Legalize / United Kingdom / Public General Act

Finance Act 2006

Type Public General Act

Publication 2006-07-19

Last updated 2020-12-31

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 £105.10 per thousand cigarettes.
2. Cigars	£153.07 per kilogram.
3. Hand-rolling tobacco	£110.02 per kilogram.
4. Other smoking tobacco and chewing tobacco	£67.30 per kilogram.

(2) This section shall be deemed to have come into force at 6 o'clock in the evening of 22nd March 2006.

Tobacco products duty: evasion

2

(1) After section 7 of the Tobacco Products Duty Act 1979 (c. 7) (regulations for management of duty) insert—

(7A) (1) A manufacturer of cigarettes or hand-rolling tobacco shall so far as is reasonably practicable avoid— (a) supplying cigarettes or hand-rolling tobacco to persons who are likely to smuggle them into the United Kingdom, (b) supplying cigarettes or hand-rolling tobacco where the nature or circumstances of the supply makes it likely that they will be resupplied to persons who are likely to smuggle them into the United Kingdom, or (c) otherwise facilitating the smuggling into the United Kingdom of cigarettes or hand-rolling tobacco. (2) In particular, a manufacturer— (a) in supplying cigarettes or hand-rolling tobacco to persons carrying on business in or in relation to a country other than the United Kingdom, shall consider whether the size or nature of the supply suggests that the products may be required for smuggling into the United Kingdom, (b) shall maintain a written policy about steps to be taken for the purpose of complying with the duty under subsection (1), and (c) shall provide a copy of the policy to the Commissioners on request. (3) In this section a reference to smuggling products into the United Kingdom is a reference to importing them into the United Kingdom without payment of duty which is— (a) chargeable under section 2, and (b) payable by virtue of section 1(1) of the Finance (No. 2) Act 1992 (c. 48) (power to fix excise duty point). (4) The Commissioners may notify a manufacturer in writing that they think the risk of smuggling into the United Kingdom is particularly great in relation to— (a) products marketed under a specified brand name; (b) products supplied to persons carrying on business in or in relation to a specified country or place. (5) The Commissioners may by notice in writing require a manufacturer of cigarettes or hand-rolling tobacco to provide, within a specified period of time, specified information about— (a) supply of products marketed under a brand name specified under subsection (4)(a); (b) supply to persons carrying on business in or in relation to a country or place specified under subsection (4)(b); (c) demand for cigarettes or hand-rolling tobacco in a country or place specified under subsection (4)(b). (6) The Commissioners may issue guidance about the content of policies under subsection (2)(b). (7) The Commissioners may make regulations— (a) under which they are required to notify manufacturers of cigarettes or hand-rolling tobacco where products of a kind specified in the regulations are seized under section 139 of the Customs and Excise Management Act 1979 (c. 2) in circumstances specified in the regulations, (b) specifying the procedure for notification, (c) including provision about access to seized products for the purpose of determining who manufactured them, and (d) requiring manufacturers to provide the Commissioners with information or documents, of a kind specified in the regulations or determined by the Commissioners, in relation to notified seizures. (7B) (1) Where the Commissioners think that a manufacturer has without reasonable excuse failed to comply with the duty under section 7A(1) they may give him written notice that they are considering requiring him to pay a penalty. (2) In determining whether to give notice to a manufacturer under subsection (1) the Commissioners shall have regard to— (a) the content of the manufacturer's policy under section 7A(2)(b), (b) compliance with that policy, (c) action taken pursuant to any notice under section 7A(4), (d) compliance by the manufacturer with any notice under section 7A(5), (e) the number, size and nature of seizures of which the manufacturer has been given notice by virtue of section 7A(7)(a), (f) compliance by the manufacturer with any requirement by virtue of section 7A(7)(d), (g) evidence about the level of demand for the manufacturer's products for consumption outside the United Kingdom, and (h) any other matter that they think relevant. (3) A notice must specify the matters to which the Commissioners have had regard in determining to give it. (4) After the end of the period of six months beginning with the date on which a notice is given to a manufacturer, the Commissioners shall give him notice in writing either— (a) that they require payment of a penalty, or (b) that they do not require payment of a penalty. (5) The Commissioners shall comply with subsection (4) during the period of 45 days beginning with the end of the period specified in that subsection; and for that purpose they shall consider— (a) any representations made by the manufacturer during that period in such form and manner as the Commissioners may direct, and (b) action taken by the manufacturer during that period. (7C) (1) A notice under section 7B(4)(a) (a “penalty notice”) must— (a) specify the amount of the penalty which the manufacturer is required to pay, and (b) state the grounds on which the Commissioners think that the manufacturer has failed to comply with the duty under section 7A(1). (2) The amount specified under subsection (1)(a) must not exceed £5 million; and in determining the amount to specify the Commissioners shall have regard to— (a) the nature or extent of the manufacturer's failure to comply with the duty under section 7A(1), (b) action taken by the manufacturer to secure compliance with that duty, (c) the content of the manufacturer's policy under section 7A(2)(b), (d) compliance with that policy, (e) action taken pursuant to any notice under section 7A(4), (f) compliance by the manufacturer with any notice under section 7A(5), (g) the number, size and nature of seizures of which the manufacturer has been given notice by virtue of section 7A(7)(a), (h) the loss of revenue by way of duty under section 2, or VAT, in respect of the products seized, and (i) any other matter that they think relevant. (3) A manufacturer who is given a penalty notice may require the Commissioners to review the decision to issue the notice; and— (a) a requirement must be imposed by notice in writing given to the Commissioners before the end of the period of 45 days beginning with the date of the penalty notice, (b) the Commissioners shall comply with a requirement given in accordance with paragraph (a), (c) the Commissioners shall confirm, vary or withdraw the penalty notice, and (d) the Commissioners shall be taken to have confirmed the penalty notice unless, within the period of 45 days beginning with the date of the requirement to conduct the review, they have varied or withdrawn it by notice in writing to the manufacturer. (4) If following a requirement under subsection (3) the Commissioners confirm or vary the notice (or are taken to have confirmed it) the manufacturer may appeal to a VAT and duties tribunal. (5) The tribunal may— (a) cancel the penalty notice, (b) reduce the penalty, or (c) confirm the penalty notice. (7D) (1) Payment of a penalty imposed under section 7B(4)(a) shall not be allowed as a deduction in computing income, profits or losses for purposes of income tax or corporation tax. (2) A penalty may be enforced as a debt due to the Commissioners. (3) In sections 7A to 7C and this section a reference to a manufacturer of cigarettes or hand-rolling tobacco includes a reference to a person who, in the opinion of the Commissioners— (a) arranges to have cigarettes or hand-rolling tobacco manufactured, and (b) is wholly or partly responsible for the initial supply of the products after manufacture. (4) Where a manufacturer is a parent undertaking or a subsidiary undertaking (within the meaning of section 258 of the Companies Act 1985 (c. 6)) the Commissioners may— (a) treat the parent and its subsidiaries as a single undertaking for the purpose of sections 7A to 7C and this section, and (b) in particular, enforce a penalty imposed on the single undertaking as a debt owed by— (i) the single undertaking, (ii) the parent, or (iii) any of the subsidiaries. (5) A notice or guidance under section 7A(4) to (6)— (a) may be issued to manufacturers generally or to one or more manufacturers or classes of manufacturer, (b) may be expressed to apply to or in respect of manufacturers generally or only to or in respect of one or more specified manufacturers or classes of manufacturer, (c) may make provision generally or only in relation to specified cases or circumstances, (d) may make different provision in relation to different cases or circumstances, and (e) may be varied, replaced or revoked. (6) The Treasury may by order— (a) amend the list in section 7B(2) or 7C(2) so as to— (i) add an entry, (ii) remove an entry, or (iii) amend an entry; (b) amend sections 7A to 7C and this section so as to alter the class of tobacco products in relation to which they apply. (7) An order under subsection (6)— (a) may include transitional, consequential or incidental provision, (b) shall be made by statutory instrument, (c) shall be laid before the House of Commons, and (d) shall cease to have effect unless approved by resolution of the House of Commons within the period of 28 days beginning with the date on which it is laid (disregarding any period of dissolution or prorogation or of adjournment for more than four days).

