tax relates, or any part of it, is unpaid at the end of the period of 6 months following the relevant date, he shall be taken, as from the end of that period, not to have been entitled to credit for input tax in respect of the VAT that is referable to the unpaid consideration or part. (2) For the purposes of subsection (1) above “the relevant date”, in relation to any sum representing consideration for a supply, is— (a) the date of the supply, or (b) if later, the date on which the sum became payable. (3) Regulations may make such supplementary, incidental, consequential or transitional provisions as appear to the Commissioners to be necessary or expedient for the purposes of this section. (4) Regulations under this section may in particular— (a) make provision for restoring the whole or any part of an entitlement to credit for input tax where there is a payment after the end of the period mentioned in subsection (1) above; (b) make rules for ascertaining whether anything paid is to be taken as paid by way of consideration for a particular supply; (c) make rules dealing with particular cases, such as those involving payment of part of the consideration or mutual debts. (5) Regulations under this section may make different provision for different circumstances. (6) Section 6 shall apply for determining the time when a supply is to be treated as taking place for the purposes of construing this section.

(2) In section 36 of that Act (bad debts), omit subsections (4A) and (5)(ea).

(3) This section has effect in relation to supplies made on or after such day as the Commissioners of Customs and Excise may appoint by order made by statutory instrument.

Flat-rate scheme

23

(1) In Part 1 of the Value Added Tax Act 1994 (c. 23) (the charge to tax), after section 26A (inserted by section 22 above) insert—

(26B) (1) The Commissioners may by regulations make provision under which, where a taxable person so elects, the amount of his liability to VAT in respect of his relevant supplies in any prescribed accounting period shall be the appropriate percentage of his relevant turnover for that period. A person whose liability to VAT is to any extent determined as mentioned above is referred to in this section as participating in the flat-rate scheme. (2) For the purposes of this section— (a) a person’s “relevant supplies” are all supplies made by him except supplies made at such times or of such descriptions as may be specified in the regulations; (b) the “appropriate percentage” is the percentage so specified for the category of business carried on by the person in question; (c) a person’s “relevant turnover” is the total of— (i) the value of those of his relevant supplies that are taxable supplies, together with the VAT chargeable on them, and (ii) the value of those of his relevant supplies that are exempt supplies. (3) The regulations may designate certain categories of business as categories in relation to which the references in subsection (1) above to liability to VAT are to be read as references to entitlement to credit for VAT. (4) The regulations may provide for persons to be eligible to participate in the flat-rate scheme only in such cases and subject to such conditions and exceptions as may be specified in, or determined by or under, the regulations. (5) Subject to such exceptions as the regulations may provide for, a participant in the flat-rate scheme shall not be entitled to credit for input tax. This is without prejudice to subsection (3) above. (6) The regulations may— (a) provide for the appropriate percentage to be determined by reference to the category of business that a person is expected, on reasonable grounds, to carry on in a particular period; (b) provide, in such circumstances as may be prescribed, for different percentages to apply in relation to different parts of the same prescribed accounting period; (c) make provision for determining the category of business to be regarded as carried on by a person carrying on businesses in more than one category. (7) The regulations may provide for the following matters to be determined in accordance with notices published by the Commissioners— (a) when supplies are to be treated as taking place for the purposes of ascertaining a person’s relevant turnover for a particular period; (b) the method of calculating any adjustments that fall to be made in accordance with the regulations in a case where a person begins or ceases to participate in the flat-rate scheme. (8) The regulations may make provision enabling the Commissioners— (a) to authorise a person to participate in the flat-rate scheme with effect from— (i) a day before the date of his election to participate, or (ii) a day that is not earlier than that date but is before the date of the authorisation; (b) to direct that a person shall cease to be a participant in the scheme with effect from a day before the date of the direction. The day mentioned in paragraph (a)(i) above may be a day before the date on which the regulations come into force. (9) Regulations under this section— (a) may make different provision for different circumstances; (b) may make such incidental, supplemental, consequential or transitional provision as the Commissioners think fit, including provision disapplying or applying with modifications any provision contained in or made under this Act.

(2) In section 83 of that Act (appeals), after paragraph (f) insert—

(fza) a decision of the Commissioners— (i) refusing or withdrawing authorisation for a person’s liability to pay VAT (or entitlement to credit for VAT) to be determined as mentioned in subsection (1) of section 26B; (ii) as to the appropriate percentage or percentages (within the meaning of that section) applicable in a person’s case.

(3) In section 84 of that Act (further provisions relating to appeals), after subsection (4) insert—

(4ZA) Where an appeal is brought— (a) against such a decision as is mentioned in section 83(fza), or (b) to the extent that it is based on such a decision, against an assessment, the tribunal shall not allow the appeal unless it considers that the Commissioners could not reasonably have been satisfied that there were grounds for the decision.

(4) This section shall be deemed to have come into force on 24th April 2002.

Invoices

24

(1) In the Value Added Tax Act 1994 (c. 23) omit the following (which are superseded by the provision inserted by subsection (2))—

(a) subsection (9) of section 6 (time of supply);

(b) in paragraph 2 (VAT invoices etc) of Schedule 11 (administration, collection and enforcement)—

(i) in the heading, the words “, VAT invoices”;

(ii) in sub-paragraph (1), the words from “and may require” to the end;

(iii) sub-paragraphs (2) and (2A).

