Finance Act 2006

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PAYE

PAYE: retrospective notional payments

94

• (1) ITEPA 2003 is amended as follows.

• (2) In section 222 (payments by employer on account of tax where deduction not possible)—

• (a) in subsection (1)(c), for “date on which the employer is treated as making the notional payment” substitute “ relevant date ”,

• (b) in subsection (2), for “date mentioned in subsection (1)(c)” substitute “ relevant date ”, and

• (c) after subsection (3) insert—

(4) In this section “the relevant date” means— (a) if the employer is treated by virtue of any Act as making the notional payment before the date on which the Act is passed, that date, and (b) in any other case, the date on which the employer is treated as making the notional payment.

• (3) In section 684(2) (PAYE regulations), in item 1—

• (a) for “time of the payment” substitute “ relevant time ”, and

• (b) after paragraph (b) insert—

“The relevant time” is— (a) if the payment is a notional payment for the purposes of section 710 and the person is treated by virtue of any Act as making it at a time before the date on which the Act is passed, that date, and (b) in any other case, the time when the payment is made.

• (4) In section 710 (notional payments: accounting for tax)—

• (a) in subsection (7), after “means” insert “ (subject to subsection (7A)) ”, and

• (b) after that subsection insert—

(7A) In a case where the notional payment is treated by virtue of any Act as made before the date on which the Act is passed— (a) the reference in sub-paragraph (i) of paragraph (a) of subsection (7) to the time when the notional payment is made is to the date on which the Act is passed, (b) the reference in sub-paragraph (ii) of that paragraph to any occasion falling within the same income tax period is to any occasion falling before the end of the income tax period next after that in which that date falls, and (c) the reference in paragraph (b) of that subsection to the income tax period in which the notional payment was made is to the income tax period next after that in which that date falls.

• (5) The provisions of ITEPA 2003 amended by this section have effect in relation to notional payments treated by virtue of this Act as made before the date on which this Act is passed as if for the references to the date on which the Act is passed in—

• (a) section 222(4)(a),

• (b) paragraph (a) of the definition of “the relevant time” in section 684(2), and

• (c) section 710(7A)(a), (b) and (c),

there were substituted references to such date as the Commissioners for Her Majesty's Revenue and Customs may by order made by statutory instrument appoint.

Alternative finance arrangements

Profit share agency

95

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

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

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

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

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

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

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

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

• (9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diminishing shared ownership

96

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Beneficial loans to employees

97

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Regulations

98

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Nuclear decommissioning

Amendment of section 29 of the Energy Act 2004

99

• (1) Section 29 of the Energy Act 2004 (c. 20) (disregard for tax purposes of cancellation etc of decommissioning provisions) is amended as follows.

• (2) In subsection (1)—

• (a) in paragraph (a), for “relevant company” substitute “ BNFL company ”;

• (b) for paragraphs (b) and (c) substitute—

(b) that provision— (i) relates to decommissioning or cleaning-up which the NDA acquires or has acquired responsibility for securing by virtue of a direction under section 3, but (ii) is not provision recognised in order to reflect the terms or effect of a management contract between the company and the NDA; and (c) the responsibility referred to in paragraph (b)(i)— (i) includes the financial responsibility under section 21, or (ii) would do so but for the fact that the amount of the financial responsibility is for the time being subject to a limit imposed by a capping agreement.

• (3) For subsections (3) and (4) substitute—

(3) This subsection applies to a credit or debit if it arises from— (a) the recognition in the accounts of the company for a relevant period beginning on or after 1st April 2005 of— (i) the relevant provision, or (ii) an asset that, in accordance with generally accepted accounting practice, is recognised in connection with the relevant provision in order to reflect the acquisition of financial responsibility referred to in subsection (1) (a “matching asset”); (b) an adjustment made in the accounts of the company for such a period of— (i) the relevant provision, or (ii) a matching asset; or (c) the removal from the accounts of the company for such a period of— (i) the relevant provision, (ii) a matching asset, or (iii) an asset or liability recognised in order to reflect the terms or effect of a contract falling within subsection (3A). (3A) A contract falls within this subsection if— (a) it is a contract made before 1st April 2005 and having effect between two or more BNFL companies under which a party to the contract assumed responsibility for securing decommissioning or cleaning-up; and (b) the rights and obligations under the contract are extinguished by reason of a transfer made under a nuclear transfer scheme.