(2) At the end of section 9 of the Tobacco Products Duty Act 1979 (c. 7) (regulations) (which becomes subsection (1)) add—

(2) Regulations under this Act— (a) may enable the Commissioners to dispense with compliance with a provision of the regulations (whether absolutely or conditionally), (b) may make provision generally or only in relation to specified cases or circumstances, (c) may make different provision in relation to different cases or circumstances, and (d) may include transitional, consequential or incidental provision.

(3) This section shall come into force in accordance with provision made by the Treasury by order.

(4) An order under subsection (3)—

(a) may include transitional, consequential or incidental provision, and

(b) shall be made by statutory instrument.

Alcoholic liquor duties

Rate of duty on beer

3

(1) In section 36(1AA)(a) of ALDA 1979 (rate of duty on beer) for “£12.92” substitute “ £13.26 ”.

(2) This section shall be deemed to have come into force at midnight on 26th March 2006.

Rates of duty on wine and made-wine

4

(1) For Part 1 of the Table of rates of duty in Schedule 1 to ALDA 1979 (rates of duty on wine and made-wine) substitute—

Description of wine or made-wine	Rates of duty per hectolitre
	£
Wine or made-wine of a strength not exceeding 4 per cent	53.06
Wine or made-wine of a strength exceeding 4 per cent but not exceeding 5.5 per cent	72.95
Wine or made-wine of a strength exceeding 5.5 per cent but not exceeding 15 per cent and not sparkling	172.17
Sparkling wine or sparkling made-wine of a strength exceeding 5.5 per cent but less than 8.5 per cent	166.70
Sparkling wine or sparkling made-wine of a strength of 8.5 per cent or of a strength exceeding 8.5 per cent but not exceeding 15 per cent	220.54
Wine or made-wine of a strength exceeding 15 per cent but not exceeding 22 per cent	229.55

(2) This section shall be deemed to have come into force at midnight on 26th March 2006.

Repeal of provisions of ALDA 1979 of no practical utility etc

5

(1) The following provisions of ALDA 1979 shall cease to have effect—

(a) section 12(4) (power to refuse or revoke distiller's licence where premises near to premises of a rectifier, registered brewer or vinegar-maker);

(b) section 14 (duty on spirits – attenuation charge);

(d) section 18(5) (power to refuse licence as a rectifier where premises near to premises of a distillery);

(e) section 21 (restrictions relating to rectifiers);

(f) section 24 (restriction on carrying on of other trades by distiller or rectifier);

(g) section 26 (importation and exportation of spirits);

(h) section 32 (restriction on transfer of British spirits in warehouses);

(i) section 35 (returns as to importation, manufacture, sale or use of alcohols);

(j) section 55A (wine and made-wine of a strength not exceeding 5.5%);

(k) section 67 (power to regulate keeping of dutiable alcoholic liquors by wholesalers and retailers);

(l) section 69 (miscellaneous provisions as to wholesalers and retailers of spirits);

(m) section 71 (penalty for mis-describing liquor as spirits);

(n) section 74 (liquor to be deemed wine or spirits); and

(o) section 82 (power to make regulations with respect to stills).

(2) In consequence of the repeal of section 55A of ALDA 1979, that Act is amended as follows.

(3) In section 54 (wine: charge of excise duty), in subsection (4A), for “wine to which section 55A below applies” substitute “ wine of a strength not exceeding 5.5 per cent ”.

(4) In section 55 (made-wine: charge of excise duty), in subsections (4A) and (5)(d), for “made-wine to which section 55A below applies” substitute “ made-wine of a strength not exceeding 5.5 per cent ”.

Hydrocarbon oil duties

Rates until 1st September 2006

6

(1) HODA 1979 is amended as follows.

(2) In section 6(1A) (hydrocarbon oil: rates of duty)—

(a) in paragraph (a) (ultra low sulphur petrol) for “£0.4832” substitute “ £0.4710 ”,

(b) in paragraph (aa) (sulphur-free petrol) for “£0.4832” substitute “ £0.4710 ”,

(c) in paragraph (b) (light oil other than ultra low sulphur petrol and sulphur-free petrol) for “£0.5766” substitute “ £0.5620 ”,

(d) in paragraph (c) (ultra low sulphur diesel) for “£0.4832” substitute “ £0.4710 ”,

(e) in paragraph (ca) (sulphur-free diesel) for “£0.4832” substitute “ £0.4710 ”, and

(f) in paragraph (d) (heavy oil other than ultra low sulphur diesel and sulphur-free diesel) for “£0.5465” substitute “ £0.5327 ”.

(3) In section 6AA(3) (biodiesel) for “£0.2832” substitute “ £0.2710 ”.

(4) In section 6AD(3) (bioethanol) for “£0.2832” substitute “ £0.2710 ”.

(5) In section 8(3) (road fuel gas)—

(a) in paragraph (a) for “£0.1080” substitute “ £0.0900 ”, and

(b) in paragraph (b) for “£0.1270” substitute “ £0.0900 ”.

(6) In section 13A(1) (rebate on unleaded petrol) for “£0.0617” substitute “ £0.0601 ”.

(7) The following statutory instruments shall cease to have effect—

(a) the Excise Duties (Surcharges or Rebates) (Hydrocarbon Oils etc.) Order 2005 (S.I. 2005/1978),

(b) the Excise Duties (Road Fuel Gases) (Reliefs) Regulations 2005 (S.I. 2005/1979), and

Rates from 1st September 2006

7

(1) HODA 1979 is amended as follows.

(2) In section 6(1A) (hydrocarbon oil: rates of duty)—

(a) in paragraph (a) (ultra low sulphur petrol) for “£0.4710” substitute “ £0.4835 ”,

(b) in paragraph (aa) (sulphur-free petrol) for “£0.4710” substitute “ £0.4835 ”,

(c) in paragraph (b) (light oil other than ultra low sulphur petrol and sulphur-free petrol) for “£0.5620” substitute “ £0.5768 ”,

(d) in paragraph (c) (ultra low sulphur diesel) for “£0.4710” substitute “ £0.4835 ”,

(e) in paragraph (ca) (sulphur-free diesel) for “£0.4710” substitute “ £0.4835 ” and

(f) in paragraph (d) (heavy oil other than ultra low sulphur diesel and sulphur-free diesel) for “£0.5327” substitute “ £0.5468 ”.

(3) In section 6AA(3) (biodiesel) for “£0.2710” substitute “ £0.2835 ”.

(4) In section 6AD(3) (bioethanol) for “£0.2710” substitute “ £0.2835 ”.

(5) In section 8(3) (road fuel gas)—

(a) in paragraph (a) for “£0.0900” substitute “ £0.1081 ”, and

(b) in paragraph (b) for “£0.0900” substitute “ £0.1221 ”.

(6) In section 11(1) (rebate on heavy oil)—

(a) in paragraph (a) for “£0.0604” substitute “ £0.0729 ”,

(b) in paragraph (b) for “£0.0644” substitute “ £0.0769 ”, and

(7) In section 13A(1) (rebate on unleaded petrol) for “£0.0601”substitute “ £0.0617 ”.

(8) In section 14(1) (rebate on light oil for use as furnace oil) for “£0.0604” substitute “ £0.0729 ”.

(9) This section comes into force on 1st September 2006.

Road vehicles

8

After section 27(1A) of HODA 1979 (interpretation) insert—

(1B) The Treasury may by order made by statutory instrument amend Schedule 1 to this Act so as to— (a) add a class of excepted vehicle, (b) remove a class of excepted vehicle, or (c) redefine a class of excepted vehicle. (1C) Section 2A(2) and (3) above shall apply to an order under subsection (1B).

Betting and gaming duties

General betting duty: gaming machines

9

(1) In section 2(2) of the Betting and Gaming Duties Act 1981 (c. 63) (general betting duty: exemptions) after paragraph (c) add—

, or (d) a bet made using a gaming machine, within the meaning of section 23 of the Value Added Tax Act 1994.

(2) This section shall have effect in respect of anything done on or after 6th December 2005 (with the reference to section 23 of the Value Added Tax Act 1994 being a reference to that definition as it is treated as having effect in relation to things done on or after that date by virtue of section 16(6) and (7) below).