(2) After paragraph 2 of Schedule 11 to that Act insert—

(2A) (1) Regulations may require a taxable person supplying goods or services to provide an invoice (a “VAT invoice”) to the person supplied. (2) A VAT invoice must give— (a) such particulars as may be prescribed of the supply, the supplier and the person supplied; (b) such an indication as may be prescribed of whether VAT is chargeable on the supply under this Act or the law of another member State; (c) such particulars of any VAT that is so chargeable as may be prescribed. (3) Regulations may confer power on the Commissioners to allow the requirements of any regulations as to the information to be given in a VAT invoice to be relaxed or dispensed with. (4) Regulations may— (a) provide that the VAT invoice that is required to be provided in connection with a particular description of supply must be provided within a prescribed time after the supply is treated as taking place, or at such time before the supply is treated as taking place as may be prescribed; (b) allow for the invoice to be issued later than required by the regulations where it is issued in accordance with general or special directions given by the Commissioners. (5) Regulations may— (a) make provision about the manner in which a VAT invoice may be provided, including provision prescribing conditions that must be complied with in the case of an invoice issued by a third party on behalf of the supplier; (b) prescribe conditions that must be complied with in the case of a VAT invoice that relates to more than one supply; (c) make, in relation to a document that refers to a VAT invoice and is intended to amend it, such provision corresponding to that which may be made in relation to a VAT invoice as appears to the Commissioners to be appropriate. (6) Regulations may confer power on the Commissioners to require a person who has received in the United Kingdom a VAT invoice that is (or part of which is) in a language other than English to provide them with an English translation of the invoice (or part). (7) Regulations under this paragraph— (a) may be framed so as to apply only in prescribed cases or only in relation to supplies made to persons of prescribed descriptions; (b) may make different provision for different circumstances. (2B) (1) This paragraph applies where a taxable person provides to himself a document (a “self-billed invoice”) that purports to be a VAT invoice in respect of a supply of goods or services to him by another taxable person. (2) Subject to compliance with such conditions as may be— (a) prescribed, (b) specified in a notice published by the Commissioners, or (c) imposed in a particular case in accordance with regulations, a self-billed invoice shall be treated as the VAT invoice required by regulations under paragraph 2A above to be provided by the supplier. (3) For the purposes of section 6(4) (under which the time of supply can be determined by the prior issue of an invoice) a self-billed invoice shall not be treated as issued by the supplier. (4) For the purposes of section 6(5) and (6) (under which the time of supply can be determined by the subsequent issue of an invoice) a self-billed invoice in relation to which the conditions mentioned in sub-paragraph (2) are complied with shall, subject to compliance with such further conditions as may be prescribed, be treated as issued by the supplier. In such a case, any notice of election given or request made for the purposes of section 6(5) or (6) by the person providing the self-billed invoice shall be treated for those purposes as given or made by the supplier. (5) Regulations under this paragraph— (a) may be framed so as to apply only in prescribed cases or only in relation to supplies made to persons of prescribed descriptions; (b) may make different provision for different circumstances.

(3) For paragraph 3 of that Schedule substitute—

(3) (1) Regulations may prescribe, or provide for the Commissioners to impose in a particular case, conditions that must be complied with in relation to— (a) the provision by electronic means of any item to which this paragraph applies; (b) the preservation by electronic means of any such item or of information contained in any such item. (2) The items to which this paragraph applies are— (a) any VAT invoice; (b) any document that refers to a VAT invoice and is intended to amend it; (c) any invoice described in regulations made for the purposes of section 6(8)(b) or 12(1)(b). (3) Regulations under this paragraph may make different provision for different circumstances.

(4) The following amendments to the Value Added Tax Act 1994 (c. 23) are consequential on other amendments made by this section—

(a) in section 6(15), for “paragraph 2(1)” substitute “ paragraph 2A ”;

(b) in section 83 (appeals), for paragraph (z) substitute—

(z) any conditions imposed by the Commissioners in a particular case by virtue of paragraph 2B(2)(c) or 3(1) of Schedule 11

;

(i) in subsection (5), for “paragraph 2” substitute “ paragraph 2A ”;

(ii) in subsection (6), for “section 6(9) or paragraph 7 of Schedule 4” substitute “ paragraph 7 of Schedule 4 or paragraph 2B(4) of Schedule 11 ”.

(5) This section comes into force on such day as the Treasury may by order made by statutory instrument appoint, and different days may be appointed for different provisions or different purposes.

(6) An order under subsection (5) may contain such transitional provisions and savings as appear to the Treasury necessary or expedient in connection with the provisions brought into force.

Relief from VAT on acquisition if importation would attract relief

25

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Part 3 — Income tax, corporation tax and capital gains tax

Chapter 1 — Charge and rate bands

Income tax

Charge and rates for 2002-03

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Indexed rate bands for 2002-03: PAYE deductions etc

27

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Personal allowance for 2003-04 for those aged under 65

28

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Personal allowances for 2003-04 for those aged 65 or over

29

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Corporation tax

Charge and main rate for financial year 2003

30

Corporation tax shall be charged for the financial year 2003 at the rate of 30%.

