Finance Act 2003

• (2) In paragraph 15 (exemption for supplies to combined heat and power stations)—

• (a) for paragraph (b) of sub-paragraph (4) substitute—

(b) the “efficiency percentage” for a combined heat and power station shall be determined in accordance with regulations under paragraph 149.

;

• (b) omit sub-paragraph (5).

• (3) In paragraph 148 (meaning of “combined heat and power station” etc)—

• (a) in sub-paragraphs (2)(c) and (3)(c), for “complying with sub-paragraph (6) and (so far as applicable)” substitute “ complying (so far as applicable) with ”;

• (b) omit sub-paragraph (6) (efficiency percentage to be stated on certificate of full or partial exemption).

• (4) In paragraph 149(1) (determination of efficiency percentages for combined heat and power stations) omit “the percentage that is to be stated in a certificate under paragraph 148 as”.

• (5) This section has effect in relation to supplies made on or after such day as the Treasury may by order made by statutory instrument appoint.

Supplies not known to be taxable when made, etc

190

• (1) In Schedule 6 to the Finance Act 2000 (climate change levy), paragraph 24 (deemed supply: change of circumstances or intentions) is amended as follows.

• (2) In the heading, for “change of circumstances or intentions” substitute “ change of circumstances etc ”.

• (3) For sub-paragraphs (1) and (2) substitute—

(1) This paragraph applies in the following cases. (1A) The first case is where— (a) a supply of a taxable commodity has been made, (b) the supply was not a taxable supply, and (c) there is such a change in circumstances or any person’s intentions that, if the changed circumstances or intentions had existed at the time the supply was made, the supply would have been a taxable supply. (1B) The second case is where— (a) a supply of a taxable commodity has been made, (b) the supply was made on the basis that it was not a taxable supply, and (c) it is later determined that the supply was (to any extent) a taxable supply. (2) This paragraph does not apply where the reason that— (a) the supply was not a taxable supply, or (b) the supply was made on the basis that it was not a taxable supply, is that it was, or was thought to be, exempt from the levy under paragraph 19 or 20A (exemption for supply of electricity produced from renewable sources or in combined heat and power stations) (but see paragraph 20 or 20B).

.

• (4) In sub-paragraph (3), at the beginning insert “ Where this paragraph applies, ”.

• (5) After that sub-paragraph insert—

(3A) Where— (a) had matters been as mentioned in sub-paragraph (1A)(c), only part of the supply would have been a taxable supply, or (b) the determination referred to in sub-paragraph (1B)(c) is that only part of the supply was a taxable supply, the reference in sub-paragraph (3) to the commodity shall be read as a reference to a corresponding part of it.

.

• (6) In sub-paragraph (5) for “sub-paragraph (1)(c)” substitute “ sub-paragraph (1A)(c) ”.

• (7) In paragraph 34(3) of that Act (time when deemed supply under paragraph 24 treated as made) at the end insert “ or, as the case may be, upon the later determination ”.

• (8) This section has effect in relation to supplies made on or after such day as the Treasury may by order made by statutory instrument appoint.

Deemed supplies

191

• (1) Schedule 6 to the Finance Act 2000 (c. 17) (climate change levy) is amended as follows.

• (2) In paragraph 5(3) (levy chargeable on deemed supply of electricity) for “paragraph 23(3)” substitute “ paragraph 20(6)(a), 20B(6)(a), 23(3) or 24 ”.

• (3) In paragraph 6 (supplies of gas)—

• (a) after sub-paragraph (2) insert—

(2A) Levy is chargeable on a supply of gas that is deemed to be made under paragraph 24.

;

• (b) in sub-paragraph (3) for “sub-paragraphs (1) and (2)” substitute “ sub-paragraph (1), (2) or (2A) ”.

• (4) Subsection (2) has effect in relation to supplies deemed to be made on or after 31st March 2003, and subsection (3) in relation to supplies deemed to be made on or after the day on which this Act is passed.

Amendments about registration, payment etc

192

• (1) Schedule 6 to the Finance Act 2000 (c. 17) (climate change levy) is amended as follows.

• (2) In paragraph 41 (returns and payment of levy)—

• (a) for paragraph (a) of sub-paragraph (1) (liability to account for levy by reference to accounting periods) substitute—

(a) for persons liable to account for levy to do so— (i) by reference to such periods (“accounting periods”) as may be determined by or under the regulations, or (ii) in such other way as may be so determined;

;

• (b) in sub-paragraph (1)(c) (liability to pay) omit “for any period”;

• (c) after sub-paragraph (2) insert—

(2A) Paragraph 91(5) provides for the application of Part 7 of this Schedule (recovery and interest) in relation to cases where, by virtue of regulations under sub-paragraph (1)(a)(ii) above, a person is liable to account for levy otherwise than by reference to accounting periods. (2B) Regulations under this paragraph may provide for the application of any provision of this Schedule in relation to such cases.

.

• (3) In paragraph 53 (requirement to be registered), after sub-paragraph (3) insert—

(4) Regulations made by the Commissioners may provide that, in such cases or circumstances and subject to such conditions or requirements as may be prescribed in the regulations, the Commissioners may exempt a person from the requirement to be registered.

.

• (4) In paragraph 62(2)(b) (provision in regulations about bringing tax credit into account) for “levy due from him for such accounting period or periods” substitute “ such levy due from him ”.

• (5) In paragraph 78 (assessments of amounts of levy due), after sub-paragraph (1) insert—

(1A) Where it appears to the Commissioners— (a) that any levy for which a person is liable to account otherwise than by reference to an accounting period has become due, and (b) that there has been a default by that person that falls within sub-paragraph (2), they may assess the amount of that levy to the best of their judgement and notify it to him.

.

• (6) In paragraph 91 (interpretation etc of Part 7) at the end insert—

(5) In relation to cases where, by virtue of regulations under paragraph 41(1)(a)(ii), a person is liable to account for levy otherwise than by reference to accounting periods, this Part of this Schedule shall have effect as if— (a) references to levy due for “an” or “any” accounting period were references simply to levy due; (b) references to levy due for a specified accounting period were references to the levy in question; (c) references to an assessment for a specified accounting period were references to an assessment in respect of the levy in question; (d) any time limit framed by reference to the end of the accounting period for which levy is due were framed by reference to the date on which payment of the levy is due; (e) references to the making of a return for an accounting period were references to the payment of the levy in question; (f) references to the amount shown in such a return were references to the amount of levy paid; (g) paragraph 88(8) and (9) were omitted.

.

• (7) In paragraph 93(4) (criminal penalty for false return)—

• (a) in paragraph (a) after “return” insert “ or other notification ”;

• (b) in paragraph (b), and in the words after that paragraph, after “return” insert “ or notification ”.

• (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (9) In paragraph 125(1) (obligation to keep records) for “persons who are, or are required to be, registered” substitute

persons who— (a) are registered, (b) are required to be registered, or (c) are exempted from the requirement to be registered by regulations under paragraph 53(4)

.

• (10) In paragraph 135(1)(c) (Commissioners' certificate as evidence of non-payment of levy shown as due in a return) after “return” insert “ or other notification ”.

Electricity from renewable sources etc

193

• (1) Schedule 6 to the Finance Act 2000 (c. 17) (climate change levy) is amended as follows.

• (2) In paragraph 20 (exemption under paragraph 19: averaging periods) for sub-paragraphs (6) to (8) substitute—

(6) If the total mentioned in sub-paragraph (3)(b) exceeds that mentioned in sub-paragraph (3)(a), then— (a) in a case where, at the time when the balancing period ends, an averaging period also ends because of sub-paragraph (2)(f) or (g), the supplier is for the purposes of this Schedule deemed to make at that time a taxable supply of a quantity of electricity equal to the excess; (b) in any other case, a balancing debit equal to the excess is carried forward to the next balancing period.

.

• (3) In paragraph 20B (exemption under paragraph 20A: averaging periods) for sub-paragraphs (6) to (8) substitute—

(6) If the total mentioned in sub-paragraph (3)(b) exceeds that mentioned in sub-paragraph (3)(a), then— (a) in a case where, at the time when the balancing period ends, an averaging period also ends because of sub-paragraph (2)(f) or (g), the supplier is for the purposes of this Schedule deemed to make at that time a taxable supply of a quantity of electricity equal to the excess; (b) in any other case, a balancing debit equal to the excess is carried forward to the next balancing period.