Rates of gaming duty

10

(1) For the Table in section 11(2) of FA 1997 (rates of gaming duty) substitute—

Part of gross gaming yield	Rate
The first £546,500	2.5 per cent.
The next £1,212,500	12.5 per cent.
The next £1,212,500	20 per cent.
The next £2,124,000	30 per cent.
The remainder	40 per cent.

(2) This section has effect in relation to accounting periods beginning on or after 1st April 2006.

Amusement machine licence duty

Definition of “gaming machine”

11

(1) For section 25(1) to (1B) of the Betting and Gaming Duties Act 1981 (c. 63) (amusement machine licence duty: definition of “amusement machine”) substitute—

(1) A machine is an amusement machine for the purposes of this Act if it is— (a) a gaming machine, and (b) a prize machine. (1A) In this Act “gaming machine” means a machine that is a gaming machine for the purposes of section 23 of the Value Added Tax Act 1994 (c. 23).

(2) In section 25(1C) of the Betting and Gaming Duties Act 1981 (“prize machine”) for “an amusement machine is a prize machine” substitute “ a machine is a prize machine ”.

(3) In Schedule 3 to the Betting and Gaming Duties Act 1981 (bingo duty) omit paragraph 6 (machine bingo).

(4) Subsections (1) and (2) shall have effect in relation to the provision of a machine on or after 1st August 2006.

(5) Subsection (3) shall have effect in relation to accounting periods beginning on or after 1st August 2006.

Classes of machine and rates of duty

12

(1) For section 21(3AA) to (3E) of the Betting and Gaming Duties Act 1981 (c. 63) (special licences and excepted machines) substitute—

(4) A special amusement machine licence shall be granted only— (a) for a small prize machine, (b) if conditions prescribed by the Commissioners by regulations are satisfied in relation to the application for the licence, the applicant and the machine, and (c) for a period of twelve months. (5) The following are excepted machines— (a) machines that are not gaming machines, (b) a gaming machine in respect of which— (i) the cost of a single game does not exceed 30p, (ii) the maximum value of the prize for winning a single game does not exceed £8, and (iii) the maximum cash component of the prize for winning a single game does not exceed £5, (c) a gaming machine in respect of which— (i) the cost of a single game does not exceed 10p, and (ii) the maximum value of the prize for winning a single game does not exceed £5, and (d) two-penny machines.

(2) In section 22(2) of that Act (gaming machines) paragraph (b) shall cease to have effect.

(3) For section 23(2) and (3) of that Act (rates) substitute—

(2) The appropriate amount for each machine shall be determined in accordance with the following Table by reference to— (a) the period for which the licence is granted, and (b) the machine's category determined in accordance with subsection (3).

(1)	(2)	(3)	(4)	(5)	(6)	(7)
Months for which licence granted	Category A	Category B1	Category B2	Category B3	Category B4	Category C
1	£435	£220	£170	£170	£155	£65
2	£875	£435	£345	£345	£310	£130
3	£1310	£655	£515	£515	£465	£195
4	£1750	£875	£690	£690	£625	£255
5	£2185	£1095	£860	£860	£780	£320
6	£2625	£1310	£1030	£1030	£935	£385
7	£3060	£1530	£1205	£1205	£1090	£450
8	£3500	£1750	£1375	£1375	£1245	£515
9	£3935	£1970	£1545	£1545	£1400	£580
10	£4375	£2185	£1720	£1720	£1555	£645
11	£4810	£2405	£1890	£1890	£1715	£705
12	£5000	£2500	£1965	£1965	£1780	£735

(3) The categories of gaming machine are as follows— Category A – a gaming machine which is not within another category. Category B1 – a gaming machine which is not within a lower category and in respect of which— (i) the cost of a single game does not exceed £2, and (ii) the maximum value of the prize for winning a single game does not exceed £4,000. Category B2 – a gaming machine which is not within a lower category and in respect of which— (i) the cost of a single game does not exceed £100, and (ii) the maximum value of the prize for winning a single game does not exceed £500. Category B3 – a gaming machine which is not within a lower category and in respect of which— (i) the cost of a single game does not exceed £1, and (ii) the maximum value of the prize for winning a single game does not exceed £500. Category B4 – a gaming machine which is not within a lower category and in respect of which— (i) the cost of a single game does not exceed £1, and (ii) the maximum value of the prize for winning a single game does not exceed £250. Category C— (i) a gaming machine in respect of which the cost of a single game does not exceed 5p, and (ii) a gaming machine in respect of which— (a) the cost of a single game does not exceed 50p, and (b) the maximum value of the prize for winning a single game does not exceed £25. (4) Where a machine offers more than one class of game, it falls within a category only if it satisfies the requirements of that category in respect of each class. (5) Where a prize is anything other than money its value for the purposes of this section is— (a) in the case of a voucher or token that may be exchanged for, or used in place of, an amount of money, that amount, (b) in the case of a voucher or token that does not fall within paragraph (a) and that may be exchanged for something other than money, the cost that the person providing the machine would incur in obtaining that thing from a person not connected with him (within the meaning of section 839 of the Income and Corporation Taxes Act 1988), and (c) in any other case, the cost that the person providing the machine would incur in obtaining the prize from a person not connected with him (within that meaning). (6) For the purposes of subsection (3) Category A is the highest category and Category C is the lowest.

(4) For section 25(4) to (7) of the Betting and Gaming Duties Act 1981 (c. 63) substitute—

(4) A machine which has a number of individual playing positions allowing persons to play simultaneously (whether or not participating in the same game) shall be treated for the purposes of sections 21 to 24 as that number of separate machines.

(5) Section 25A of that Act (power to modify definitions) shall cease to have effect.

(6) In section 26(2) of that Act (supplemental) the following shall cease to have effect—

(a) the definition of “ video machine ”, and

(b) in the definition of “two-penny machine”, the words from “and “five-penny machine”” to the end.

(7) Paragraphs 2 and 3 of Schedule 4 to that Act (exemptions) shall cease to have effect.

(8) Subsections (1) to (7) shall have effect in relation to the grant of an amusement machine licence on or after 1st August 2006.

(9) An amusement machine licence granted before that time shall continue to have effect (for which purpose the Betting and Gaming Duties Act 1981 shall have effect without the amendments effected by this section).

(10) But subsection (9) shall not apply in relation to machines which become gaming machines by virtue of section 11 of this Act.

(11) For the purpose of the application of Schedule 4A to that Act (default licences) in respect of a period before 1st August 2006 no account shall be taken of an amendment effected by subsections (1) to (7) above or by section 11 above.

Vehicle excise duty

Rates

13

(1) Schedule 1 to VERA 1994 (annual rates of duty) is amended as follows.

(2) In paragraph 1(2) (general rate of duty), for “£170” substitute “ £175 ”.

(3) For paragraph 1B (rates for light passenger vehicles) substitute—

(1B) The annual rate of vehicle excise duty applicable to a vehicle to which this Part of this Schedule applies shall be determined in accordance with Table A, where the vehicle is first registered before 23rd March 2006, or Table B, where the vehicle is first registered on or after that date, by reference to— (a) the applicable CO₂ emissions figure, and (b) whether the vehicle qualifies for the reduced rate of duty, or is liable to the standard rate or the premium rate of duty.

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	£	£	£
100	120	30	40	50
120	150	90	100	110
150	165	115	125	135
165	185	140	150	160
185		180	190	195
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	£	£	£
100	120	30	40	50
120	150	90	100	110
150	165	115	125	135
165	185	140	150	160
185	225	180	190	195
225		200	210	215

(4) In paragraph 1C (reduced rate for light passenger vehicles)—

(a) for sub-paragraph (2) substitute—

(2) Condition A is that the vehicle— (a) is constructed— (i) so as to be propelled by a relevant type of fuel, or (ii) so as to be capable of being propelled by any of a number of relevant types of fuel, or (b) is constructed or modified— (i) so as to be propelled by a prescribed type of fuel, or (ii) so as to be capable of being propelled by any of a number of prescribed types of fuel, and complies with any other requirements prescribed for the purposes of this condition.

, and

(b) after sub-paragraph (5) insert—

(6) In this paragraph— - “bioethanol” has the meaning given in section 2AB of the Hydrocarbon Oil Duties Act 1979, - “relevant type of fuel” means— 1. bioethanol, or 2. a mixture of bioethanol and unleaded petrol, if the proportion of bioethanol by volume is at least 85%, and - “unleaded petrol” has the meaning given in section 1(3C) of the Hydrocarbon Oil Duties Act 1979. (7) The Secretary of State may, with the consent of the Treasury, by regulations amend sub-paragraph (6).