Small companies' rate and fraction for financial year 2002

31

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Corporation tax starting rate and fraction for financial year 2002

32

For the financial year 2002—

(a) the corporation tax starting rate shall be 0%, and

(b) the fraction mentioned in section 13AA(3) of the Taxes Act 1988 (marginal relief for small companies) shall be 19/400ths.

Chapter 2 — Other provisions

Employer-subsidised public transport bus services

33

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Car fuel: calculation of cash equivalent of benefit

34

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Statutory paternity pay and statutory adoption pay

35

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Exemption of minor benefits: application to non-cash vouchers

36

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Minor amendments to Schedule E charge

37

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Provision of services through an intermediary: minor amendments

38

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39

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Treatment of deductions from payments to sub-contractors

40

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) In section 829 of the Taxes Act 1988 (application of Income Tax Acts to public departments), after subsection (2) insert—

(2A) Subsections (1) and (2) above have effect in relation to Chapter 4 of Part 13 of this Act (sub-contractors in the construction industry) as if the whole of any deduction required to be made under section 559 were in all cases a deduction of income tax.

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) This section has effect in relation to deductions made under section 559 of the Taxes Act 1988 on or after 6th April 2002.

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Parliamentary visits to EU candidate countries: tax treatment of members' expenses

41

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Chargeable gains

Reallocation within group of gain or loss accruing under section 179

42

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) In Schedule 7B to that Act (modification of Act in relation to overseas life insurance companies), immediately before paragraph 8 insert—

(7A) In section 179A(12), the words “section 11(2)(b), (c) or (d) of the Taxes Act” shall be treated as substituted for “section 10(3)".

(3) In section 97(1) of the Inheritance Tax Act 1984 (c. 51) (transfers within group, etc)—

(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) in paragraph (aa) for “the deemed transfer” substitute “ the election ”.

(4) This section applies—

(a) in relation to a case where a company is treated by virtue of section 179(3) of the Taxation of Chargeable Gains Act 1992 (c. 12) as having sold and immediately reacquired an asset, where the company’s ceasing to be a member of the group in question happens on or after 1st April 2002;

(b) in relation to a case where a company is so treated by virtue of section 179(6) of that Act, where the relevant time (within the meaning of that subsection) is on or after that date.

Roll-over of degrouping charge on business assets

43

(1) After section 179A of the Taxation of Chargeable Gains Act 1992 (c. 12) (inserted by section 42 above) insert—

(179B) (1) Where a company is treated by virtue of section 179(3) or (6) as having sold and immediately reacquired an asset at market value, relief under section 152 or 153 (roll-over relief on replacement of business assets) is available in accordance with this section in relation to any gain accruing to the company on the deemed sale. (2) For this purpose, sections 152 and 153 and the other enactments specified in Schedule 7AB apply with the modifications set out in that Schedule. (3) Where there has been an election under section 179A, any claim for relief available in accordance with this section must be made by company C rather than company A. (4) For this purpose, the enactments modified by Schedule 7AB have effect as if— (a) references to company A, except those in sections 152(1)(a) and (1B), 153(1B), 153A(5), 159(1), 175 and 198(1), were to company C; (b) the references to “that company” in section 159(1) and “the company” in section 185(3)(b) were to company C; (c) the reference to “that trade” in section 198(1) were to a ring fence trade carried on by company C. (5) Where there has been an election under section 179A in respect of part only of the chargeable gain accruing on the deemed sale of an asset, the enactments modified by Schedule 7AB and subsections (3) and (4) above apply as if the deemed sale had been of a separate asset representing a corresponding part of the asset; and any necessary apportionments shall be made accordingly. (6) A reference in this section to company A or to company C is to the company referred to as such in section 179A.

(2) After Schedule 7AA to the 1992 Act insert the Schedule 7AB set out in Schedule 7 to this Act.

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) This section applies—

(a) in relation to a case where a company is treated by virtue of section 179(3) of the 1992 Act as having sold and immediately reacquired an asset, where the company’s ceasing to be a member of the group in question happens on or after 1st April 2002;

(b) in relation to a case where a company is so treated by virtue of section 179(6) of that Act, where the relevant time (within the meaning of that subsection) is on or after that date.

Exemptions for disposals by companies with substantial shareholding

44

(1) In Chapter 1 of Part 6 of the Taxation of Chargeable Gains Act 1992 (c. 12) (provisions relating to chargeable gains of companies), after section 192 insert—

Disposals by companies with substantial shareholding (192A) Schedule 7AC (exemptions for disposal of shares etc by companies with substantial shareholding) has effect.

(2) Schedule 8 to this Act (exemptions for disposals by companies with substantial shareholding) has effect.

In that Schedule—

Part 1 contains Schedule 7AC to be inserted after Schedule 7AB to the Taxation of Chargeable Gains Act 1992 (c. 12) (inserted by Schedule 7 to this Act); and

Part 2 contains consequential amendments.

(3) This section and Schedule 8 to this Act apply in relation to disposals on or after 1st April 2002.

(4) Paragraph 38 of the Schedule 7AC inserted by that Schedule (degrouping: time when deemed sale and reacquisition treated as taking place) has effect where the time of degrouping or relevant time (as defined for the purposes of that paragraph) is on or after that date.