.

• (4) The amendment made by subsection (2) has effect where the end of the balancing period referred to in paragraph (a) of the sub-paragraph (6) substituted by that subsection falls on or after 31st March 2003.

• (5) The amendment made by subsection (3) has effect where the end of the balancing period referred to in paragraph (a) of the sub-paragraph (6) substituted by that subsection falls on or after 1st April 2003.

Insurance premium tax

Higher rate of tax: divided companies

194

• (1) In Schedule 6A to the Finance Act 1994 (c. 9) (insurance premium tax: premiums liable to tax at higher rate), insert after paragraph 3—

(3A) (1) A premium under a taxable insurance contract relating to a motor car or motor cycle also falls within paragraph 2 above if— (a) the insurance to be provided under the contract is provided by a divided company, and (b) any division of that company would, if it were a separate company, be a person connected with a supplier of motor cars or motor cycles. (2) A premium under a taxable insurance contract relating to relevant goods also falls within paragraph 3 above if— (a) the insurance to be provided under the contract is provided by a divided company, and (b) any division of that company would, if it were a separate company, be a person connected with a supplier of relevant goods. (3) Sub-paragraph (1) or (2) above does not apply if the insurance is provided to the insured free of charge. (4) A premium falls within paragraph 2 above by virtue of this paragraph only to the extent that it is attributable to cover for a risk which relates to a motor car or motor cycle supplied by a supplier of motor cars or motor cycles with whom the division in question would, if it were a separate company, be connected. (5) A premium falls within paragraph 3 above by virtue of this paragraph only to the extent that it is attributable to cover for a risk which relates to relevant goods supplied by a supplier of relevant goods with whom the division would, if it were a separate company, be connected. (6) For the purposes of this paragraph— (a) a company is a “divided company” if under the law under which the company is formed, under the company’s constitution or under arrangements entered into by or in relation to the company— (i) some or all of the assets of the company are available primarily, or only, to meet particular liabilities of the company, and (ii) some or all of the members of the company, and some or all of its creditors, have rights primarily, or only, in relation to particular assets of the company; (b) a “division” of such a company means an identifiable part of it (by whatever name known) that carries on distinct business activities and to which particular assets and liabilities of the company are primarily or wholly attributable. (7) In this paragraph “provided to the insured free of charge” has the meaning given by sub-paragraph (5) of paragraph 2 or 3 above. In determining for this purpose whether a divided company by whom insurance is provided is a person falling within sub-paragraph (2) of paragraph 2 or 3 above, the company shall be treated as connected with any person with whom a division of that company would be connected if it were a separate company. (8) Other expressions defined for the purposes of paragraph 2 or 3 above have the same meaning in this paragraph.

.

• (2) Subsection (1) applies in relation to a premium that falls to be regarded for the purposes of Part 3 of the Finance Act 1994 (c. 9) (insurance premium tax) as received under a taxable insurance contract by an insurer on or after the day on which this Act is passed.

Part 9 — Miscellaneous and supplementary provisions

Provisions consequential on changes to company law

Companies acquiring their own shares

195

• (1) This section applies for the purposes of the Taxes Acts and the Inheritance Tax Act 1984 (c. 51) where a company acquires any of its own shares (whether by purchase, the issuing of bonus shares or otherwise).

• (2) The acquisition of any of those shares by the company is not to be treated as the acquisition of an asset.

• (3) The company is not, by virtue of the acquisition or holding of any of those shares or its being entered in the company’s register of members in respect of any of them, to be treated as a member of itself.

• (4) Subject to subsection (5)—

• (a) the company’s issued share capital is to be treated as if it had been reduced by the nominal value of the shares acquired,

• (b) such of those shares as are not cancelled on acquisition are to be treated as if they had been so cancelled, and

• (c) any subsequent cancellation by the company of any of those shares is to be disregarded (and, accordingly, is not the disposal of an asset and does not give rise to an allowable loss within the meaning of the Taxation of Chargeable Gains Act 1992 (c. 12)).

• (5) Where the shares are issued to the company as bonus shares, subsection (4)(a) and (b) does not apply and the shares are to be treated as if they had not been issued.

• (6) Where, disregarding subsections (2) to (5)—

• (a) a company holds any of its own shares, and

• (b) the company issues bonus shares in respect of those shares or any class of those shares (“the existing shares”),

nothing in this section prevents the existing shares being the company’s holding of shares for the purposes of the application of section 126 of the Taxation of Chargeable Gains Act 1992 (application of sections 127 to 131 of that Act (company reorganisations etc)).

• (7) In subsection (6) the reference to the application of section 126 of the Taxation of Chargeable Gains Act 1992 does not include a reference to the application of that section in a modified form by virtue of any enactment relating to chargeable gains.

• (8) Where a company disposes of any of its own shares to a person in circumstances where, but for subsections (2) to (5), it would be regarded as holding the shares immediately before the disposal—

• (a) subsections (4)(b) and (c) and (5) cease to apply in relation to the shares disposed of (“the relevant shares”),

• (b) the relevant shares are to be treated as having been issued as new shares to that person by the company at the time of the disposal (and not as having been disposed of by the company at that time),

• (c) that person is to be treated as having subscribed for the relevant shares,

• (d) an amount equal to the amount or value of the consideration (if any) payable for the disposal of the relevant shares is to be treated as the amount subscribed for those shares,

• (e) if the amount or value of that consideration does not exceed the nominal value of those shares, the share capital of those shares is to be treated for the purposes of Part 23 of the Corporation Tax Act 2010 as if it were an amount equal to the amount or value of that consideration, and

• (f) if the amount or value of that consideration exceeds their nominal value, the relevant shares are to be treated as if they had been issued at a premium representing that excess.

• (9) Where—

• (a) a company purchases its own shares, and

• (b) the price payable by a company for the shares is taken into account in computing the profits of the company which are chargeable to tax under Chapter 2 of Part 3 of the Corporation Tax Act 2009,

subsections (2) to (7) do not apply and subsection (8) does not apply in relation to any disposal by the company of any of the shares.

• (10) Schedule 40 to this Act (which makes amendments relating to the acquisition and disposal by a company of its own shares) has effect.

• (11) For the purposes of this section—

• (a) a company issues “bonus shares” if it issues share capital as paid up otherwise than by the receipt of new consideration (within the meaning of section 1115 of the Corporation Tax Act 2010), and

• (b) “the Taxes Acts” has the same meaning as in the Taxes Management Act 1970 (c. 9),

and in this section references to a “company” are to a company with a share capital.

• (12) The preceding provisions of this section and the provisions of Schedule 40 to this Act have effect in relation to any acquisition of shares by a company on or after such day as the Treasury may by order made by statutory instrument appoint.

Companies in administration

196

Schedule 41 to this Act (provisions relating to the treatment, for tax purposes, of companies in administration) has effect.

International matters

Exchange of information between tax authorities of member States

197

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

Arrangements for mutual exchange of tax information

198

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

Savings income: Community obligations and international arrangements

199

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

Controlled foreign companies: exempt activities

200

• (1) Schedule 42 to this Act (which amends Part 2 of Schedule 25 to the Taxes Act 1988 (exempt activities)) shall have effect.

• (2) The amendments made by that Schedule have effect in relation to accounting periods of a controlled foreign company beginning on or after 27th November 2002.

• (3) 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.

• (4) This section shall be taken to have come into force on 27th November 2002.

Application of CFC provisions to Hong Kong and Macao companies

201

• (1) In Part 2 (exempt activities) of Schedule 25 to the Taxes Act 1988 (cases where section 747(3) does not apply), in paragraph 5 insert after sub-paragraph (2)—

(3) In the case of a controlled foreign company— (a) which is, by virtue of section 749(5), presumed to be resident in a territory in which it is subject to a lower level of taxation, (b) the business affairs of which are, throughout the accounting period in question, effectively managed in a special administrative region, and (c) which is liable to tax for that period in that region, references in the following provisions of this Part of this Schedule to the territory in which that company is resident shall be construed as references to that region. (4) In sub-paragraph (3) above “special administrative region” means the Hong Kong or the Macao Special Administrative Region of the People’s Republic of China. (5) Where sub-paragraph (3) above applies, it applies in place of sub-paragraph (2).