(5) In paragraph 1J(a) (rates for light goods vehicles), for “£165” substitute “ £170 ”.

(6) In paragraph 1K(a) (lower-emission vans), after “1st March 2003” insert “ and before 1st January 2007 ”.

(7) In paragraph 2(1) (rates for motorcycles)—

(a) in paragraph (b), for “£30” substitute “ £31 ”,

(b) in paragraph (c), for “£45” substitute “ £46 ”, and

(8) In Schedule 2 to VERA 1994 (exempt vehicles), after paragraph 24 insert—

(25) A vehicle is an exempt vehicle if— (a) it is a vehicle to which Part 1A of Schedule 1 applies, and (b) the applicable CO₂ emissions figure (as defined in paragraph 1A(3) and (4) of that Schedule) for the vehicle does not exceed 100 g/km.

(9) Subsection (8) comes into force on 23rd March 2006; but nothing in that subsection has the effect that a nil licence is required to be in force in respect of a vehicle while a vehicle licence is in force in respect of it.

(10) The rest of this section has effect in relation to licences taken out on or after that date.

Reduced pollution certificates

14

In section 61B of VERA 1994 (reduced pollution certificates), for subsection (2) substitute—

(2) For the purposes of this Act, the reduced pollution requirements are satisfied with respect to a vehicle at any time if, at that time, prescribed requirements relating to the vehicle's emissions are satisfied as a result of— (a) the design, construction or equipment of the vehicle as manufactured; or (b) adaptations of a prescribed description having been made to the vehicle after a prescribed date. (2A) Different requirements may be prescribed under subsection (2) for vehicles first registered at different times.

Late renewal supplement

15

In VERA 1994, after section 7B insert—

(7C) (1) The Secretary of State may by regulations provide for the recovery of supplement that has become payable under section 7A by diligence authorised by summary warrant. (2) Regulations under subsection (1) may, in particular, provide— (a) for such summary warrants— (i) to be granted by the sheriff on the application of the Secretary of State; and (ii) to authorise any of the diligences mentioned in subsection (3); (b) for such applications to be accompanied by a certificate mentioned in subsection (4); and (c) for the fees and outlays of sheriff officers incurred in executing such summary warrants to be chargeable against the debtor. (3) The diligences referred to in subsection (2)(a)(ii) are— (a) an attachment; (b) an earnings arrestment; (c) an arrestment and action of furthcoming or sale. (4) The certificate referred to in subsection (2)(b) is a certificate by the Secretary of State — (a) stating that none of the persons specified in the application has paid the supplement due; (b) stating that payment of the amount due from each such person has been demanded from him; (c) stating whether in response to that demand any such person disputes liability to pay; and (d) specifying the amount due from and unpaid by each such person. (5) No fee shall be chargeable by the sheriff officer against the debtor for— (a) collecting; or (b) accounting to the Secretary of State for, sums paid to him by the debtor in respect of the amount owing. (6) No summary warrant for recovery of supplement payable under section 7A may be granted against a person if— (a) he disputes liability to pay; or (b) an action for payment to recover such supplement from him has already been raised. (7) Failure to respond to a demand to pay shall not be taken to mean liability to pay is disputed. (8) An action for payment to recover supplement payable under section 7A may be raised against a person notwithstanding that a summary warrant has already been granted for recovery of such supplement from him but only if none of the diligences mentioned in subsection (3) has been executed against him. (9) Where such an action is raised, the summary warrant shall cease to have effect in relation to such person. (10) This section extends to Scotland only.

Part 2 — Value added tax

Gaming machines

16

(1) Section 23 of VATA 1994 (gaming machines) shall be amended as follows.

(2) In subsection (1)—

(a) for “plays a game of chance” substitute “ gambles ”, and

(b) omit “to play”.

(3) In subsection (2) for “playing” substitute “ gambling ”.

(4) In subsection (3)—

(a) for “playing” substitute “ gambling ”, and

(b) for “to play” substitute “ to use ”.

(5) For subsection (4) substitute—

(4) In this section “gaming machine” means a machine which is designed or adapted for use by individuals to gamble (whether or not it can also be used for other purposes). (5) But— (a) a machine is not a gaming machine to the extent that it is designed or adapted for use to bet on future real events, (b) a machine is not a gaming machine to the extent that— (i) it is designed or adapted for the playing of bingo, and (ii) bingo duty is charged under section 17 of the Betting and Gaming Duties Act 1981 (c. 63) on the playing of that bingo, or would be charged but for paragraphs 1 to 5 of Schedule 3 to that Act, and (c) a machine is not a gaming machine to the extent that— (i) it is designed or adapted for the playing of a real game of chance, and (ii) the playing of the game is dutiable gaming for the purposes of section 10 of the Finance Act 1997 (c. 16), or would be dutiable gaming but for subsections (3) and (4) of that section. (6) In this section— (a) a reference to gambling is a reference to— (i) gaming within the meaning of section 6 of the Gambling Act 2005 (c. 19), and (ii) betting within the meaning of section 9 of that Act, (b) a reference to a machine is a reference to any apparatus which uses or applies mechanical power, electrical power or both, (c) a reference to a machine being designed or adapted for a purpose includes a reference to a machine to which anything has been done as a result of which it can reasonably be expected to be used for that purpose, (d) a reference to a machine being adapted includes a reference to computer software being installed on it, (e) “real” has the meaning given by section 353(1) of that Act, (f) “game of chance” has such meaning as may be prescribed by the Treasury by order, (g) “bingo” means any version of that game, irrespective of by what name it is described. (7) The Treasury may by order amend subsections (4) to (6).

(6) This section shall have effect in relation to anything done on or after 6th December 2005.

(7) In the application of section 23(5)(c) of VATA 1994 as substituted by this section in relation to anything done before 1st November 2006, “game of chance” shall have the same meaning as in the Gaming Act 1968 (c. 65).

Land

Buildings and land

17

(1) The Treasury may by order—

(a) make provision for substituting Schedule 10 to VATA 1994 (buildings and land) for the purpose of rewriting that Schedule with amendments;

(b) make provision amending sections 83 and 84 of that Act (appeals) in connection with any provision of that Schedule as so rewritten.

(2) The Treasury may by order make provision repealing—

(a) paragraph (b) of item 1 in Group 1 of Schedule 9 to VATA 1994 (exempt supplies of land not to include supplies made pursuant to a developmental tenancy, developmental lease or developmental licence), and

(b) Note (7) in that Group (meaning of developmental tenancy, developmental lease or developmental licence).

The power conferred by this subsection is not to be regarded as affecting in any way the power to vary Schedule 9 to that Act conferred by section 31(2) of that Act.

(3) The Treasury may by order make provision repealing—

(a) section 26 of FA 1995 (co-owners etc of buildings and land), and

(b) the enactments inserted by that section (section 51A of VATA 1994 and paragraph 8(2) and (3) of Schedule 10 to that Act).

(4) Any power to make an order under this section includes power—

(a) to make any provision that might be made by an Act, and

(b) to make incidental, consequential, supplemental, or transitional provision or savings.

(5) The consequential provision that may be made under subsection (4)(b) includes provision amending any Act or any instrument made under any Act.

(6) Any order under this section—

(a) is to be made by statutory instrument,

(b) must be laid before the House of Commons, and

(c) unless approved by that House before the end of the period of 28 days beginning with the date on which it is made, ceases to have effect at the end of that period.

(7) But, if an order so ceases to have effect, this does not affect—

(a) anything previously done under the order, or

(b) the making of a new order.

(8) In reckoning the period of 28 days no account is to be taken of any time—

(a) during which Parliament is dissolved or prorogued, or

(b) during which the House of Commons is adjourned for more than 4 days.

Imported works of art etc

Value of imported works of art etc: auctioneer’s commission

18

(1) Section 21 of VATA 1994 (value of imported goods) is amended as follows.

(2) In subsection (2) (value of imported goods to include taxes and expenses), after “shall” insert “ (subject to subsection (2A) below) ”.