(5) The amendment made by paragraph 2 of Schedule 8 to this Act has effect where the company in question ceases to be a member of the group in question on or after that date.

45

(1) Schedule 9 to this Act (chargeable gains: share exchanges and company reconstructions) has effect.

(2) In that Schedule—

Part 1 provides for the replacement of sections 135 and 136 of the Taxation of Chargeable Gains Act 1992;

Part 2 makes consequential amendments; and

Part 3 provides for commencement.

Taper relief: holding period for business assets

46

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Taper relief: minor amendments

47

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Use of trading losses against chargeable gains

48

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Election to forgo roll-over relief on transfer of business

49

(1) After section 162 of the Taxation of Chargeable Gains Act 1992 (c. 12) (roll-over relief on transfer of business) insert—

(162A) (1) Section 162 shall not apply where the transferor makes an election under this section. (2) An election under this section must be made by a notice given to an officer of the Board no later than the relevant date. (3) Except where subsection (4) below applies, the relevant date is the second anniversary of the 31st January next following the year of assessment in which the transfer of the business took place. (4) Where, by the end of the year of assessment following the one in which the transfer of the business took place, the transferor has disposed of all the new assets, the relevant date is the first anniversary of the 31st January next following the year of assessment in which the transfer of the business took place. (5) For the purposes of subsection (4) above— (a) a disposal of any of the new assets by the transferor shall be disregarded if it falls within section 58(1) (transfers between husband and wife); but (b) where a disposal of any assets to a person is disregarded by virtue of paragraph (a) above, a subsequent disposal by that person of any of those assets (other than a disposal to the transferor) shall be regarded as a disposal by the transferor. (6) All such adjustments shall be made, whether by way of discharge or repayment of tax, the making of assessments or otherwise, as are required to give effect to an election under this section. (7) Where, immediately before it was transferred, the business was owned by two or more persons— (a) each of them has a separate entitlement to make an election under this section; (b) an election made by a person by virtue of paragraph (a) above shall apply only to— (i) the share of the amount of the gain on the old assets, and (ii) the share of the new assets, that is attributable to that person for the purposes of this Act. (8) The reference in subsection (7) above to ownership by two or more persons includes, in Scotland as well as elsewhere in the United Kingdom, a reference to ownership by a partnership consisting of two or more persons. (9) Expressions used in this section and in section 162 have the same meaning in this section as in that one. But references in this section to new assets also include any shares or debentures that are treated by virtue of one or more applications of section 127 (including that section as applied by virtue of any enactment relating to chargeable gains) as the same asset as the new assets.

(2) This section applies in relation to a transfer of a business on or after 6th April 2002.

Shares acquired on same day: election for alternative treatment

50

(1) After section 105 of the Taxation of Chargeable Gains Act 1992 (c. 12) (disposal on or before day of acquisition of shares and other unidentified assets) insert—