.

• (2) This section shall be deemed to have had effect—

• (a) as from 1st July 1997, so far as relating to the Hong Kong Special Administrative Region;

• (b) as from 20th December 1999, so far as relating to the Macao Special Administrative Region.

Administrative matters

Deduction of tax from interest: recognised clearing houses etc

202

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

Authorised unit trusts: interest distributions paid gross

203

• (1) Chapter 3 of Part 12 of the Taxes Act 1988 (unit trust schemes) is amended as follows.

• (2) In section 468L(4) (obligation to deduct tax from interest distributions to be subject to provision made by sections 468M and 468N), for “sections 468M and 468N” substitute “ section 468M ”.

• (3) For sections 468M and 468N substitute—

(468M) (1) Where an interest distribution is made for a distribution period to a unit holder, any obligation to deduct under section 349(2) does not apply to the interest distribution if— (a) the unit holder is a company or the trustees of a unit trust scheme, or (b) either the residence condition or the reputable intermediary condition is on the distribution date fulfilled with respect to the unit holder. (2) Section 468O makes provision about the circumstances in which the residence condition or the reputable intermediary condition is fulfilled with respect to a unit holder.

.

• (4) Section 468O (residence condition) is amended as follows.

• (5) In subsection (1), for “sections 468M and 468N” substitute “ section 468M ”.

• (6) After that subsection insert—

(1A) For the purposes of section 468M, the reputable intermediary condition is fulfilled with respect to a unit holder if— (a) the interest distribution is paid on behalf of the unit holder to a company, (b) the company either is subject to the EC Money Laundering Directive, or to equivalent non-EC provisions, or is an associated company resident in a regulating country or territory of a company which is so subject, and (c) the trustees of the authorised unit trust have reasonable grounds for believing that the unit holder is not ordinarily resident in the United Kingdom. (1B) For the purposes of subsection (1A)(b) above— (a) a company is subject to the EC Money Laundering Directive if it is a credit institution or financial institution as defined by Article 1 of Directive 91/308/EEC, as amended by Directive 2001/97/EC, (b) a company is subject to equivalent non-EC provisions if it is required by the law of any country or territory which is not a member State to comply with requirements similar to those which, under Article 3 of that Directive (as so amended), member States must ensure are complied with by credit institutions and financial institutions, (c) a company is to be treated as another’s associated company if it would be so treated for the purposes of Part 11 (see section 416), and (d) a country or territory is a regulating country or territory if it either is a member State or imposes requirements similar to those which, under Article 3 of that Directive (as so amended), member States must ensure are complied with by credit institutions and financial institutions. (1C) If Directive 91/308/EEC ceases to have effect, or is further amended, the Treasury may by order make consequential amendments in subsections (1A) and (1B) above.

.

• (7) In the sidenote, insert at the end “ and reputable intermediary condition ”.

• (8) In section 468P(1) (residence declarations)—

• (a) for “468O” substitute “ 468O(1) ”, and

• (b) for “subsections (2) to (4)” substitute “ subsection (2) or (3) ”.

• (9) After section 468P insert—

(468PA) Where— (a) an interest distribution is made to a unit holder by the trustees of an authorised unit trust, (b) the trustees, in reliance on the reputable intermediary condition being fulfilled with respect to the unit holder, do not comply with the obligation under section 349(2) to make a deduction from the interest distribution, (c) that obligation would apply but for that condition being so fulfilled, and (d) (contrary to the belief of the trustees) the unit holder is in fact ordinarily resident in the United Kingdom, section 350 and Schedule 16 have effect as if that obligation applied. (468PB) (1) The Board may by regulations make provision for giving effect to sections 468M to 468PA. (2) The regulations may, in particular, include provision modifying the application of those sections in relation to interest distributions made to or received under a trust. (3) The regulations may, in particular, include provision for the giving by officers of the Board of notices requiring trustees of authorised unit trusts to supply information and make available books, documents and other records for inspection on behalf of the Board. (4) The regulations may— (a) make provision in relation to times before they are made, (b) make different provision for different cases, and (c) make such supplementary, incidental, consequential or transitional provision as appears to the Board to be appropriate.

.

• (10) Section 98 of the Taxes Management Act 1970 (c. 9) (penalties: provisions requiring information etc in response to notices) is amended as follows.

• (11) In subsection (4A)(b), for “or (4D)” substitute “ , (4D) or (4E) ”.

• (12) After subsection (4D) insert—

(4E) A payment is within this subsection if— (a) it is an interest distribution made to a unit holder by the trustees of an authorised unit trust, (b) the trustees, in purported reliance on the reputable intermediary condition being fulfilled with respect to the unit holder, do not comply with the obligation under section 349(2) of the principal Act to make a deduction from the interest distribution, (c) that obligation would apply if that condition were not so fulfilled, and (d) the trustees did not believe that the unit holder was not ordinarily resident in the United Kingdom or could not reasonably have so believed (so that that condition was not so fulfilled). Expressions used in this subsection have the same meaning as in Chapter 3 of Part 12 of the principal Act.

.

• (13) In the first column of the Table, after the entry relating to regulations under section 431E(1) or 441A(3) of the principal Act, insert—

“ section 468P(6); regulations under section 468PB(3); ”.

• (14) This section has effect in relation to interest distributions made on or after 16th October 2002.

Mandatory electronic payment by large employers

204

• (1) The Commissioners for Her Majesty's Revenue and Customs may make regulations requiring a person to use electronic means in making specified payments under legislation relating to a tax (or duty) for which the Commissioners are responsible.

• (2) The regulations may provide for exceptions.

• (3) Regulations under this section may make provision—

• (a) as to conditions that must be complied with in connection with the use of electronic means for the making of any payment;

• (b) for treating a payment as not having been made unless conditions imposed by any of the regulations are satisfied;

• (c) for determining the time when payment is to be taken to have been made.

• (4) Regulations under this section may also make provision (which may include provision for the application of conclusive or other presumptions) as to the manner of proving for any purpose—

• (a) whether any use of electronic means for making a payment is to be taken as having resulted in the payment being made;

• (b) the time of the making of any payment for the making of which electronic means have been used;

• (c) any other matter for which provision may be made by regulations under this section.

• (5) Regulations under this section may—

• (a) allow any authorisation or requirement for which the regulations may provide to be given or imposed by means of a specific or general direction given by the Commissioners;

• (b) provide that the conditions of any such authorisation or requirement are to be taken to be satisfied only where Her Majesty's Revenue and Customs are satisfied as to specified matters.

• (6) Regulations under this section may contain provision—

• (a) requiring Her Majesty's Revenue and Customs to notify persons appearing to them to be, or to have become, a person required to use electronic means for the making of any payments in accordance with the regulations;

• (b) enabling a person so notified to have the question whether he is such a person determined in the same way as an appeal.

• (7) Regulations under this section may confer power on the Commissioners to give specific or general directions—

• (a) suspending, for any period during which the use of electronic means for the making of payments is impossible or impractical, any requirements imposed by the regulations relating to the use of such means;

• (b) substituting alternative requirements for the suspended ones;

• (c) making any provision that is necessary in consequence of the imposition of the substituted requirements.

• (8) The power to make provision by regulations under this section includes power—

• (a) to provide for a contravention by a large employer of, or any failure by a large employer to comply with, the regulations (a “default”) to attract a surcharge of a specified amount;

• (b) to provide that specified enactments relating to penalties imposed for the purposes of any matter relating to a tax (or duty) for which the Commissioners are responsible (including enactments relating to assessments, review and appeal) apply, with or without modifications, in relation to surcharges under the regulations.

• (9) The regulations may specify the surcharge for each default as—

• (a) a specified percentage, depending on the circumstances but not exceeding 10%, of the amount of the payment to which the default relates, or

• (b) a specified percentage, depending on the circumstances but not exceeding 0.83%, of the total amount of tax due for the accounting period, year of assessment or other specified period of twelve months during which the default occurred;

but, in either case, they may specify £30 if it is more.

• (10) Regulations under this section may—

• (a) make different provision for different cases;

• (b) make such incidental, supplemental, consequential and transitional provision in connection with any provision contained in any of the regulations as the Commissioners think fit.

• (11) Regulations under this section shall be made by statutory instrument subject to annulment in pursuance of a resolution of the House of Commons.