(3) After subsection (2) insert—

(2A) Where— (a) any goods falling within subsection (5) below are sold by auction at a time when they are subject to the procedure specified in subsection (2B) below, and (b) arrangements made by or on behalf of the purchaser of the goods following the sale by auction result in the importation of the goods from a place outside the member States, the value of the goods shall not be taken for the purposes of this Act to include, in relation to that importation, any commission or premium payable to the auctioneer in connection with the sale of the goods. (2B) That procedure is the customs procedure for temporary importation with total relief from import duties provided for in Articles 137 to 141 of Council Regulation 2913/92/EEC establishing the Community Customs Code.

(4) Subsections (1) to (3) come into force on such day as the Treasury may by order made by statutory instrument appoint.

Avoidance and fraud

Missing trader intra-community fraud

19

(1) After section 55 of VATA 1994 (customers to account for tax on supplies of gold etc) insert—

(55A) (1) Subsection (3) applies if— (a) a taxable (but not a zero-rated) supply of goods (“the relevant supply”) is made to a person (“the recipient”), (b) the relevant supply is of goods to which this section applies (see subsection (9)), (c) the relevant supply is not an excepted supply (see subsection (10)), and (d) the total value of the relevant supply, and of corresponding supplies made to the recipient in the month in which the relevant supply is made, exceeds £1,000 (“the disregarded amount”). (2) For this purpose a “corresponding supply” means a taxable (but not a zero-rated) supply of goods which— (a) is a supply of goods to which this section applies, and (b) is not an excepted supply. (3) The relevant supply, and the corresponding supplies made to the recipient in the month in which the relevant supply is made, are to be treated for the purposes of Schedule 1— (a) as taxable supplies of the recipient (as well as taxable supplies of the person making them), and (b) in so far as the recipient is supplied in connection with the carrying on by him of any business, as supplies made by him in the course or furtherance of that business, but the relevant supply, and those corresponding supplies, are to be so treated only in so far as their total value exceeds the disregarded amount. (4) Nothing in subsection (3)(b) requires any supply to be disregarded for the purposes of Schedule 1 on the grounds that it is a supply of capital assets of the recipient's business. (5) For the purposes of subsections (1) and (3), the value of a supply is determined on the basis that no VAT is chargeable on the supply. (6) If— (a) a taxable person makes a supply of goods to a person (“the recipient”) at any time, (b) the supply is of goods to which this section applies and is not an excepted supply, and (c) the recipient is a taxable person at that time and is supplied in connection with the carrying on by him of any business, it is for the recipient, on the supplier's behalf, to account for and pay tax on the supply and not for the supplier. (7) The relevant enforcement provisions apply for the purposes of this section, in relation to any person required under subsection (6) to account for and pay any VAT, as if that VAT were VAT on a supply made by him. (8) For this purpose “the relevant enforcement provisions” means so much of— (a) this Act and any other enactment, and (b) any subordinate legislation, as has effect for the purposes of, or in connection with the enforcement of, any obligation to account for and pay VAT. (9) For the purposes of this section, goods are goods to which this section applies if they are of a description specified in an order made by the Treasury. (10) For the purposes of this section, an “excepted supply” means a supply which is of a description specified in, or determined in accordance with, provision contained in an order made by the Treasury. (11) Any order made under subsection (10) may describe a supply of goods by reference to— (a) the use which has been made of the goods, or (b) other matters unrelated to the characteristics of the goods themselves. (12) The Treasury may by order substitute for the sum for the time being specified in subsection (1)(d) such greater sum as they think fit. (13) The Treasury may by order make such amendments of any provision of this Act as they consider necessary or expedient for the purposes of this section or in connection with this section. An order under this subsection may confer power on the Commissioners to make regulations or exercise any other function, but no order may be made under this subsection on or after 22nd March 2009. (14) Any order made under this section (other than one under subsection (12)) may— (a) make different provision for different cases, and (b) contain supplementary, incidental, consequential or transitional provisions.

(2) After section 26A of VATA 1994 (disallowance of input tax where consideration not paid) insert—

(26AB) (1) This section applies if— (a) a person is, as a result of section 26A, taken not to have been entitled to any credit for input tax in respect of any supply, and (b) the supply is one in respect of which the person is required under section 55A(6) to account for and pay VAT. (2) The person is entitled to make an adjustment to the amount of VAT which he is so required to account for and pay. (3) The amount of the adjustment is to be equal to the amount of the credit for the input tax to which the person is taken not to be entitled. (4) 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. (5) Regulations under this section may in particular— (a) make provision for the manner in which, and the period for which, the adjustment is to be given effect, (b) require the adjustment to be evidenced and quantified by reference to such records and other documents as may be specified by or under the regulations, (c) require the person entitled to the adjustment to keep, for such period and in such form and manner as may be so specified, those records and documents, (d) make provision for readjustments if any credit for input tax is restored under section 26A. (6) Regulations under this section may make different provision for different circumstances.

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

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) In section 69 of VATA 1994 (breaches of regulatory provisions), in subsection (1) (failure to comply with a requirement imposed under provisions mentioned in the paragraphs in that subsection), after paragraph (b) insert—

(ba) paragraph 2(3B) of Schedule 11; or

(6) In section 97 of VATA 1994 (orders, rules and regulations), in subsection (4) (orders which cease to have effect unless approved by House of Commons), after paragraph (e) insert—

(ea) an order under section 55A(13);

(7) In Schedule 11 to VATA 1994 (administration, collection and enforcement), in paragraph 2 (accounting for VAT and payment of VAT), after sub-paragraph (3) insert—

(3A) Regulations under this paragraph may require the submission to the Commissioners by taxable persons, at such times and intervals, in such cases and in such form and manner as may be— (a) specified in the regulations, or (b) determined by the Commissioners in accordance with powers conferred by the regulations, of statements containing such particulars of supplies to which section 55A(6) applies in which the taxable persons are concerned, and of the persons concerned in those supplies, as may be prescribed. (3B) Regulations under this paragraph may make provision, in relation to the first occasion on which a person makes a supply of goods to which section 55A(6) applies, for requiring the person to give to the Commissioners such notification of the supply at such time and in such form and manner as may be specified in the regulations.

(8) The amendments made by this section have effect in relation to supplies made on or after such day as the Treasury may by order made by statutory instrument appoint.

But no order may be made under this subsection on or after 22nd March 2009.

(9) An order under subsection (8) may contain transitional provision and savings.

Power to inspect goods

20

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Directions to keep records where belief VAT might not be paid

21

(1) VATA 1994 is amended as follows.

(2) After section 69A (breach of record-keeping requirements etc in relation to transactions in gold) insert—

(69B) (1) If any person fails to comply with a requirement imposed under paragraph 6A(1) of Schedule 11, the person is liable to a penalty. (2) The amount of the penalty is equal to £200 multiplied by the number of days on which the failure continues (up to a maximum of 30 days). (3) If any person fails to comply with a requirement to preserve records imposed under paragraph 6A(6) of Schedule 11, the person is liable to a penalty of £500. (4) If it appears to the Treasury that there has been a change in the value of money since— (a) the day on which the Finance Act 2006 is passed, or (b) (if later) the last occasion when the power conferred by this subsection was exercised, they may by order substitute for the sums for the time being specified in subsections (2) and (3) such other sums as appear to them to be justified by the change. (5) But any such order does not apply to a failure which began before the date on which the order comes into force. (6) A failure by any person to comply with any requirement mentioned in subsection (1) or (3) does not give rise to a liability to a penalty under this section if the person concerned satisfies— (a) the Commissioners, or (b) on appeal, a tribunal, that there is a reasonable excuse for the failure. (7) If by reason of conduct falling within subsection (1) or (3) a person— (a) is assessed to a penalty under section 60, or (b) is convicted of an offence (whether under this Act or otherwise), that conduct does not also give rise to a penalty under this section.

(3) In section 76(1) (assessment of amounts due by way of penalty, interest or surcharge) for “69A”, in both places, substitute “ 69B ”.