(105A) (1) Subsection (2) below applies where an individual— (a) acquires shares (“the relevant shares”) of the same class, on the same day and in the same capacity, and (b) some of the relevant shares (“the approved-scheme shares”) are shares acquired by him as a result of— (i) the exercise of a qualifying option within the meaning of paragraph 1(1) of Schedule 14 to the Finance Act 2000 (enterprise management incentives) in circumstances where paragraph 44, 45 or 46 of that Schedule (exercise of option to acquire shares) applies, or (ii) the exercise of an option to which subsection (1) of section 185 of the Taxes Act (approved share option schemes) applies in circumstances where paragraphs (a) and (b) of subsection (3) of that section apply. (2) Where the individual first makes a disposal of any of the relevant shares, he may elect for subsections (3) to (5) below to have effect in relation to that disposal and all subsequent disposals of any of those shares. (3) In circumstances where section 105 applies, that section shall have effect as if— (a) paragraph (a) of subsection (1) of that section required the approved-scheme shares to be treated as acquired by the individual by a single transaction separate from the remainder of the relevant shares (which shall also be treated by virtue of that paragraph as acquired by the individual by a single transaction), and (b) subsection (1) of that section required the approved-scheme shares to be treated as disposed of after the remainder of the relevant shares. (4) If the relevant shares include shares to which relief under Chapter 3 of Part 7 of the Taxes Act or deferral relief (within the meaning of Schedule 5B to this Act) is attributable— (a) paragraph 4(4) of that Schedule has effect as if it required the approved-scheme shares falling within paragraph (a), (b), (c) or (d) of that provision to be treated as disposed of after the remainder of the relevant shares falling within the paragraph in question, and (b) section 299 of the Taxes Act has effect for the purposes of section 150A(4) below as if it required— (i) the approved-scheme shares falling within paragraph (a), (b), (c) or (d) of subsection (6A) of section 299 of that Act to be treated as disposed of after the remainder of the relevant shares falling within the paragraph in question, and (ii) the approved-scheme shares to which subsection (6B) of that section applies to be treated as disposed of after the remainder of the relevant shares to which that subsection applies. (5) Where section 127 applies in relation to any of the relevant shares (“the reorganisation shares”), that section shall apply separately to such of those shares as are approved-scheme shares and to the remainder of the reorganisation shares (so that those approved-scheme shares and the remainder of the reorganisation shares are treated as comprised in separate holdings of original shares and identified with separate new holdings). (6) In subsection (5)— (a) the reference to section 127 includes a reference to that section as it is applied by virtue of any enactment relating to chargeable gains, and (b) “original shares” and “new holding” have the same meaning as in section 127 or (as the case may be) that section as applied by virtue of the enactment in question. (7) For the purposes of subsection (1) above— (a) any shares to which relief under Chapter 3 of Part 7 of the Taxes Act is attributable and which were transferred to an individual as mentioned in section 304 of that Act, and (b) any shares to which deferral relief (within the meaning of Schedule 5B to this Act), but not relief under that Chapter, is attributable and which were acquired by an individual on a disposal to which section 58 above applies, shall be treated as acquired by the individual on the day on which they were issued. (8) In this section the references to Chapter 3 of Part 7, section 299 and section 304 of the Taxes Act shall be read as references to those provisions as they apply to shares issued after 31st December 1993 (enterprise investment scheme). (105B) (1) The provisions of section 105A have effect in the case of any disposal notwithstanding that some or all of the securities disposed of are otherwise identified— (a) by the disposal, or (b) by a transfer or delivery giving effect to it. (2) An election must be made, by a notice given to an officer of the Board, on or before the first anniversary of the 31st January next following the year of assessment in which the individual first makes a disposal of any of the relevant shares. (3) Where— (a) an election is made in respect of the relevant shares, and (b) any shares (“the other shares”) acquired by the individual on the same day and in the same capacity as the relevant shares cease to be treated under section 104(4) as shares of a different class from the relevant shares, the election shall have effect in respect of the other shares from the time they cease to be so treated. (4) In determining for the purposes of section 105A(2) and subsection (2) above whether the individual has made a disposal of any of the relevant shares, sections 122(1) and 128(3) shall be disregarded. (5) No election may be made in respect of ordinary shares in a venture capital trust. For this purpose “ordinary shares” has the meaning given in section 151A(7). (6) For the purposes of section 105A, shares in a company shall not be treated as being of the same class unless they are so treated by the practice of a recognised stock exchange, or would be so treated if dealt with on that recognised stock exchange. (7) In section 105A(2) to (5) and subsections (2) to (4) above, any reference to the relevant shares or to the approved-scheme shares includes a reference to the securities (if any) directly or indirectly derived from the shares in question by virtue of one or more applications of section 127 (including that section as applied by virtue of any enactment relating to chargeable gains). (8) In this section— - “the approved-scheme shares” has the same meaning as in section 105A; - “election” means an election under that section; - “the relevant shares” has the same meaning as in that section; and - “securities” has the meaning given in section 104(3); and in subsection (4) the reference to section 128(3) includes a reference to that provision as it is applied by virtue of any enactment relating to chargeable gains.

(2) The amendment made by subsection (1) has effect in relation to shares acquired by an individual on or after 6th April 2002.

(3) For this purpose—

(a) any shares to which relief under Chapter 3 of Part 7 of the Taxes Act 1988 is attributable and which were transferred to an individual as mentioned in section 304 of that Act, and

(b) any shares to which deferral relief (within the meaning of Schedule 5B to the Taxation of Chargeable Gains Act 1992 (c. 12)), but not relief under that Chapter, is attributable and which were acquired by an individual on a disposal to which section 58 of that Act applies,

shall be treated as acquired by the individual on the day on which they were issued.

(4) In subsection (3)(a), the references to Chapter 3 of Part 7 and section 304 of the Taxes Act 1988 shall be read as references to those provisions as they apply to shares issued after 31st December 1993 (enterprise investment scheme).

Deduction of personal losses from gains treated as accruing to settlors

51

Schedule 11 to this Act (deduction of personal losses from gains treated as accruing to settlors) has effect.

Capital gains tax: variation of dispositions taking effect on death

52

(1) In section 62(7) of the Taxation of Chargeable Gains Act 1992 (c. 12) (election to treat subsequent variation of dispositions taking effect on death as if effected by deceased) for the words from “unless” to the end of the subsection substitute “ unless the instrument contains a statement by the persons making the instrument to the effect that they intend the subsection to apply to the variation. ”.

(2) This section applies in relation to instruments made on or after 1st August 2002.

New reliefs

Tax relief for expenditure on research and development

53

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Tax relief for expenditure on vaccine research etc

54

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Gifts of medical supplies and equipment

55

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R&D tax relief for small and medium-sized enterprises: minor and consequential amendments

56

Schedule 15 to this Act (which makes minor amendments to Schedule 20 to the Finance Act 2000 (tax relief for R&D expenditure of small and medium-sized enterprises), including amendments consequential on Schedules 12 and 13 to this Act) has effect for accounting periods ending on or after 1st April 2002.

Community investment tax relief

57

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) Schedule 17 to this Act (which makes provision consequential on the introduction of community investment tax relief) has effect.

(3) Schedules 16 and 17 shall come into force on such day as the Treasury may by order appoint.