• (4) In subsection (5)—

• (a) for the definition of “BNFL company” substitute—

“BNFL company” means— (a) BNFL, (b) a company that immediately before 1st April 2005 was a wholly-owned subsidiary of BNFL, or (c) a wholly-owned subsidiary of a company falling within paragraph (b);

;

• (b) after that definition insert—

• “capping agreement” means an agreement under subsection (9) of section 21, entered into on 1st April 2005, the sole or main effect of which is to impose a limit on the NDA's financial responsibility under that section;
• “management contract” has the same meaning as in section 27;

;

• (c) for the definition of “relevant company” substitute—

“relevant period”, in relation to a company, means an accounting period during the whole of which the company is publicly owned;

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• (5) After that subsection insert—

(5A) Where a company ceases to be publicly owned otherwise than at the end of an accounting period— (a) the accounting period during which it ceases to be publicly owned is treated for the purposes of corporation tax as ending when it so ceases; and (b) its profits and losses are to be computed accordingly for those purposes.

• (6) The amendments made by this section have effect in relation to accounting periods of a BNFL company ending on or after 22nd March 2006.

Amendment of section 30 of the Energy Act 2004

100

• (1) Section 30 of the Energy Act 2004 (disregard for tax purposes of decommissioning provisions recognised by Nuclear Decommissioning Authority) is amended as follows.

• (2) In subsection (1)—

• (a) for paragraph (b) substitute—

(b) that responsibility— (i) includes the financial responsibility under section 21, or (ii) would do so but for the fact that the amount of the financial responsibility is for the time being subject to a limit imposed by a capping agreement;

;

• (b) in paragraph (c) omit “on the coming into force of the direction mentioned in paragraph (a),”;

• (c) at the end of that paragraph insert

; and (d) the provision is recognised— (i) in order to reflect the coming into force of the direction mentioned in paragraph (a), or (ii) in consequence of the variation or removal of a limit on the NDA's financial responsibility under section 21 imposed by a capping agreement.

• (3) For subsection (3) substitute—

(3) In computing the profits, gains or losses of the NDA for the purposes of corporation tax, no amount shall be brought into account in connection with— (a) the recognition made in the accounts of the NDA of— (i) the relevant provision, or (ii) an asset that, in accordance with generally accepted accounting practice, is recognised in order to reflect a limit on the NDA's financial responsibility under section 21 imposed by a capping agreement; (b) any adjustment made in those accounts (including the removal from the accounts of an asset falling within paragraph (a)(ii)) in consequence of a variation or removal of the limit mentioned in paragraph (a)(ii).

• (4) In subsection (4), for the words after “in connection with” substitute “ an adjustment not falling within paragraph (b) of that subsection ”.

• (5) In subsection (5), after the definition of “BNFL company” insert—

“capping agreement” has the same meaning as in section 29;

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• (6) The amendments made by this section have effect in relation to accounting periods of the Nuclear Decommissioning Authority ending on or after 22nd March 2006.

Accounting practice

Securitisation companies

101

• (1) Section 83 of FA 2005 (application of accounting standards to securitisation companies) is amended as follows.

• (2) In subsection (1)(b) (periods of account in relation to which old UK GAAP is to apply) for “1st January 2007” substitute “ 1st January 2008 ”.

• (3) In subsection (3) (meaning of “note-issuing company”)—

• (a) omit “and” at the end of paragraph (c);

• (b) after paragraph (d) insert—

, and (e) if it has any business apart from the activity mentioned in paragraph (a) (and any incidental activities) it consists in one or both of the following— (i) acquiring, holding and managing assets forming the whole or part of the security for the capital market arrangement; (ii) acting as guarantor in respect of loan relationships, derivative contracts, finance leases or other liabilities of other companies where the whole, or substantially the whole, of the company's rights in respect of the guarantee (including any right of subrogation) form the whole or part of the security for the capital market arrangement.

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• (4) In subsection (5) (meaning of “intermediate borrowing company”)—

• (a) in paragraph (a) after “asset-holding company”, and

• (b) in paragraph (b) after “note-issuing company”,

insert “ (or another intermediate borrowing company) ”.

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

• (6) The amendments in this section shall be deemed always to have had effect, subject as follows.

• (7) A company that would have been a securitisation company for the purposes of section 83 of FA 2005 if the amendments in this section had not been made, being either—

• (a) a note-issuing company that—

• (i) had become party as debtor to the capital market investment before 22nd March 2006, or

• (ii) had before that date entered into a binding arrangement to become a party as debtor to the capital market investment, or

• (b) another description of securitisation company by virtue of its connection with a company within paragraph (a),

may elect to be taxed as if the amendments in subsection (3) had not been made.

• (8) Any such election must be made not later than 31st March 2007 and has effect for all relevant periods of account.

Accountancy change: spreading of adjustment

102

• (1) Schedule 15 to this Act (accountancy change: spreading of adjustment) has effect.