(4) In section 83 (appeals)—

(a) in paragraph (n) (penalties or surcharges by virtue of any of sections 59 to 69A) for “69A” substitute “ 69B ” and

(b) after paragraph (z) (conditions imposed by virtue of paragraph 2B(2)(c) or 3(1) of Schedule 11) insert—

(zza) a direction under paragraph 6A of Schedule 11;

(5) In section 84 (further provision relating to appeals) after subsection (7A) (appeals against directions mentioned in section 83(wa)) insert—

(7B) Where there is an appeal against a decision to make such a direction as is mentioned in section 83(zza)— (a) the tribunal shall not allow the appeal unless it considers that the Commissioners could not reasonably have been satisfied that there were grounds for making the direction; (b) the direction shall have effect pending the determination of the appeal.

(6) In Schedule 11 (administration, collection and enforcement), after paragraph 6 (duty to keep records) insert—

(6A) (1) The Commissioners may direct any taxable person named in the direction to keep such records as they specify in the direction in relation to such goods as they so specify. (2) A direction under this paragraph may require the records to be compiled by reference to VAT invoices or any other matter. (3) The Commissioners may not make a direction under this paragraph unless they have reasonable grounds for believing that the records specified in the direction might assist in identifying taxable supplies in respect of which the VAT chargeable might not be paid. (4) The taxable supplies in question may be supplies made by— (a) the person named in the direction, or (b) any other person. (5) A direction under this paragraph— (a) must be given by notice in writing to the person named in it, (b) must warn that person of the consequences under section 69B of failing to comply with it, and (c) remains in force until it is revoked or replaced by a further direction. (6) The Commissioners may require any records kept in pursuance of this paragraph to be preserved for such period not exceeding 6 years as they may require. (7) Sub-paragraphs (4) to (6) of paragraph 6 (preservation of information by means approved by the Commissioners) apply for the purposes of this paragraph as they apply for the purposes of that paragraph. (8) This paragraph is without prejudice to the power conferred by paragraph 6(1) to make regulations requiring records to be kept. (9) Any records required to be kept by virtue of this paragraph are in addition to any records required to be kept by virtue of paragraph 6.

Treatment of credit vouchers

22

(1) VATA 1994 is amended as follows.

(2) In section 97 (orders, rules and regulations), in subsection (4) (orders which cease to have effect unless approved by House of Commons), after paragraph (f) insert—

(fa) an order under paragraph 3(4) of Schedule 10A;

(3) In paragraph 3 of Schedule 10A (treatment of credit vouchers), after sub-paragraph (3) (circumstances in which consideration for supply of credit voucher not to be disregarded under sub-paragraph (2) for the purposes of Act) insert—

(4) The Treasury may by order specify other circumstances in which sub-paragraph (2) above does not apply.

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

Chapter 1 — Income tax and corporation tax: charge and rate bands

Income tax

Charge and rates for 2006-07

23

Income tax shall be charged for the year 2006-07, and for that year—

(a) the starting rate shall be 10%;

(b) the basic rate shall be 22%;

Corporation tax

Charge and main rate for financial year 2007

24

Corporation tax shall be charged for the financial year 2007 at the rate of 30%.

Small companies' rate and fraction for financial year 2006

25

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Abolition of corporation tax starting rate and non-corporate distribution rate

26

(1) Section 13AA of ICTA (corporation tax starting rate) shall cease to have effect.

(2) Section 13AB of ICTA (the non-corporate distribution rate), and Schedule A2 to that Act (supplementary provisions in relation to that rate), shall cease to have effect.

(3) In section 13A of ICTA (close investment-holding companies), in subsection (1) (meaning of “close investment-holding company” for purposes of sections 13(1) and 13AA(8)), omit “or 13AA(8)”.

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) In paragraph 1(a) of Schedule 12 to FA 1989 (provision of information for the purposes of close companies provisions), for “13 to 13A” substitute “ 13, 13ZA, 13A ”.

(7) In paragraph 8(1) of Schedule 18 to FA 1998 (tax calculation in company tax return), in the second step, omit “or 13AA(2)”>.

(8) The amendments made by this section have effect for the financial year 2006 and subsequent financial years (but see also subsections (9) to (11)).

(9) In the case of an accounting period (a “straddling period”)—

(a) beginning before 1st April 2006, and

(b) ending on or after that date,

sections 13AA and 13AB of, and Schedule A2 to, ICTA (“the repealed provisions”) apply as if the different parts of the straddling period falling in the different financial years were separate accounting periods.

(10) Where the rate of corporation tax charged on a company's basic profits for any such separate accounting period ending with 31st March 2006 is determined in accordance with any of the repealed provisions, section 13 of ICTA (small companies' relief) also so applies.

(11) For the purpose of treating different parts of the straddling period as separate accounting periods in accordance with subsections (9) and (10), the profits and basic profits of the straddling period are to be apportioned between those separate accounting periods.

Chapter 2 — Reliefs for business

Group relief

Group relief where surrendering company not resident in UK

27

Schedule 1 (which makes provision in relation to group relief where the surrendering company is not resident in the United Kingdom) has effect.

Research and development

Relief for research and development: subjects of clinical trials

28

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Claims for relief for research and development

29

Schedule 3 (which amends Schedule 18 to FA 1998 in connection with claims for tax relief for expenditure on research and development) has effect.

Capital allowances

Temporary increase in amount of first-year allowances for small enterprises

30

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Chapter 3 — Films and sound recordings

Introductory

31

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Meaning of “film production company”

32

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Meaning of “film-making activities” etc

33

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34

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Meaning of “UK expenditure”

35

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Meaning of “qualifying co-production” and “co-producer”

36

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Taxation of activities of film production company

37

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Film tax relief

Films qualifying for film tax relief

38

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Conditions of relief: intended theatrical release

39

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Conditions of relief: British film

40

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Conditions of relief: UK expenditure

41

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Film tax relief: further provisions

42

(1) Schedule 5 to this Act contains further provisions about film tax relief.

(2) In that Schedule—

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

Part 2 provides for the certification of British films for the purposes of the relief;

Part 3 makes provision for claims for the relief;

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

Film losses

Films: restriction on use of losses while film in production

43

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Films: use of losses in later periods

44

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Films: terminal losses

45

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Films: withdrawal of existing reliefs

Films: withdrawal of existing reliefs (corporation tax)

46

(1) Sections 40A to 40D of F(No.2)A 1992 (treatment of expenditure on production or acquisition of film) do not apply—

(a) to production expenditure on a film that commences principal photography on or after 1st January 2007;

(b) to acquisition expenditure—

(i) on a film that commences principal photography on or after 1st January 2007, or

(ii) that is incurred on or after 1st October 2007 on a film (whenever made).

(2) Section 41 of that Act (preliminary expenditure) does not apply to expenditure incurred after the date on which this Act is passed.

(3) Section 42 of that Act and section 48 of F(No.2)A 1997 (special reliefs for British films) do not apply—

(a) to production expenditure on a film that commences principal photography on or after 1st January 2007;

(b) to acquisition expenditure—

(i) on a film that commences principal photography on or after 1st January 2007, or

(ii) that is incurred on or after 1st October 2007.

(4) References in this section to expenditure on the acquisition of a film, or to sums received from the disposal of a film, are to expenditure on the acquisition of, or sums received from the disposal of, the original master version of the film.

(5) For this purpose—

(a) “original master version” means the original negative, tape or disc;

(b) references to the original master version of a film include the original master version of the film soundtrack (if any);

(c) references to the original master version include any rights in the original master version that are held or acquired with it.

(6) The provisions of sections 1181 to 1187 of CTA 2009 apply for the purposes of this section as if this section were contained in Part 15 of that Act.

Films: withdrawal of existing reliefs (income tax)

47

(1) Sections 134 and 135 of ITTOIA 2005 (treatment of expenditure on production or acquisition of film) do not apply—

(a) to production expenditure on a film that commences principal photography on or after 1st January 2007 ;

(b) to acquisition expenditure—

(i) on a film that commences principal photography on or after 1st January 2007, or

(ii) that is incurred on or after 1st October 2007 on a film (whenever made).

(2) Section 137 of that Act (preliminary expenditure) does not apply to expenditure incurred after the date on which this Act is passed.

(3) Sections 138 to 144 of that Act (special reliefs for British films) do not apply—

(a) to production expenditure on a film that commences principal photography on or after 1st January 2007;

(b) to acquisition expenditure—

(i) on a film that commences principal photography on or after 1st January 2007, or

(ii) that is incurred on or after 1st October 2007.