• (12) In this section—

• “Her Majesty's Revenue and Customs” includes a person acting under the authority of the Commissioners in relation to payment by electronic means;

• “large employer” means a person paying PAYE income to 250 or more recipients (and regulations under this section may make provision as to the date or period by reference to which this is to be determined and the circumstances in which a person is to be treated as paying PAYE income to a recipient);

• “legislation” means any enactment, EU or subordinate legislation;

• “specified” means specified by or under regulations under this section;

• “subordinate legislation” has the same meaning as in the Interpretation Act 1978 (c. 30).

• (13) Regulations under section 95(1) of the Finance Act 2007 (payment by cheque) may, in particular, provide for a payment which is made by cheque in contravention of regulations under this section to be treated as made when the cheque clears, as defined in the regulations under that section.

Use of electronic means of payment under other provisions

205

• (1) Any power to make subordinate legislation for or in connection with the making of payments conferred in relation to a taxation (or duty) matter on—

• (a) the Commissioners for Her Majesty's Revenue and Customs, or

• (b) the Treasury,

includes power to make any such provision in relation to the making of those payments as could be made in exercise of the power conferred by section 204.

• (2) Provision as to means of payment made in exercise of the powers conferred by section 204 or subsection (1) above has effect notwithstanding so much of any enactment or subordinate legislation as would otherwise allow payment to be made by any other means.

• (3) Expressions used in this section and section 204 have the same meaning in this section as in that section.

• (4) Nothing in this section shall be read as restricting the generality of the power conferred by section 204.

Admissibility of evidence not affected by offer of settlement etc

206

• (1) In section 105(1) of the Taxes Management Act 1970 (c. 9) (evidence in cases of fraudulent conduct), for paragraphs (a) and (b) and the word “that” preceding them substitute—

(a) that where serious tax fraud has been committed the Board may accept a money settlement and that the Board will accept such a settlement, and will not pursue a criminal prosecution, if he makes a full confession of all tax irregularities, or (b) that the extent to which he is helpful and volunteers information is a factor that will be taken into account in determining the amount of any penalty,

.

• (2) For the heading to that section substitute “ Admissibility of evidence not affected by offer of settlement etc ”.

• (3) In paragraph 3(1) of Schedule 18 to the Finance Act 1999 (c. 16) (which makes corresponding provision in relation to stamp duty), for paragraphs (a) and (b) substitute—

(a) that where serious stamp duty fraud has been committed the Board may accept a money settlement and that the Board will accept such a settlement, and will not pursue a criminal prosecution, if he makes a full confession of all stamp duty irregularities, or (b) that the extent to which he is helpful and volunteers information is a factor that will be taken into account in determining the amount of any penalty,

.

• (4) For the heading before that paragraph substitute “ Admissibility of evidence not affected by offer of settlement etc ”.

• (5) The above amendments have effect in relation to statements made, or documents produced, after the passing of this Act.

Consequential claims etc

207

• (1) In Part 4 of the Taxes Management Act 1970 (assessment and claims), after section 43B insert—

(43C) (1) Where— (a) a return is amended under section 28A(2)(b), 28B(2)(b) or 28B(4), and (b) the amendment is made for the purpose of making good to the Crown any loss of tax attributable to fraudulent or negligent conduct on the part of the taxpayer or a person acting on his behalf, sections 36(3) and 43(2) apply in relation to the amendment as they apply in relation to any assessment under section 29. (2) Where— (a) a return is amended under section 28A(2)(b), 28B(2)(b) or 28B(4), and (b) the amendment is not made for the purpose mentioned in subsection (1)(b) above, sections 43(2), 43A and 43B apply in relation to the amendment as they apply in relation to any assessment under section 29. (3) References to an assessment in sections 36(3), 43(2), 43A and 43B, as they apply by virtue of subsection (1) or (2) above, shall accordingly be read as references to the amendment of the return. (4) Where it is necessary to make any adjustment by way of an assessment on any person— (a) in order to give effect to a consequential claim, or (b) as a result of allowing a consequential claim, the assessment is not out of time if it is made within one year of the final determination of the claim. For this purpose a claim is not taken to be finally determined until it, or the amount to which it relates, can no longer be varied, on appeal or otherwise. (5) In subsection (4) above “consequential claim” means any claim, supplementary claim, election, application or notice that may be made or given under section 36(3), 43(2) or 43A (as it applies by virtue of subsection (1) or (2) above or otherwise).

.

• (2) In section 43A of that Act (further assessments: claims etc), in subsection (2A) (elections to which extension of time limit does not apply) for the words from “an election under” to the end substitute

an election under— (a) section 257BA of the principal Act (election as to transfer of married couple’s allowance), or (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (c) section 35(5) of the Taxation of Chargeable Gains Act 1992 (election for assets to be re-based to 1982).

.

• (3) So far as it applies in relation to an amendment of a return, this section applies only where the notice of the amendment is issued after the day on which this Act is passed.

National Savings

Ordinary accounts and investment accounts

208

• (1) The National Savings Bank Act 1971 (c. 29) is amended as follows.

• (2) In section 3 (ordinary and investment deposits), after subsection (1) insert—

(1A) But subsection (1) is subject to any provision made in relation to ordinary accounts or ordinary deposits by regulations under section 2 of this Act made by virtue of section 8(3) of this Act.

.

• (3) Section 6 (interest on investment deposits) is amended as follows.

• (4) In subsection (2), for “Director of Savings may from time to time determine with the consent of the Treasury” substitute “ Treasury may from time to time determine ”.

• (5) After that subsection insert—

(2ZA) The Treasury may determine that a rate of interest payable on investment deposits, or investment deposits of a particular description, is to be a rate produced by the operation of a formula involving the movement of an index or indices or any other factor.

.

• (6) In subsection (3), after “description” insert “ (other than one occasioned by the operation of a formula) ”.

• (7) After that subsection insert—

(4) In the case of an alteration in a rate of interest not affecting deposits received before it is made, any notice of the alteration required to be given by subsection (3) above may be given after the alteration is made.

.

• (8) Section 8 (regulations as to particular matters) is amended as follows.

• (9) In subsection (1), after paragraph (b) insert—

(ba) for the issuing of cards for use in making investment deposits or in withdrawing cash from investment accounts (or both) and regulating the use of such cards;

.

• (10) After subsection (2) insert—

(3) Regulations under section 2 of this Act may also make provision— (a) prohibiting the opening of ordinary accounts after a prescribed date; (b) prohibiting the opening of investment accounts of a prescribed description after a date prescribed in relation to that description of accounts; (c) prohibiting the making of ordinary deposits after a prescribed date; (d) prohibiting the making of deposits in investment accounts of a prescribed description after a date prescribed in relation to that description of accounts; (e) requiring the withdrawal of all of the money deposited in any dormant account of a prescribed description if any of the money deposited in it is withdrawn after a date prescribed in relation to that description of account; (f) for the transfer to investment accounts of a prescribed description of deposits in dormant accounts of a prescribed description; (g) for the transfer to a special Director’s account of deposits in dormant accounts of a prescribed description or in accounts to which deposits have been transferred pursuant to provision made by virtue of paragraph (f) above. (4) In subsection (3) above— “dormant account” means an account in which deposits may not be made because of provision made by virtue of paragraph (c) or (d) of that subsection; and “special Director’s account” means an investment account in the name of the Director of Savings in which deposits are held on behalf of the persons entitled to them.

.

• (11) After section 9 insert—

(9A) (1) Any provision which may be made in relation to investment deposits by regulations under section 2 of this Act may, in the case of deposits in investment accounts of any description first made available after the passing of the Finance Act 2003, be included instead in the terms and conditions of the accounts. (2) Any provision included in the terms and conditions of investment accounts under subsection (1) above has effect subject to regulations under section 2 of this Act and orders under section 4 of this Act. (3) In this section “terms and conditions” means terms and conditions set by the Treasury and published by Director of Savings in a manner approved by the Treasury.

.

Abolition of accounting requirements relating to investment deposits

209

In section 120 of the Finance Act 1980 (c. 48) (investment deposits with National Savings Bank: accounting provisions etc), omit subsections (4) and (5) (which require the Director of Savings to keep an account of investment deposits etc and transmit annual statements to the Comptroller and Auditor General for examination etc).