• (2) In that Schedule—

• Part 1 makes provision for income tax purposes, and

• Part 2 makes provision for corporation tax purposes.

• (3) In section 21B of ICTA (corporation tax: application to Schedule A business of other rules applicable to Case 1 of Schedule D) for “section 44 of and Schedule 6 to the Finance Act 1998” substitute “ section 64 of and Schedule 22 to the Finance Act 2002 ”.

Part 4 — Real Estate Investment Trusts

Introduction

Real Estate Investment Trusts

103

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Property rental business

104

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Other key concepts

105

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Conditions for company

106

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Conditions for tax-exempt business

107

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Conditions for balance of business

108

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Entering Real Estate Investment Trust Regime

Notice

109

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Duration

110

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Effects of entry

111

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Entry charge

112

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Assets etc

Ring-fencing of tax-exempt business

113

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Maximum shareholding

114

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Profit: financing-cost ratio

115

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Minor or inadvertent breach

116

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Cancellation of tax advantage

117

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Funds awaiting re-investment

118

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Profits

Corporation tax

119

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Calculation of profits

120

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Distributions: liability to tax

121

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Distributions: deduction of tax

122

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Attribution of distributions

123

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Capital gains

Corporation tax

124

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Movement of assets out of ring-fence

125

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Movement of assets into ring-fence

126

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Interpretation

127

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Leaving Real Estate Investment Trust Regime

Termination by notice: company

128

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Termination by notice: Commissioners

129

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Automatic termination for breach of requirement

130

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Effects of cessation

131

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Early exit by notice

132

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Early exit

133

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Groups

Group Real Estate Investment Trusts

134

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Transfer within group

135

After section 171(2)(d) of TCGA 1992 (transfer within a group: exclusions) insert—

; or (da) a disposal by or to a company to which Part 4 of the Finance Act 2006 applies (Real Estate Investment Trusts);

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Availability of group reliefs

136

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Miscellaneous

Insurance companies

137

In section 212(1) of TCGA 1992 (annual deemed disposal of holdings of certain assets) after paragraph (b) insert—

, or (c) shares in a company to which Part 4 of the Finance Act 2006 applies (Real Estate Investment Trusts),

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Joint ventures

138

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Manufactured dividends

139

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Penalties for failure to give notice, etc

140

At the end of the second column of the Table in section 98(5) of TMA 1970 (penalties) add—

Section 106 of FA 2006 as modified by Schedule 17 to that Act. Section 116 of FA 2006. Regulations under section 116 of FA 2006. Regulations under section 122 of FA 2006. Section 130 of FA 2006.

Effect of deemed disposal and re-acquisition

141

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Interpretation

142

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Housing investment trusts: repeal

143

Section 160 of, and Schedule 30 to, FA 1996 (housing investment trusts) shall cease to have effect (and accordingly—

• (a) sections 508A and 508B of ICTA shall cease to have effect,

• (b) the amendments of section 842(1)(a) and (e) of ICTA effected by paragraph 2(2) of Schedule 30 shall cease to have effect, and

• (c) section 842(1AA) of ICTA shall cease to have effect).

General

Regulations

144

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Commencement

145

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

• (2) Section 143 shall have effect in relation to accounting periods beginning on or after the day on which this Act is passed.

Part 5 — Oil

New basis for determining market value

New basis for determining the market value of oil

146

• (1) In OTA 1975, in Schedule 3 (petroleum revenue tax: miscellaneous provisions) before paragraph 2 (definition of market value of oil) insert—