(4) References in this section to expenditure on the acquisition of a film, or to sums received from the disposal of a film, are to expenditure on the acquisition of, or sums received from the disposal of, the original master version of the film.

(5) For this purpose—

(a) “original master version” means the original negative, tape or disc;

(b) references to the original master version of a film include the original master version of the film soundtrack (if any);

(c) references to the original master version include any rights in the original master version that are held or acquired with it.

(6) The provisions of sections 1181 to 1187 of CTA 2009 apply for the purposes of this section as if this section were contained in Part 15 of that Act.

Corporation tax treatment of sound recordings

Sound recordings: revenue nature of expenditure

48

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Sound recordings: allocation of expenditure

49

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Sound recordings: interpretation

50

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Supplementary provisions

Corporation tax: films and sound recordings as intangible fixed assets

51

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Films: application of provisions to certain films already in production

52

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Films and sound recordings: commencement and power to alter dates

53

(1) The provisions of this Chapter come into force on such day as the Treasury may appoint by order.

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

Chapter 4 — Charities

Transactions with substantial donors

54

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Non-charitable expenditure

55

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Trade profits

56

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Gift aid relief for companies wholly owned by one or more charities

57

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

Extension of restrictions on gift aid payments by close companies

58

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

Chapter 5 — Personal taxation

Cars

Cars with a CO2 emissions figure

59

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

Mobile telephones and computers

Mobile telephones

60

(1) In section 266(2) of ITEPA 2003 (exemption of non-cash vouchers for exempt benefits), insert at the end

or (d) section 319 (mobile telephones).

(2) In section 267(2) of that Act (exemption of credit-tokens used for exempt benefits), after paragraph (f) insert—

(g) section 319 (mobile telephones).

(3) For section 319 of that Act (employment income: exemption for mobile telephones) substitute—

(319) (1) No liability to income tax arises by virtue of section 62 (general definition of earnings) or Chapter 10 of Part 3 (taxable benefits: residual liability to charge) in respect of the provision of one mobile telephone for an employee without any transfer of property in it. (2) In this section “mobile telephone” means telephone apparatus which— (a) is not physically connected to a land-line, and (b) is not used only as a wireless extension to a telephone which is physically connected to a land-line, or any thing which may be used in such apparatus for the purpose of gaining access to, or using, a public electronic communications service. (3) In this section the reference to the provision of a mobile telephone includes a reference to the provision, together with the mobile telephone provided, of access to, or the use of, a public electronic communications service by means of one mobile telephone number. (4) For the purposes of subsection (2) “telephone apparatus” means wireless telegraphy apparatus designed or adapted for the primary purpose of transmitting and receiving spoken messages and used in connection with a public electronic communications service.

(4) This section has effect for the year 2006-07 and subsequent years of assessment.

(5) But the amendment made by subsection (3) does not cause any liability to income tax to arise in respect of the provision of a mobile telephone for an employee, or a member of an employee's family or household, if the mobile telephone was first provided to him before 6th April 2006.

Computer equipment

61

(1) Omit section 320 of ITEPA 2003 (employment income: limited exemption for computer equipment).

(2) This section has effect for the year 2006-07 and subsequent years of assessment.

(3) But it does not cause any liability to income tax to arise in respect of the provision of computer equipment by making it available to an employee, or a member of an employee's family or household, if the computer equipment was first made available to him before 6th April 2006.

Eye care

Exemption for employees' eye tests and special glasses

62

(1) Part 4 of ITEPA 2003 (employment income: exemptions) is amended as follows.

(2) In Chapter 11 (miscellaneous exemptions), before section 321 (and the cross-heading “Awards and gifts”) insert—

(320A) (1) No liability to income tax arises in respect of the provision for an employee of— (a) an eye and eyesight test, or (b) special corrective appliances that an eye and eyesight test shows are necessary, if conditions A and B are met. (2) Condition A is that the provision of the test or appliances is required by regulations made under the Health and Safety at Work etc. Act 1974. (3) Condition B is that tests and appliances of the kind mentioned in subsection (1) are made available generally to those employees of the employer in question for whom they are required to be provided by the regulations.

(3) In section 266 (exemption of non-cash vouchers for exempt benefits), at the end of subsection (3) insert

, or (f) section 320A (eye tests and special corrective appliances).

(4) In section 267 (exemption of credit-tokens used for exempt benefits), at the end of subsection (2) insert

, and (h) section 320A (eye tests and special corrective appliances).

(5) This section has effect for the year 2006-07 and subsequent years of assessment.

Vouchers and tokens

Power to exempt use of vouchers or tokens to obtain exempt benefits

63

In Chapter 4 of Part 3 of ITEPA 2003 (taxable benefits: vouchers and credit-tokens), after section 96 insert—

(96A) (1) The Treasury may by regulations provide for exemption from any liability that would otherwise arise by virtue of this Chapter in respect of— (a) non-cash vouchers which are or can be used to obtain specified exempt benefits, or which evidence an employee's entitlement to specified exempt benefits; (b) credit-tokens which are used to obtain specified exempt benefits. (2) In this section— - “exempt benefit” means a benefit the direct provision of which is exempted from liability to income tax by a provision of Part 4 (employment income: exemptions), and - “specified” means specified in the regulations. (3) Regulations under this section may operate by amending section 266 (exemption of non-cash vouchers for exempt benefits) or section 267 (exemption of credit-tokens used for exempt benefits).

Holocaust victims

Payments to or in respect of victims of National-Socialist persecution

64

(1) In section 369 of ITTOIA 2005 (charge to tax on interest), in subsection (3) (non-exhaustive list of exemptions), in paragraph (e) (exemptions under sections 749 to 756)—

(a) for “756” substitute “ 756A ”, and

(b) for “and interest on certain foreign currency securities)” substitute “ , certain foreign currency securities and interest on certain deposits of victims of National-Socialist persecution) ”.

(2) After section 756 of ITTOIA 2005 (which securities and loans are foreign currency ones for section 755) insert—

(756A) (1) No liability to income tax arises in respect of interest which is paid— (a) to or in respect of a victim of National-Socialist persecution, (b) under a qualifying compensation scheme, and (c) for a qualifying purpose in respect of a qualifying deposit of the victim. (2) A scheme is a qualifying compensation scheme if— (a) it is constituted (whether under the law of any part of the United Kingdom or elsewhere) by an instrument in writing, and (b) the purpose of the scheme, or one of its purposes, is to make payments of interest to or in respect of victims of National-Socialist persecution for qualifying purposes in respect of qualifying deposits. (3) Interest is paid for a qualifying purpose in respect of a deposit if— (a) it is paid for meeting a liability in respect of interest on the deposit, or (b) it is paid for compensating for the effects of inflation on the deposit. (4) In relation to a victim of National-Socialist persecution, a deposit is a qualifying deposit if it was made— (a) by, or on behalf of, the victim, and (b) on or before 5th June 1945. (5) In this section “deposit” has the meaning given by section 481(3) of ICTA.

(3) In section 783 of ITTOIA 2005 (general disregard of exempt income for income tax purposes)—

(a) for subsection (2) (exception to general disregard) substitute—

(2) There are exceptions to this in the following cases. (2A) Interest on deposits in ordinary accounts with the National Savings Bank which is exempt under this Part from every charge to income tax is not to be ignored for the purpose of providing information. (2B) Interest paid to or in respect of victims of National-Socialist persecution which is so exempt is not to be ignored for the purposes of sections 17 and 18 of TMA 1970 (information provisions relating to interest).

, and

(b) in subsection (3) (subsection (2) without prejudice to other exceptions) for “This express exception to subsection (1) is” substitute “ These express exceptions to subsection (1) are ”.

(4) After section 268 of TCGA 1992 (decorations for valour or gallant conduct) insert—

(268A) (1) A gain accruing on a disposal is not a chargeable gain if it accrues on— (a) a disposal of the right to receive the whole or any part of a qualifying payment in respect of National-Socialist persecution, or (b) a disposal of an interest in any such right. (2) A payment is a qualifying payment in respect of National-Socialist persecution if it is payable as mentioned in paragraphs (a) to (c) of section 756A(1) of ITTOIA 2005 (income tax exemption for payments to or in respect of victims of National-Socialist persecution). (3) In this section “interest”, in relation to any right, means an interest as a co-owner of the right. (4) It does not matter— (a) whether the right is owned jointly or in common, or (b) whether or not the interests of the co-owners are equal.