(4) On and after that day—

(a) Schedule 16 shall have effect in relation to—

(i) investments made on or after such day as the Treasury may so appoint, being a day not earlier than 17th April 2002, and

(ii) claims made on or after such day as the Treasury may so appoint,

(b) paragraphs 2 to 4 of Schedule 17 shall have effect for years of assessment ending on or after the day appointed under paragraph (a)(i), and

Relief for community amateur sports clubs

58

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Cars with low carbon dioxide emissions

59

Schedule 19 to this Act (first-year allowances in respect of expenditure on cars with low CO₂ emissions and exemption from single asset pool rules) has effect in relation to expenditure incurred on or after 17th April 2002.

Expense of hiring cars with low carbon dioxide emissions

60

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Plant or machinery for gas refuelling station: first-year allowances

61

Schedule 20 to this Act (first-year allowances in respect of expenditure on plant or machinery for gas refuelling station) has effect in relation to expenditure incurred on or after 17th April 2002.

Expenditure on green technologies: leasing

62

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

First-year allowances for expenditure wholly for a ring fence trade

63

(1) Schedule 21 to this Act shall have effect.

(2) In that Schedule—

(a) Part 1 makes provision for and in connection with first-year allowances under Part 2 of the Capital Allowances Act 2001 in respect of expenditure incurred by a company on the provision of plant or machinery for use wholly for the purposes of a ring fence trade chargeable to tax under section 330(1) of the Corporation Tax Act 2010; and

(b) Part 2 makes provision for and in connection with first-year allowances under Part 5 of that Act (mineral extraction allowances) in respect of expenditure incurred by a company wholly for the purposes of such a trade.

(3) The amendments made by that Schedule have effect in relation to expenditure incurred on or after 17th April 2002.

Computation of profits

Adjustment on change of basis

64

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Postponement of change to mark to market in certain cases

65

(1) This section applies in relation to the computation in accordance with the provisions applicable for the purposes of section 35 of the Corporation Tax Act 2009 (charge on trade profits) of the profits of the insurance business, other than life assurance business, of—

(a) an insurance company,

(b) a corporate member of Lloyd’s, or

(2) For periods of account to which this section applies nothing in—

(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) section 46 of the Corporation Tax Act 2009 (computation of profits to be on basis giving true and fair view),

prevents the company from computing the profits of that business on a realisation basis rather than a mark to market basis.

A “realisation basis” means not recognising a profit or loss on an asset until it is realised, and a “mark to market basis” means bringing assets into account in each period of account at a fair value.

(3) Subject to subsection (4), this section applies in relation to any period of account that—

(a) began before 1st August 2001, and

(b) ends before 31st July 2002.

(4) This section does not apply if—

(a) an earlier period of account beginning on or after 1st January 2001 ended with an accounting date different from that with which the previous period of account ended,

(b) the change of accounting date was notified—

(i) to the registrar of companies, or

(ii) in the case of a company established under the law of a country or territory outside the United Kingdom, to the corresponding authority of that country or territory,

on or after 17th April 2002, and

(c) the purpose, or one of the purposes, for which the change was made was so that a subsequent period of account would be one to which section 64 above applies (computation of profits: adjustment on change of basis).

(5) In this section—

“controlled foreign company” has the same meaning as in Chapter 4 of Part 17 of the Taxes Act 1988; and

“corporate member of Lloyd’s” means a corporate member as defined in section 230(1) of the Finance Act 1994 (c. 9).

Election to continue postponement of mark to market

66

(1) Where section 65 (postponement of change to mark to market in certain cases) applies in relation to a period of account, the company may elect that it shall continue to apply in relation to subsequent periods of account as regards assets held by it on 1st January 2002.

Any such election must be made within twelve months after the end of the accounting period of the company current on that date.

(2) An insurance company that carries on both long-term business and business other than long-term business may make an election under this section limited to assets held by the company otherwise than in the company’s long-term insurance fund.

(3) For the purpose of determining whether an election under this section applies to an asset in a case where—

(a) assets are realised by the company in an accounting period beginning on or after 1st January 2002,

(b) the assets are of such a kind that the particular assets realised are not readily identifiable,

(d) some but not all of the company’s holding was acquired after 1st January 2002,

assets realised shall be identified with assets acquired on the same basis as that used by the company for accounting purposes, unless the basis used by the company is “last in, first out” in which case assets realised shall be identified with assets acquired on or before 1st January 2002 in priority to assets acquired after that day.

(4) Where a company has made an election under this section and—

(a) an asset in relation to which the election has effect is transferred to another company (“the transferee company”) in pursuance of an insurance business transfer scheme, and

(b) immediately after the transfer either—

(i) the transferee company is resident in the United Kingdom, or

(ii) the asset is held for the purposes of a business carried on by the transferee company in the United Kingdom through a branch or agency,

this section applies as if the transferee company had made an election under this section in relation to that asset.

(5) ...

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Mark to market: miscellaneous amendments

67

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) In section 81 of the Finance Act 1999 (c. 16) (acquisitions disregarded under insurance companies concession), at the end add—

(13) If the relevant company changes from— (a) not recognising a profit or loss on an asset until it is realised, to (b) bringing assets into account in each period of account at a fair value, then, in calculating the amount of any adjustment required under Schedule 22 to the Finance Act 2002 (calculation of adjustment on change of basis), the amount to be taken into account as the cost of the asset in relation to a period of account before the change is the cost of the previous acquisition.