Other financial matters

Payments for service of national debt

210

• (1) Section 15 of the National Loans Act 1968 (c. 13) (payments for service of national debt) is amended as follows.

• (2) In subsection (1) (payments to be made out of Consolidated Fund into National Loans Fund), for “charges on the National Loans Fund for the service of national debt over” substitute

payments out of the National Loans Fund— (a) which represent interest on liabilities of the National Loans Fund, or (b) which, in the opinion of the Treasury, ought to be treated in the same way as payments which represent such interest, over

.

• (3) Omit subsection (3) (which defines “charges on the National Loans Fund for the service of national debt”).

• (4) In paragraph 13 of Schedule 5A to that Act (Debt Management Account: payments to be made out of National Loans Fund into Debt Management Account), omit sub-paragraph (2) (payments to be treated as charges on the National Loans Fund for the service of national debt).

Definition of liabilities and assets of National Loans Fund

211

In section 19(4) of the National Loans Act 1968 (c. 13) (which defines as the liabilities of the National Loans Fund the nominal amount of the debt outstanding to it and as its assets its balance and loans etc outstanding to it), for the words from “of the National Loans Fund” onwards substitute “ and assets of the National Loans Fund shall be as determined by the Treasury. ”.

Accounts of Consolidated Fund and National Loans Fund

212

• (1) Section 21 of the National Loans Act 1968 (accounts of Consolidated Fund and National Loans Fund) is amended as follows.

• (2) In subsection (1) (annual accounts of payments in and out), for the words from “in such form” onwards substitute “ an account relating to the Consolidated Fund, and an account relating to the National Loans Fund, in such form and containing such information as the Treasury consider appropriate. ”.

• (3) Omit subsection (3) (statements of additional information regarding transactions, assets and liabilities of Consolidated Fund and National Loans Fund).

• (4) Subsection (2) has effect for the financial year ending with 31st March 2004 and subsequent financial years.

• (5) Subsection (3) has effect for such financial year as the Treasury may by order made by statutory instrument appoint and subsequent financial years.

Debt Management Account: abolition of borrowing cap

213

In Schedule 5A to the National Loans Act 1968 (Debt Management Account), omit paragraph 8 (borrowings otherwise than from National Loans Fund not to exceed total standing to credit of that Account in that Fund and at Bank of England).

Payments in error from or to National Loans Fund

214

In paragraph 11 of Schedule 5A to the National Loans Act 1968 (c. 13) (payments between National Loans Fund and Debt Management Account in respect of difference between assets and liabilities of that Account), insert at the end—

(4) If any amount paid under sub-paragraph (1A) or (3) above should not have been paid, the Treasury may repay the whole or any part of it.

.

Supplementary

Interpretation

215

In this Act “the Taxes Act 1988” means the Income and Corporation Taxes Act 1988 (c. 1).

Repeals

216

• (1) The enactments mentioned in Schedule 43 to this Act (which include provisions that are spent or of no practical utility) are repealed to the extent specified.

• (2) The repeals specified in that Schedule have effect subject to the commencement provisions and savings contained or referred to in the notes set out in that Schedule.

Short title

217

This Act may be cited as the Finance Act 2003.

SCHEDULE 1

1

In Part 3 of the Value Added Tax Act 1994 (c. 23) (application of Act in particular cases) insert after section 51A—

(51B) Schedule 10A shall have effect with respect to face-value vouchers.

.

2

After Schedule 10 to that Act insert—

SCHEDULE 10A (1) (1) In this Schedule “face-value voucher” means a token, stamp or voucher (whether in physical or electronic form) that represents a right to receive goods or services to the value of an amount stated on it or recorded in it. (2) References in this Schedule to the “face value” of a voucher are to the amount referred to in sub-paragraph (1) above. (2) The issue of a face-value voucher, or any subsequent supply of it, is a supply of services for the purposes of this Act. (3) (1) This paragraph applies to a face-value voucher issued by a person who— (a) is not a person from whom goods or services may be obtained by the use of the voucher, and (b) undertakes to give complete or partial reimbursement to any such person from whom goods or services are so obtained. Such a voucher is referred to in this Schedule as a “credit voucher”. (2) The consideration for any supply of a credit voucher shall be disregarded for the purposes of this Act except to the extent (if any) that it exceeds the face value of the voucher. (3) Sub-paragraph (2) above does not apply if any of the persons from whom goods or services are obtained by the use of the voucher fails to account for any of the VAT due on the supply of those goods or services to the person using the voucher to obtain them. (4) (1) This paragraph applies to a face-value voucher issued by a person who— (a) is a person from whom goods or services may be obtained by the use of the voucher, and (b) if there are other such persons, undertakes to give complete or partial reimbursement to those from whom goods or services are so obtained. Such a voucher is referred to in this Schedule as a “retailer voucher”. (2) The consideration for the issue of a retailer voucher shall be disregarded for the purposes of this Act except to the extent (if any) that it exceeds the face value of the voucher. (3) Sub-paragraph (2) above does not apply if— (a) the voucher is used to obtain goods or services from a person other than the issuer, and (b) that person fails to account for any of the VAT due on the supply of those goods or services to the person using the voucher to obtain them. (4) Any supply of a retailer voucher subsequent to the issue of it shall be treated in the same way as the supply of a voucher to which paragraph 6 below applies. (5) The consideration for the supply of a face-value voucher that is a postage stamp shall be disregarded for the purposes of this Act except to the extent (if any) that it exceeds the face value of the stamp. (6) (1) This paragraph applies to a face-value voucher that is not a credit voucher, a retailer voucher or a postage stamp. (2) A supply of such a voucher is chargeable at the rate in force under section 2(1) (standard rate) except where sub-paragraph (3), (4) or (5) below applies. (3) Where the voucher is one that can only be used to obtain goods or services in one particular non-standard rate category, the supply of the voucher falls in that category. (4) Where the voucher is used to obtain goods or services all of which fall in one particular non-standard rate category, the supply of the voucher falls in that category. (5) Where the voucher is used to obtain goods or services in a number of different rate categories— (a) the supply of the voucher shall be treated as that many different supplies, each falling in the category in question, and (b) the value of each of those supplies shall be determined on a just and reasonable basis. (7) Where— (a) a face-value voucher (other than a postage stamp) and other goods or services are supplied to the same person in a composite transaction, and (b) the total consideration for the supplies is no different, or not significantly different, from what it would be if the voucher were not supplied, the supply of the voucher shall be treated as being made for no consideration. (8) (1) In this Schedule— - “credit voucher” has the meaning given by paragraph 3(1) above; - “face value” has the meaning given by paragraph 1(2) above; - “face value voucher” has the meaning given by paragraph 1(1) above; - “retailer voucher” has the meaning given by paragraph 4(1) above. (2) For the purposes of this Schedule— (a) the “rate categories” of supplies are— (i) supplies chargeable at the rate in force under section 2(1) (standard rate), (ii) supplies chargeable at the rate in force under section 29A (reduced rate), (iii) zero-rated supplies, and (iv) exempt supplies and other supplies that are not taxable supplies; (b) the “non-standard rate categories” of supplies are those in sub-paragraphs (ii), (iii) and (iv) of paragraph (a) above; (c) goods or services are in a particular rate category if a supply of those goods or services falls in that category. (3) A reference in this Schedule to a voucher being used to obtain goods or services includes a reference to the case where it is used as part-payment for those goods or services.

.

3

In Schedule 6 to the Value Added Tax Act 1994 (c. 23) (valuation: special cases), omit paragraph 5 (vouchers etc).

4

The amendments made by this Schedule apply to supplies of tokens, stamps or vouchers issued on or after 9th April 2003.

SCHEDULE 2

Introductory

1

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

Insertion of new section 3A

2

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

Persons registered under Schedule 1

3

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

The special accounting scheme

4

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

SCHEDULE 3

No chargeable consideration

1

A land transaction is exempt from charge if there is no chargeable consideration for the transaction.

Grant of certain leases by registered social landlords

2

• (1) The grant of a lease of a dwelling is exempt from charge if the lease—

• (a) is granted by a relevant housing provider to one or more individuals in accordance with arrangements to which this paragraph applies, and

• (b) is for an indefinite term or is terminable by notice of a month or less.