(1A) (1) This paragraph has effect for determining, for the purposes of this Schedule, the day which is the “notional delivery day” in the case of any particular quantity of oil of any particular kind whose market value falls to be determined in accordance with the provisions of this Schedule in the case of any chargeable period. (2) The notional delivery day need not be a day in the chargeable period. (3) In the case of a quantity of oil which, at the end of the chargeable period,— (a) has neither been disposed of nor relevantly appropriated in the period, or (b) has been disposed of but not delivered in the period, the notional delivery day is the last business day of the chargeable period. (4) In the case of— (a) a quantity of oil won and disposed of which is delivered on a day in the chargeable period, or (b) a quantity of oil— (i) relevantly appropriated on a day in the chargeable period, but (ii) not disposed of in the chargeable period, the notional delivery day is to be determined in accordance with sub-paragraphs (5) to (7) below. (5) If that oil is— (a) oil transported by ship from the place of extraction to a place in the United Kingdom or elsewhere, or (b) oil transported by pipeline to a place in the United Kingdom and loaded on to a ship there, and there is a loading slot for it (see sub-paragraph (8)), the notional delivery day is the middle day of the loading slot. (6) If sub-paragraph (5) above does not apply to that oil, then— (a) if it is oil delivered on a day in the chargeable period, the notional delivery day is the date of the delivery, or (b) if it is oil relevantly appropriated on a day in the chargeable period, the notional delivery day is the date of the appropriation. (7) The Treasury may by regulations make provision for or in connection with substituting as the notional delivery day in such circumstances as may be prescribed— (a) in the case of oil transported by ship from the place of extraction to a place in the United Kingdom or elsewhere, the date of completion of load, or (b) in the case of oil transported by pipeline to a place in the United Kingdom and loaded on to a ship there, the date of the bill of lading. (8) The “loading slot” for any oil is the period of three days within which the loading of the oil on to the ship is or was to take place— (a) as duly published by the operator of the facility at which that loading is or was to take place (unless paragraph (b) below applies), or (b) as subsequently finally duly varied to give effect to any modifications duly notified to that operator by the participator concerned. (9) In sub-paragraph (8) above, “duly” means in accordance with the arrangements for the time being governing the time and manner of— (a) publication, or variation, of the final loading schedule for the calendar month in which loading is or was to take place, or (b) notification of modifications to that schedule, and, in any case, before the end of the calendar month immediately preceding that in which loading is to take place. (10) If the Treasury consider that, for the purpose of defining “loading slot”, any period of days for the time being specified by or under this Act as the period of days within which loading of oil on to a ship is to take place is, or is to be, no longer appropriate, they may by regulations make provision for, or in connection with,— (a) varying the number of days in the period, (b) determining the day that is to be the notional delivery day if the number, as varied, is an even number. The power conferred by this sub-paragraph includes power to make amendments to, or modifications of, this Schedule.

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• (2) Paragraph 2 of that Schedule (definition of market value of oil) is amended as follows.

• (3) In sub-paragraph (1) (market value of oil in any calendar month to be determined in accordance with the paragraph) for “any oil in any calendar month” substitute “ any particular quantity of oil of any kind on any day ”.

• (4) After sub-paragraph (1) insert—

(1A) This paragraph makes different provision according to whether the oil is— (a) Category 1 oil of any kind, or (b) Category 2 oil of any kind. (1B) For the purposes of this Act— (a) Category 1 oil is oil of any of one or more kinds specified as such in regulations made for the purpose by the Board; (b) Category 2 oil is oil of any other kind. (1C) The Board may specify oil of any particular kind as Category 1 oil only if they are satisfied that reports of prices for sales of oil of that kind are published and widely available (whether or not on payment of a fee).

.

• (5) For sub-paragraph (2) substitute—

(2) The market value of any particular quantity of Category 1 oil of any kind is the price for which that quantity of oil of that kind might reasonably have been expected to be sold under a contract of sale that meets the following conditions— (a) the contract is for the sale of the oil at arm's length to a willing buyer; (b) the contract is for delivery of a single standard cargo of the oil; (c) the contract specifies a period of three days within which loading of the oil is to take place and that period includes the notional delivery day for the actual oil; (d) the contract requires the oil to have been subjected to appropriate initial treatment before delivery; (e) the contract requires the oil to be delivered— (i) in the case of oil extracted in the United Kingdom, at the place of extraction; or (ii) in the case of oil extracted from strata in the sea bed and subsoil of the territorial sea of the United Kingdom or of a designated area, at the place in the United Kingdom or another country at which the seller could reasonably be expected to deliver it or, if there is more than one such place, the one nearest to the place of extraction. The terms as to payment which are to be implied in the contract are those which are customarily contained in contracts for the sale at arm's length of oil of the kind in question. (2AA) The market value of any particular quantity of Category 2 oil of any kind is the price for which that quantity of oil of that kind might reasonably have been expected to be sold under a contract of sale that meets the following conditions— (a) the contract is for the sale of the oil at arm's length to a willing buyer; (b) the contract provides for delivery of the oil on the notional delivery day for the actual oil or within such period that includes that day as is normal under a contract at arm's length for the sale of oil of that kind (or, if there is more than one such period, the shortest of them); (c) the contract is made on a date such that the period between that date and the notional delivery day for the actual oil is the normal period between contract and delivery in the case of a contract at arm's length for the sale of oil of that kind (or, if there is more than one such period, the shortest of them); (d) the contract requires the oil to have been subjected to appropriate initial treatment before delivery; (e) the contract requires the oil to be delivered— (i) in the case of oil extracted in the United Kingdom, at the place of extraction; or (ii) in the case of oil extracted from strata in the sea bed and subsoil of the territorial sea of the United Kingdom or of a designated area, at the place in the United Kingdom or another country at which the seller could reasonably be expected to deliver it or, if there is more than one such place, the one nearest to the place of extraction. The terms as to payment which are to be implied in the contract are those which are customarily contained in contracts for the sale at arm's length of oil of the kind in question.