(4) The provisions of this section come into force as follows—

(a) the amendments in subsections (1) and (2) apply in relation to periods of account ending on or after 1st August 2001;

(b) the amendment in subsection (3) applies wherever an adjustment falls to be made under Schedule 22 to the Finance Act 2002 (see Part 5 of that Schedule).

Expenditure involving crime

68

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financial instruments

Qualifying contracts for unallowable purposes

69

Forward premiums and discounts under currency contracts

70

Loan relationships

Accounting method where rate of interest etc is reset

71

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Convertible securities etc: loan relationships

72

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Convertible securities etc: issuing company not to be connected company

73

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Convertible securities etc: debtor relationships

74

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Asset-linked loan relationships

75

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Asset-linked loan relationships involving guaranteed returns

76

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Loan relationships ceasing to be within section 93 of the Finance Act 1996

77

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Guaranteed returns on transactions involving futures and options

78

Foreign exchange gains and losses, loan relationships and currency

Forex and exchange gains and losses from loan relationships etc

79

(1) The following provisions shall cease to have effect—

(a) paragraph 4 of Schedule 9 to the Finance Act 1996 (c. 8) (which excludes foreign exchange gains and losses from the computation of credits and debits under the loan relationships legislation); and

(b) in consequence, sections 125 to 169 of the Finance Act 1993 (c. 34) (taxation of foreign exchange gains and losses).

(2) Schedule 23 to this Act (which makes provision in relation to exchange gains and losses from loan relationships etc) shall have effect.

(3) The amendments made by subsection (1) and by Parts 1 and 2 of Schedule 23 have effect in relation to accounting periods beginning on or after 1st October 2002.

Corporation tax: currency

80

(1) Schedule 24 to this Act (which makes provision in relation to corporation tax and currency) shall have effect.

(2) This section has effect in relation to accounting periods beginning on or after 1st October 2002.

Transitional provision

81

(1) The Treasury may by regulations make such transitional or consequential provision, or such savings (with or without modifications), as they may from time to time consider appropriate in consequence of, or otherwise in connection with, any provision of section 79 or 80 or Schedule 23 or 24 (or any repeal consequential on any such provision).

(2) The power conferred by subsection (1) includes power—

(a) to make different provision for different cases or different purposes;

(b) to amend any statutory instrument; and

(3) The provision that may be made by virtue of subsection (1) or (2) includes provision for or in connection with bringing amounts into account—

(a) for the purposes of the Taxation of Chargeable Gains Act 1992 (c. 12), as if they were chargeable gains or allowable losses; or

(b) for the purposes of Part 5 of the Corporation Tax Act 2009, as if they were credits or debits in respect of a loan relationship or a related transaction of the company concerned.

(4) Nothing in any provision of Schedule 23 or 24 shall prejudice the operation of this section.

(5) Nothing in this section or in Schedule 23 or 24 limits the operation of section 16 or 17 of the Interpretation Act 1978 (c. 30) (effect of repeals).

Loan relationships and other money debts

Loan relationships: general amendments

82

(1) Schedule 25 to this Act (which makes provision in relation to loan relationships) shall have effect.

(2) The amendments made by Parts 1 and 2 of that Schedule have effect in relation to accounting periods beginning on or after 1st October 2002.

Derivative contracts

83

(1) The following shall have effect—

(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) Schedule 27 to this Act (which makes minor and consequential amendments relating to the taxation of derivative contracts); and

(c) Schedule 28 to this Act (which contains transitional provisions etc in connection with the coming into force of this section and Schedules 26 and 27).

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) This section has effect in relation to accounting periods beginning on or after 1st October 2002.

(4) Subsection (3) is subject to any specific provision of Schedule 28.

Intangible fixed assets

Gains and losses from intangible fixed assets of company

84

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) Schedule 30 to this Act contains consequential amendments.

Insurance

Gains of insurance company from venture capital investment partnership

85

(1) In Chapter 3 of Part 6 of the Taxation of Chargeable Gains Act 1992 (c. 12) (insurance), after section 211 insert—

(211A) Schedule 7AD to this Act has effect with respect to the gains of an insurance company from a venture capital investment partnership.

(2) After Schedule 7AC to that Act (inserted by Part 1 of Schedule 8 to this Act) insert the Schedule 7AD set out in Schedule 31 to this Act.

Lloyd’s underwriters

86

(1) Schedule 32 to this Act (which makes provision about the taxation of Lloyd’s underwriters) has effect.

(2) The amendments in that Schedule have effect in relation to quota share contracts (within the meaning of section 178 of the Finance Act 1993 (c. 34) or section 225 of the Finance Act 1994) entered into on or after 17th April 2002.

Life policies etc: chargeable events

87

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

International matters

Extension of power to give effect to double taxation arrangements

88

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) The following amendments are consequential on that above—

(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) This section applies on and after the date on which this Act is passed in relation to arrangements made before that date (as well as in relation to arrangements made on or after that date).

Controlled foreign companies: territorial exclusions from s.748 exemptions

89

(1) In section 748 of the Taxes Act 1988 (controlled foreign companies: cases where no apportionment falls to be made under section 747(3)) after subsection (5) insert—

(6) This section is subject to section 748A.