• (2) This paragraph applies to arrangements between a relevant housing provider and a housing authority under which the relevant housing provider provides, for individuals nominated by the authority in pursuance of its statutory housing functions, temporary rented accommodation which the relevant housing provider itself has obtained on a short-term basis.

The reference above to accommodation obtained by the relevant housing provider “on a short-term basis” is to accommodation leased to the relevant housing provider for a term of five years or less.

• (2A) A “relevant housing provider” means—

• (a) a non-profit registered provider of social housing, or

• (b) a registered social landlord.

• (3) A “housing authority” means—

• (a) in relation to England and Wales—

• (i) a principal council within the meaning of the Local Government Act 1972 (c. 70), or

• (ii) the Common Council of the City of London;

• (b) in relation to Scotland, a council constituted under section 2 of the Local Government etc. (Scotland) Act 1994 (c. 39);

• (c) in relation to Northern Ireland—

• (i) the Department for Social Development in Northern Ireland, or

• (ii) the Northern Ireland Housing Executive.

Transactions in connection with divorce etc

3

A transaction between one party to a marriage and the other is exempt from charge if it is effected—

• (a) in pursuance of an order of a court made on granting in respect of the parties an order or decree for their divorce, the annulment of the marriage or their judicial separation;

• (b) in pursuance of an order of a court made in connection with the dissolution or annulment of the marriage, or the parties' judicial separation, at any time after the granting of such an order or decree for divorce, annulment or judicial separation as is mentioned in paragraph (a);

• (c) in pursuance of—

• (i) an order of a court made at any time under section 22A, 23A or 24A of the Matrimonial Causes Act 1973 (c. 18), or

• (ii) an incidental order of a court made under section 8(2) of the Family Law (Scotland) Act 1985 (c. 37) by virtue of section 14(1) of that Act;

• (d) at any time in pursuance of an agreement of the parties made in contemplation or otherwise in connection with the dissolution or annulment of the marriage, their judicial separation or the making of a separation order in respect of them.

Variation of testamentary dispositions etc

4

• (1) A transaction following a person’s death that varies a disposition (whether effected by will, under the law relating to intestacy or otherwise) of property of which the deceased was competent to dispose is exempt from charge if the following conditions are met.

• (2) The conditions are—

• (a) that the transaction is carried out within the period of two years after a person’s death, and

• (b) that no consideration in money or money’s worth other than the making of a variation of another such disposition is given for it.

• (2A) Where the condition in sub-paragraph (2)(b) is not met, the chargeable consideration for the transaction is determined in accordance with paragraph 8A(2) of Schedule 4.

• (3) This paragraph applies whether or not the administration of the estate is complete or the property has been distributed in accordance with the original dispositions.

Power to add further exemptions

5

• (1) The Treasury may by regulations provide that any description of land transaction specified in the regulations is exempt from charge.

• (2) The regulations may contain such supplementary, incidental and transitional provision as appears to the Treasury to be appropriate.

SCHEDULE 4

Money or money’s worth

1

• (1) The chargeable consideration for a transaction is, except as otherwise expressly provided, any consideration in money or money’s worth given for the subject-matter of the transaction, directly or indirectly, by the purchaser or a person connected with him.

• (2) Section 1122 of the Corporation Tax Act 2010 (connected persons) applies for the purposes of sub-paragraph (1).

Value added tax

2

The chargeable consideration for a transaction shall be taken to include any value added tax chargeable in respect of the transaction, other than value added tax chargeable by virtue of an option to tax any land under Part 1 of Schedule 10 to the Value Added Tax Act 1994 (c. 23) made after the effective date of the transaction.

Postponed consideration

3

The amount or value of the chargeable consideration for a transaction shall be determined without any discount for postponement of the right to receive it or any part of it.

Just and reasonable apportionment

4

• (1) For the purposes of this Part consideration attributable—

• (a) to two or more land transactions, or

• (b) in part to a land transaction and in part to another matter, or

• (c) in part to matters making it chargeable consideration and in part to other matters,

shall be apportioned on a just and reasonable basis.

• (2) If the consideration is not so apportioned, this Part has effect as if it had been so apportioned.

• (3) For the purposes of this paragraph any consideration given for what is in substance one bargain shall be treated as attributable to all the elements of the bargain, even though—

• (a) separate consideration is, or purports to be, given for different elements of the bargain, or

• (b) there are, or purport to be, separate transactions in respect of different elements of the bargain.

Exchanges

5

• (1) This paragraph applies to determine the chargeable consideration where one or more land transactions are entered into by a person as purchaser (alone or jointly) wholly or partly in consideration of one or more other land transactions being entered into by him (alone or jointly) as vendor.

• (2) In this paragraph—

• (a) “relevant transaction” means any of those transactions, and

• (b) “relevant acquisition” means a relevant transaction entered into as purchaser and “relevant disposal” means a relevant transaction entered into as vendor.

• (3) The following rules apply if the subject-matter of any of the relevant transactions is a major interest in land—

• (a) where a single relevant acquisition is made, the chargeable consideration for the acquisition is—

• (i) the amount determined under sub-paragraph (3A) in respect of the acquisition, or

• (ii) if greater, the amount which would be the chargeable consideration for the acquisition ignoring paragraph 5;

• (b) where two or more relevant acquisitions are made, the chargeable consideration for each relevant acquisition is—

• (i) the amount determined under sub-paragraph (3A) in respect of that acquisition, or

• (ii) if greater, the amount which would be the chargeable consideration for that acquisition ignoring paragraph 5;

• (3A) The amount mentioned in sub-paragraph (3)(a)(i) and (b)(i) is—

• (a) the market value of the subject-matter of the acquisition, and

• (b) if the acquisition is the grant of a lease at a rent, that rent.

• (4) The following rules apply if the subject-matter of none of the relevant transactions is a major interest in land—

• (a) where a single relevant acquisition is made in consideration of one or more relevant disposals, the chargeable consideration for the acquisition is the amount or value of any chargeable consideration other than the disposal or disposals that is given for the acquisition;

• (b) where two or more relevant acquisitions are made in consideration of one or more relevant disposals, the chargeable consideration for each relevant acquisition is the appropriate proportion of the amount or value of any chargeable consideration other than the disposal or disposals that is given for the acquisitions.

• (5) For the purposes of sub-paragraph (4)(b) the appropriate proportion is—

$$MVTMV$where—MV is the market value of the subject-matter of the acquisition for which the chargeable consideration is being determined, andTMV is the total market value of the subject-matter of all the relevant acquisitions.$

• (6) This paragraph has effect subject to—

• paragraph 6 of this Schedule (partition etc: disregard of existing interest), ...

• ...

• ...

• (7) This paragraph does not apply in a case to which paragraph 17 applies.

Partition etc: disregard of existing interest

6

In the case of a land transaction giving effect to a partition or division of a chargeable interest to which persons are jointly entitled, the share of the interest held by the purchaser immediately before the partition or division does not count as chargeable consideration.

Valuation of non-monetary consideration

7

Except as otherwise expressly provided, the value of any chargeable consideration for a land transaction, other than—

• (a) money (whether in sterling or another currency), or

• (b) debt as defined for the purposes of paragraph 8 (debt as consideration),

shall be taken to be its market value at the effective date of the transaction.

Debt as consideration

8

• (1) Where the chargeable consideration for a land transaction consists in whole or in part of—

• (a) the satisfaction or release of debt due to the purchaser or owed by the vendor, or

• (b) the assumption of existing debt by the purchaser,

the amount of debt satisfied, released or assumed shall be taken to be the whole or, as the case may be, part of the chargeable consideration for the transaction.

• (1A) Where—

• (a) debt is secured on the subject-matter of a land transaction immediately before and immediately after the transaction, and

• (b) the rights or liabilities in relation to that debt of any party to the transaction are changed as a result of or in connection with the transaction,

then for the purposes of this paragraph there is an assumption of that debt by the purchaser, and that assumption of debt constitutes chargeable consideration for the transaction.

• (1B) Where in a case in which sub-paragraph (1)(b) applies—

• (a) the debt assumed is or includes debt secured on the property forming the subject-matter of the transaction, and

• (b) immediately before the transaction there were two or more persons each holding an undivided share of that property, or there are two or more such persons immediately afterwards,

the amount of secured debt assumed shall be determined as if the amount of that debt owed by each of those persons at a given time were the proportion of it corresponding to his undivided share of the property at that time.