(5) If at any time before claims could have been made under any qualifying compensation scheme—

(a) a person beneficially entitled to a qualifying deposit has died, and

(b) no information in respect of that deposit was contained in any account relating to that deceased person under any provision of IHTA 1984,

that deposit is to be ignored for all purposes of IHTA 1984.

(6) For this purpose “qualifying compensation scheme” and “qualifying deposit” have the same meaning as in section 756A of ITTOIA 2005.

(7) Subsection (2) has effect (and is deemed always to have had effect)—

(a) for the year 1996-97, and

(b) subsequent years of assessment.

(8) Subsection (4) has effect (and is deemed always to have had effect) in relation to disposals made on or after 6th April 1996; but no loss accruing on a disposal made before 6th April 2006 is, as a result of that subsection, to cease to be an allowable loss.

(9) In relation to any time before 6th April 2005 (the commencement of ITTOIA 2005)—

(a) the section inserted by subsection (2) is to be treated as if it were inserted into ICTA (and as if, in subsection (5) of that section, “of ICTA” were omitted), and

(b) any reference to that section in any enactment is to be read accordingly.

(10) In relation to the year 2005-06 or any earlier year of assessment, all such adjustments are to be made as are required to give effect to the exemptions conferred as a result of this section.

(11) But the adjustments are to be made only if the person entitled to the exemption makes a claim for the exemption on or before 31st January 2012.

(12) The adjustments may be made by discharge or repayment of tax, the making of an assessment or otherwise.

Chapter 6 — The London Olympic Games and Paralympic Games

London Organising Committee

65

(1) In this section “LOCOG” means the private company limited by guarantee incorporated on 22nd October 2004 with the Company Number 05267819 and with the name The London Organising Committee of the Olympic Games Limited.

(2) LOCOG shall be exempt from corporation tax.

(3) The duties to deduct under Chapters 6, 7, 10 and 14 of Part 15 of ITA 2007 (deduction of income tax at source) shall not apply to payments to LOCOG.

(4) A claim may be made for any repayment of income tax required as a result of an exemption conferred by this section.

(5) The Treasury may by regulations provide for subsections (2) to (4) to apply to a wholly-owned subsidiary of LOCOG (within the meaning of section 736 of the Companies Act 1985 (c. 6)) as they apply to LOCOG.

(6) Subsection (7) applies if it appears to the Treasury—

(a) that LOCOG has been or may have been, or is or may be, directly or indirectly connected with another person, or

(b) has been or may have been, or is or may be, acting in association or co-operation with another person (whether by virtue of part-ownership, partnership, membership of a group or consortium or in any other way).

(7) The Treasury may make regulations—

(a) restricting the application of a provision of this section to a specified extent;

(b) removing or restricting an exemption or relief under an enactment relating to corporation tax, income tax or capital gains tax;

(c) preventing a loss or expense of a specified kind from being used or treated in a specified way for purposes of corporation tax, income tax or capital gains tax;

(d) wholly or to a specified extent preventing an allowance from being claimed for purposes of corporation tax, income tax or capital gains tax;

(e) providing for a transfer of property to be disregarded, or treated in a specified way, for purposes of corporation tax, income tax or capital gains tax;

(f) providing for specified action taken by LOCOG or the other person to have, or not to have, a specified effect for purposes of corporation tax, income tax or capital gains tax;

(g) providing for an enactment relating to the treatment of groups of companies for purposes of corporation tax, income tax or capital gains tax to be wholly or partly disapplied or to be applied with modifications;

(h) making any other provision which appears to the Treasury to be expedient for the purpose of preventing this section from being used or relied upon otherwise than in connection with the functions of LOCOG under the Host City Contract;

and provision made under any of paragraphs (b) to (h) may relate to LOCOG or to the other person mentioned in subsection (6).

(8) If it appears to the Treasury that LOCOG has undertaken, is undertaking or may undertake activities other than in pursuance of the Host City Contract, the Treasury may make regulations restricting the application of a provision of this section to a specified extent.

(9) Regulations under subsection (5) may include provision of a kind similar to that which may be made under subsection (7) or (8).

Section 65: supplementary

66

(1) Regulations under section 65(5) to (8)—

(a) may make provision which applies generally or only in specified cases or circumstances,

(b) may make different provision for different cases or circumstances,

(d) may include incidental, consequential or transitional provision.

(2) Regulations under section 65 shall be made by statutory instrument.

(3) Regulations under section 65(5)—

(a) shall be subject to annulment in pursuance of a resolution of the House of Commons, or

(b) if they include provision by virtue of section 65(9), may not be made unless a draft has been laid before and approved by resolution of the House of Commons.

(4) Regulations under section 65(7) or (8) may not be made unless a draft has been laid before and approved by resolution of the House of Commons.

(5) In section 65 “the Host City Contract” has the meaning given by section 1 of the London Olympic Games and Paralympic Games Act 2006.

(6) Section 65 shall be treated as having come into force on 22nd October 2004.

(7) The Treasury may by order made by statutory instrument repeal section 65 and this section.

International Olympic Committee

67

(1) The Treasury may make regulations—

(a) providing for the International Olympic Committee to be treated for the purposes of corporation tax as not having a permanent establishment in the United Kingdom;

(b) providing for the International Olympic Committee not to be chargeable to income tax or capital gains tax;

(c) disapplying the duties to deduct under Chapters 3, 6, 7, 10 and 14 of Part 15 of ITA 2007 (deduction of income tax at source) to payments to the International Olympic Committee.

(2) The Treasury may make regulations—

(a) providing for a specified person or class of person appearing to the Treasury to be owned or controlled by the International Olympic Committee to be treated for the purposes of corporation tax as not having a permanent establishment in the United Kingdom;

(b) providing for a specified person or class of person appearing to the Treasury to be owned or controlled by the International Olympic Committee not to be chargeable to income tax or capital gains tax;

(c) disapplying the duties to deduct under Chapters 3, 6, 7, 10 and 14 of Part 15 of ITA 2007 (deduction of income tax at source) to payments to a specified person or class of person appearing to the Treasury to be owned or controlled by the International Olympic Committee.

(3) Regulations under this section—

(a) may make provision which applies generally or only in specified cases or circumstances,

(b) may make different provision for different cases or circumstances,

(d) may include incidental, consequential or transitional provision.

(4) Regulations under this section—

(a) shall be made by statutory instrument, and

(b) shall be subject to annulment in pursuance of a resolution of the House of Commons.

(5) A claim may be made for any repayment of income tax required as a result of an exemption conferred under this section.

Competitors and staff

68

(1) The Treasury may make regulations—

(a) exempting specified classes of person from income tax in respect of specified classes of income arising from participation in London Olympic events;

(b) providing for specified classes of activity undertaken in connection with London Olympic events to be disregarded for purposes of corporation tax, income tax or capital gains tax;

(c) providing for specified classes of activity in connection with London Olympic events to be disregarded in determining for fiscal purposes whether a person has a permanent establishment in the United Kingdom;

(d) disapplying the duties to deduct under Chapters 6, 7, 10 and 14 of Part 15 of ITA 2007 (deduction of income tax at source) in consequence of provision made under paragraphs (a) to (c) above.

(2) The regulations may specify classes of person wholly or partly by reference to—

(a) residence outside the United Kingdom, determined in such manner as the regulations may provide;

(b) documents issued or authority given by such persons exercising functions in connection with the London Olympics as the regulations may provide.

(3) Regulations under this section—

(a) may make provision which applies generally or only in specified cases or circumstances,

(b) may make different provision for different cases or circumstances, and

(4) Regulations under this section—

(a) shall be made by statutory instrument, and

(b) shall be subject to annulment in pursuance of a resolution of the House of Commons.

(5) In this section “London Olympic event” and “the London Olympics” have the meaning given by section 1 of the London Olympic Games and Paralympic Games Act 2006.

Chapter 7 — Chargeable gains

Capital losses

Restriction on a company’s allowable losses

69

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

Restrictions on companies buying losses or gains

70

(1) TCGA 1992 is amended as follows.

(2) After section 184 insert—

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