(2) After section 748 of the Taxes Act 1988 insert—

(748A) Territorial exclusions from exemption under section 748 (1) Nothing in section 748 prevents an apportionment under section 747(3) falling to be made as regards an accounting period of a controlled foreign company if the company— (a) is a company incorporated in a territory to which this section applies as respects that accounting period; or (b) is at any time in that accounting period liable to tax in such a territory by reason of domicile, residence or place of management; or (c) at any time in that accounting period carries on business through a branch or agency in such a territory. (2) The condition in subsection (1)(c) above is not satisfied as regards an accounting period of a controlled foreign company if the business carried on by the company in that period through branches or agencies in territories to which this section applies, taken as a whole, is only a minimal part of the whole of the business carried on by the company in that period. (3) The territories to which this section applies as respects an accounting period of a controlled foreign company are those specified as such in regulations made by the Treasury. (4) Regulations under subsection (3) above— (a) may make different provision for different cases or with respect to different territories; and (b) may contain such incidental, supplemental, consequential or transitional provision as the Treasury may think fit. (5) A statutory instrument containing regulations under subsection (3) above shall not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.

(3) This section has effect in relation to accounting periods of controlled foreign companies beginning on or after the day on which this Act is passed.

(4) In this section “accounting period” and “controlled foreign company” have the same meaning as in Chapter 4 of Part 17 of the Taxes Act 1988.

Controlled foreign companies and treaty non-resident companies

90

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Supplementary charge in respect of ring fence trades

91

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Assessment, recovery and postponement of supplementary charge

92

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) In section 59E of the Taxes Management Act 1970 (c. 9) (further provision as to when corporation tax is due and payable) in subsection (11) (extension of references in the section to corporation tax) after paragraph (b) add—

(c) to any sum chargeable on a company under section 501A(1) of the principal Act (supplementary charge in respect of ring fence trades) as if it were an amount of corporation tax chargeable on the company

(3) In Schedule 18 to the Finance Act 1998 (c. 36) (company tax returns: assessments and related matters) in paragraph 1 (meaning of “tax”) in the second sentence (amounts assessable or chargeable as if they were corporation tax) for the word “and” immediately preceding the paragraph beginning “section 747(4)(a)” substitute the following paragraph—

section 501A(1) of that Act (supplementary charge in respect of ring fence trades), and

(4) In paragraph 8 of that Schedule (calculation of tax payable) after paragraph number 1 of the third step insert—

(1A) Any sum chargeable under section 501A(1) of that Act (supplementary charge in respect of ring fence trades).

(5) Regulation 3 of the Instalment Payment Regulations (large companies) is amended as follows.

(6) In paragraph (1) (which, subject to paragraphs (2) and (3), defines a large company) for “paragraphs (2) and (3),” substitute “ paragraphs (2) to (3A), ”.

(7) After paragraph (3) insert—

(3A) Any question whether a company is, or is not, a large company as respects an accounting period beginning on or after 17th April 2002 shall, so far as not falling to be determined by reference to the company’s total liability, be determined as it would have been determined apart from section 501A of the Taxes Act (supplementary charge in respect of ring fence trades).

(8) The amendment by this section of any provision contained in regulations shall not be taken to have prejudiced any power to make further regulations revoking or amending that provision, whether in relation to the same or any other chargeable periods.

(9) In this section “the Instalment Payment Regulations” means the Corporation Tax (Instalment Payments) Regulations 1998 (S.I. 1998/3175).

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Finance Act 2002

Part 1 — Excise duties

Tobacco products duty

Rates of tobacco products duty

1

Alcoholic liquor duties

Cars registered on or after 1st March 2001: rates of duty

2

Invoices

3

Shares acquired on same day: election for alternative treatment

4

Hydrocarbon oil duties

Gifts of real property to charity

5

Regulating trade in rebated heavy oil etc

6

The Finance Act 1994

7

Betting and gaming duties

Commercial exploitation

8

Partnerships involving companies

9

Limits on credit: corporation tax

10

Exchange gains and losses where derivative contracts not on arm’s length terms

11

Profits arising from derivative contracts

12

Carry back of net losses on derivative contracts to which paragraph 45A applies

13

Contracts becoming held for purposes of trade

14

Vehicle excise duty

Derivative contracts and relevant contracts

15

Vans registered on or after 1st March 2001: rates of duty

16

Introduction

17

Motorcycles (and motorcycle trade licences): rates of duty

18

Registered vehicles etc

19

Calculating cylinder capacity of vehicles

20

General

Drawback of excise duty

21

Part 2 — Value added tax

Disallowance of input tax where consideration not paid

22

Flat-rate scheme

23

Invoices

24

Relief from VAT on acquisition if importation would attract relief

25

Part 3 — Income tax, corporation tax and capital gains tax

Chapter 1 — Charge and rate bands

Income tax

Charge and rates for 2002-03

26

Indexed rate bands for 2002-03: PAYE deductions etc

27

Personal allowance for 2003-04 for those aged under 65

28

Personal allowances for 2003-04 for those aged 65 or over

29

Corporation tax

Charge and main rate for financial year 2003

30

Small companies' rate and fraction for financial year 2002

31

Corporation tax starting rate and fraction for financial year 2002

32

Chapter 2 — Other provisions

Employment income and related matters

Employer-subsidised public transport bus services