• (1C) For the purposes of sub-paragraph (1B), ... each joint tenant of property is treated as holding an equal undivided share of it.

• (2) If the effect of this paragraph would be that the amount of the chargeable consideration for the transaction exceeded the market value of the subject-matter of the transaction, the amount of the chargeable consideration is treated as limited to that value.

• (3) In this paragraph—

• (a) “debt” means an obligation, whether certain or contingent, to pay a sum of money either immediately or at a future date,

• (b) “existing debt”, in relation to a transaction, means debt created or arising before the effective date of, and otherwise than in connection with, the transaction, and

• (c) references to the amount of a debt are to the principal amount payable or, as the case may be, the total of the principal amounts payable, together with the amount of any interest that has accrued due on or before the effective date of the transaction.

Conversion of amounts in foreign currency

9

• (1) References in this Part to the amount or value of the consideration for a transaction are to its amount or value in sterling.

• (2) For the purposes of this Part the sterling equivalent of an amount expressed in another currency shall be ascertained by reference to the London closing exchange rate on the effective date of the transaction (unless the parties have used a different rate for the purposes of the transaction).

Carrying out of works

10

• (1) Where the whole or part of the consideration for a land transaction consists of the carrying out of works of construction, improvement or repair of a building or other works to enhance the value of land, then—

• (a) to the extent that the conditions specified in sub-paragraph (2) are met, the value of the works does not count as chargeable consideration, and

• (b) to the extent that those conditions are not met, the value of the works shall be taken into account as chargeable consideration.

• (2) The conditions referred to in sub-paragraph (1) are—

• (a) that the works are carried out after the effective date of the transaction,

• (b) that the works are carried out on land acquired or to be acquired under the transaction or on other land held by the purchaser or a person connected with him, and

• (c) that it is not a condition of the transaction that the works are carried out by the vendor or a person connected with him.

• (2A) Where by virtue of—

• (a) subsection (8) of section 44 (contract and conveyance),

• (b) paragraph 12A of Schedule 17A (agreement for lease), or

• (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

there are two notifiable transactions (the first being the contract or agreement and the second being the transaction effected on completion or, as the case may be, the grant or execution of the lease), the condition in sub-paragraph (2)(a) is treated as met in relation to the second transaction if it is met in relation to the first.

• (3) In this paragraph—

• (a) references to the acquisition of land are to the acquisition of a major interest in it;

• (b) the value of the works shall be taken to be the amount that would have to be paid in the open market for the carrying out of the works in question.

• (4) Section 839 of the Taxes Act 1988 (connected persons) has effect for the purposes of this paragraph.

• (5) This paragraph is subject to paragraph 17 (arrangements involving public or educational bodies).

Provision of services

11

• (1) Where the whole or part of the consideration for a land transaction consists of the provision of services (other than the carrying out of works to which paragraph 10 applies), the value of that consideration shall be taken to be the amount that would have to be paid in the open market to obtain those services.

• (2) This paragraph is subject to paragraph 17 (arrangements involving public or educational bodies).

Land transaction entered into by reason of employment

12

• (1) Where a land transaction is entered into by reason of the purchaser’s employment, or that of a person connected with him, then—

• (a) if the transaction gives rise to a charge to tax under Chapter 5 of Part 3 of the Income Tax (Earnings and Pensions) Act 2003 (c. 1) (taxable benefits: living accommodation) and—

• (i) no rent is payable by the purchaser, or

• (ii) the rent payable by the purchaser is less than the cash equivalent of the benefit calculated under section 105 or 106 of that Act,

there shall be taken to be payable by the purchaser as rent an amount equal to the cash equivalent chargeable under those sections;

• (b) if the transaction would give rise to a charge under that Chapter but for section 99 of that Act (accommodation provided for performance of duties), the consideration for the transaction is the actual consideration (if any);

• (c) if neither paragraph (a) nor paragraph (b) applies, the consideration for the transaction shall be taken to be not less than the market value of the subject-matter of the transaction as at the effective date of the transaction.

• (2) Section 839 of the Taxes Act 1988 (connected persons) has effect for the purposes of this paragraph.

Obligations under lease

13

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

Surrender of existing lease in return for new lease

14

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

Reverse premium

15

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

Indemnity given by purchaser

16

Where the purchaser agrees to indemnify the vendor in respect of liability to a third party arising from breach of an obligation owed by the vendor in relation to the land that is the subject of the transaction, neither the agreement nor any payment made in pursuance of it counts as chargeable consideration.

SCHEDULE 5

Introduction

1

This Schedule provides for calculating the tax chargeable—

• (a) in respect of a chargeable transaction for which the chargeable consideration consists of or includes rent, or

• (b) where such a transaction is to be taken into account as a linked transaction.

Calculation of tax chargeable in respect of rent

2

• (1) Tax is chargeable under this Schedule in respect of so much of the chargeable consideration as consists of rent.

• (2) The tax chargeable is the total of the amounts produced by taking the relevant percentage of so much of the relevant rental value as falls within each rate band.

• (3) The relevant percentages and rate bands are determined by reference to whether the relevant land—

• (a) consists entirely of residential property (in which case Table A below applies), or

• (b) consists of or includes land that is not residential property (in which case Table B below applies).

Rate bands	Percentage
£0 to £125,000	0%
Over £125,000	1%
Rate bands	Percentage
---	---
£0 to £150,000	0%
Over £150,000 but not over £5 million	1%
Over £5 million	2%

• (4) For the purposes of sub-paragraphs (2) and (3)—

• (a) the relevant rental value is the net present value of the rent payable over the term of the lease, and

• (b) the relevant land is the land that is the subject of the lease.

• (5) If the lease in question is one of a number of linked transactions for which the chargeable consideration consists of or includes rent, the above provisions are modified.

• (6) In that case the tax chargeable is determined as follows.

• First, calculate the amount of the tax that would be chargeable if the linked transactions were a single transaction, so that—the relevant rental value is the total of the net present values of the rent payable over the terms of all the leases, andthe relevant land is all land that is the subject of any of those leases.

• Then, multiply that amount by the fraction:$NPVTNPV$where— NPV is the net present value of the rent payable over the term of the lease in question, and TNPV is the total of the net present values of the rent payable over the terms of the all the leases.

Net present value of rent payable over term of lease

3

The net present value (v) of the rent payable over the term of a lease is calculated by applying the formula:

Rent payable

4

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Effect of provision for rent review

5

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Term of lease

6

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Treatment of lease for indefinite term

7

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Temporal discount rate

8

• (1) For the purposes of this Schedule the “temporal discount rate” is 3.5% or such other rate as may be specified by regulations made by the Treasury.

• (2) Regulations under this paragraph may make any such provision as is mentioned in subsection (3)(b) to (f) of section 178 of the Finance Act 1989 (c. 26) (power of Treasury to set rates of interest).

• (3) Subsection (5) of that section (power of Inland Revenue to specify rate by order in certain circumstances) applies in relation to regulations under this paragraph as it applies in relation to regulations under that section.

Tax chargeable in respect of consideration other than rent

9

• (1) Where in the case of a transaction to which this Schedule applies there is chargeable consideration other than rent, the provisions of this Part apply in relation to that consideration as in relation to other chargeable consideration ....

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

• (2A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

• (4) Tax chargeable under this Schedule is in addition to any tax chargeable under section 55 or 74(1A) or Schedule 4A ... in respect of consideration other than rent.

• (5) Where a transaction to which this Schedule applies falls to be taken into account for the purposes of section 55 ... as a linked transaction, no account shall be taken of rent in determining the relevant consideration.

Increase of rent treated as grant of new lease

10

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Interpretation

11

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SCHEDULE 6

Part 1 — Disadvantaged areas

Meaning of “disadvantaged area”

1

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Continuation of regulations made for purposes of stamp duty

2

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Part 2 — Land wholly situated in a disadvantaged area

Introduction

3

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Land all non-residential

4

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Land all residential

5

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Land partly non-residential and partly residential

6

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Part 3 — Land partly situated in a disadvantaged area

Introduction

7

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Land all non-residential

8

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Land all residential

9

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Land partly non-residential and partly residential

10

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Part 4 — Supplementary

Relevant consideration and relevant rental value

11

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Rent and annual rent

12

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SCHEDULE 7

Part 1 — Group relief

Group relief

1

• (1) A transaction is exempt from charge if the vendor and purchaser are companies that at the effective date of the transaction are members of the same group.

• (2) For the purposes of group relief—

• (a) “company” means a body corporate, and

• (b) companies are members of the same group if one is the 75% subsidiary of the other or both are 75% subsidiaries of a third company.

• (3) For the purposes of group relief a company (“company A”) is the 75% subsidiary of another company (“company B”) if company B—

• (a) is beneficial owner of not less than 75% of the ordinary share capital of company A,

• (b) is beneficially entitled to not less than 75% of any profits available for distribution to equity holders of company A, and

• (c) would be beneficially entitled to not less than 75% of any assets of company A available for distribution to its equity holders on a winding-up.

• (4) The ownership referred to in sub-paragraph (3)(a) is ownership either directly or through another company or companies.

For the purposes of that provision the amount of ordinary share capital of company A owned by company B through another company or companies shall be determined in accordance with sections 1155 to 1157 of the Corporation Tax Act 2010.

• (5) In sub-paragraphs (3)(a) and (4) above “ordinary share capital”, in relation to a company, means all the issued share capital (by whatever name called) of the company, other than capital the holders of which have a right to a dividend at a fixed rate but have no other right to share in the profits of the company.

• (6) Chapter 6 of Part 5 of the Corporation Tax Act 2010 (group relief: equity holders and profits or assets available for distribution) applies for the purposes of sub-paragraphs (3)(b) and (c) above as it applies for the purposes of section 151(4)(a) and (b) of that Act.

• (6A) In that Chapter as it applies for the purposes of sub-paragraphs (3)(b) and (c) above, sections 171(1)(b) and (3), 173, 174 and 176 to 178 of that Act are to be treated as omitted.

• (7) This paragraph is subject to paragraph 2 (restrictions on availability of group relief) and paragraphs 3 and 4A (withdrawal of group relief).

Restrictions on availability of group relief

2

• (1) Group relief is not available if at the effective date of the transaction there are arrangements in existence by virtue of which, at that or some later time, a person has or could obtain, or any persons together have or could obtain, control of the purchaser but not of the vendor.

This does not apply to arrangements entered into with a view to an acquisition of shares by a company (“the acquiring company”)—

• (a) in relation to which section 75 of the Finance Act 1986 (c. 41) (stamp duty: acquisition relief) will apply,

• (b) in relation to which the conditions for relief under that section will be met, and

• (c) as a result of which the purchaser will be a member of the same group as the acquiring company.

For other exceptions to this, see sub-paragraph (3A) and paragraphs 2A and 2B.

• (2) Group relief is not available if the transaction is effected in pursuance of, or in connection with, arrangements under which—

• (a) the consideration, or any part of the consideration, for the transaction is to be provided or received (directly or indirectly) by a person other than a group company, or

• (b) the vendor and the purchaser are to cease to be members of the same group by reason of the purchaser ceasing to be a 75% subsidiary of the vendor or a third company.

• (3) Arrangements are within sub-paragraph (2)(a) if under them the vendor or the purchaser, or another group company, is to be enabled to provide any of the consideration, or is to part with any of it, by or in consequence of the carrying out of a transaction or transactions involving, or any of them involving, a payment or other disposition by a person other than a group company.

• (3A) Sub-paragraphs (1) and (2)(b) do not apply to arrangements in so far as they are for the purpose of facilitating a transfer of the whole or part of the business of a company to another company in relation to which—

• (a) section 96 of the Finance Act 1997 is intended to apply (stamp duty relief: demutualisation of insurance companies), and

• (b) the conditions for relief under that section are intended to be met.

• (4) In sub-paragraphs (2)(a) and (3) a “group company” means a company that at the effective date of the transaction is a member of the same group as the vendor or the purchaser.

• (4A) Group relief is not available if the transaction—

• (a) is not effected for bona fide commercial reasons, or

• (b) forms part of arrangements of which the main purpose, or one of the main purposes, is the avoidance of liability to tax.

“Tax” here means stamp duty, income tax, corporation tax, capital gains tax or tax under this Part.

• (5) In this paragraph—

• “arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable; and

• “control” has the meaning given by section 1124 of the Corporation Tax Act 2010.

Withdrawal of group relief

3

• (1) Where in the case of a transaction (“the relevant transaction”) that is exempt from charge by virtue of paragraph 1 (group relief)—

• (a) the purchaser ceases to be a member of the same group as the vendor—

• (i) before the end of the period of three years beginning with the effective date of the transaction, or

• (ii) in pursuance of, or in connection with, arrangements made before the end of that period,

and

• (b) at the time the purchaser ceases to be a member of the same group as the vendor (“the relevant time”), it or a relevant associated company holds a chargeable interest—

• (i) that was acquired by the purchaser under the relevant transaction, or

• (ii) that is derived from a chargeable interest so acquired,

and that has not subsequently been acquired at market value under a chargeable transaction for which group relief was available but was not claimed,

group relief in relation to the relevant transaction, or an appropriate proportion of it, is withdrawn and tax is chargeable in accordance with this paragraph.

• (2) The amount chargeable is the tax that would have been chargeable in respect of the relevant transaction but for group relief if the chargeable consideration for that transaction had been an amount equal to—

• (a) the market value of the subject-matter of the transaction, and

• (b) if the acquisition was the grant of a lease at a rent, that rent,

or, as the case may be, an appropriate proportion of the tax that would have been so chargeable.

• (3) In sub-paragraphs (1) and (2) “an appropriate proportion” means an appropriate proportion having regard to the subject matter of the relevant transaction and what is held at the relevant time by the transferee company or, as the case may be, by that company and its relevant associated companies.

• (4) In this paragraph—

• “arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable; and

• “relevant associated company”, in relation to the purchaser, means a company that—is a member of the same group as the purchaser immediately before the purchaser ceases to be a member of the same group as the vendor, andceases to be a member of the same group as the vendor in consequence of the purchaser so ceasing.

• (5) This paragraph has effect subject to paragraphs 4 and 4ZA (cases in which group relief not withdrawn) and paragraph 4A (withdrawal of group relief in certain cases involving successive transactions).

Cases in which group relief not withdrawn

4

• (1) Group relief is not withdrawn under paragraph 3 in the following cases.

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

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

• (4) The second case is where the purchaser ceases to be a member of the same group as the vendor by reason of anything done for the purposes of, or in the course of, winding up the vendor or another company that is above the vendor in the group structure.

• (5) For the purposes of sub-paragraph (4) a company is “above” the vendor in the group structure if the vendor, or another company that is above the vendor in the group structure, is a 75% subsidiary of the company.

• (6) The third case is where—

• (a) the purchaser ceases to be a member of the same group as the vendor as a result of an acquisition of shares by another company (“the acquiring company”) in relation to which—

• (i) section 75 of the Finance Act 1986 (c. 41) applies (stamp duty: acquisition relief), and

• (ii) the conditions for relief under that section are met,

and

• (b) the purchaser is immediately after that acquisition a member of the same group as the acquiring company.

• (6A) The fourth case is where—

• (a) the purchaser ceases to be a member of the same group as the vendor as a result of the transfer of the whole or part of the vendor's business to another company (“the acquiring company”) in relation to which—

• (i) section 96 of the Finance Act 1997 applies (stamp duty relief: demutualisation of insurance companies), and

• (ii) the conditions for relief under that section are met, and

• (b) the purchaser is immediately after that transfer a member of the same group as the acquiring company.

• (7) But if in a case within sub-paragraph (6) or (6A) —

• (a) the purchaser ceases to be a member of the same group as the acquiring company—

• (i) before the end of the period of three years beginning with the effective date of the relevant transaction, or

• (ii) in pursuance of, or in connection with, arrangements made before the end of that period,

and

• (b) at the time the purchaser ceases to be a member of the same group as the acquiring company, it or a relevant associated company holds a chargeable interest—

• (i) that was acquired by the purchaser under the relevant transaction, or

• (ii) that is derived from an interest so acquired,

and that has not subsequently been acquired at market value under a chargeable transaction for which group relief was available but was not claimed,

the provisions of this Part relating to group relief apply as if the purchaser had then ceased to be a member of the same group as the vendor.

• (8) In sub-paragraph (7)—