.

• (6) For sub-paragraphs (2A) to (2D) substitute—

(2E) For the purposes of sub-paragraph (2) or (2AA) above, the price of any quantity of Category 1 or Category 2 oil of any kind shall be determined in such manner, on the basis of such information, and by reference to such factors, as may be prescribed for oil of that Category and kind in regulations made by the Board. (2F) The provision that may be made by regulations under subsection (2E) above includes provision for or in connection with any or all of the following— (a) determining the price by reference to prices, or an average of prices, for sales of oil (whether or not oil of the Category or kind in question, and whether the prices are prices under actual contracts, prices that are published and widely available (whether on payment of a fee or otherwise) or prices ascertained or determined in some other way); (b) the prices to be taken into account; (c) the descriptions of contracts to be taken into account; (d) the method to be used for determining an average of prices; (e) the day or days, or period or periods, by reference to which prices, or any average of prices, is to be determined; (f) the application of a prescribed price differential, in cases where the price of oil of one kind falls to be determined in whole or in part by reference to prices for oil of some other kind. (2G) Sub-paragraph (2I) below has effect if, or in so far as, the Board are satisfied that it is impracticable or inappropriate to determine for the purposes of sub-paragraph (2) or (2AA) above the price of any oil in accordance with the provisions of regulations for the time being in force under sub-paragraph (2E) above. (2H) For that purpose it is immaterial whether the impracticability or inappropriateness is by virtue of— (a) an insufficiency of contracts or published prices that satisfy the conditions, (b) an insufficiency of information relating to such contracts or published prices, or (c) the nature of the market for oil of the kind in question, or for any other reason. (2I) Where this sub-paragraph has effect, the price is to be determined— (a) so far as it is practicable and appropriate to do so by reference to other contracts or published prices (whether or not relating to oil of the same kind) and in accordance with the principles set out in the regulations for determining an average of prices; and (b) so far as it is not practicable or appropriate to determine it as mentioned in paragraph (a) above, in such other manner as appears to the Board to be appropriate in the circumstances.

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• (7) Omit sub-paragraph (3) (which relates to the market value of disposals in a calendar month).

• (8) In sub-paragraph (3A) (oil that has been subjected to initial treatment)—

• (a) for “sub-paragraphs (1) and (2) above” substitute “ sub-paragraph (1) and sub-paragraph (2) or (2AA) above ”, and

• (b) for “sub-paragraph (2)(a) above” substitute “ sub-paragraph (2)(d) or (2AA)(d) above ”.

• (9) In sub-paragraph (4) (application of sub-paragraphs (2) and (3) in relation to paragraph 2(2) of Schedule 2) for “sub-paragraphs (2) and (3)” substitute “ sub-paragraphs (2) and (2AA) ”.

• (10) After paragraph (4) insert—

(5) In this paragraph “prescribed” means specified in, or determined in accordance with, regulations.

.

• (11) Schedule 18 (which makes minor and consequential amendments) has effect.

Section 146: commencement and transitional provisions

147

• (1) The amendments made by section 146 and Schedule 18 have effect in relation to oil delivered or appropriated on or after 1st July 2006 (disregarding section 12A of that Act).

• (2) Those amendments also have effect for the purpose of determining for any chargeable period ending on or after 31st December 2006—

• (a) the value to be brought into account under section 2(4)(b) of OTA 1975 by reference to a previous chargeable period ending on or after 30th June 2006, and

• (b) the value to be brought into account under section 2(5)(d) of that Act.

• (3) Subsections (1) and (2) are subject to any express provision in Schedule 18 as to the commencement or application of any provision of that Schedule.

• (4) In the following provisions of this section—

• (a) “the last old period” means the chargeable period that ends on 30th June 2006, and

• (b) “the first new period” means the chargeable period that ends on 31st December 2006.

• (5) Subsection (6) applies in relation to oil which was won from an oil field before 1st July 2006 and which—

• (a) was loaded on to a ship before 1st July 2006 and transported from the place of extraction to a place in the United Kingdom or elsewhere, or

• (b) was transported by pipeline from the place of extraction to a place in the United Kingdom and there loaded on to a ship before that date.

• (6) If the oil is or was disposed of crude by a participator in sales otherwise than at arm's length, but the market value of the oil—

• (a) does not fall to be brought into account for the purposes of section 2(5)(b) of OTA 1975 for the last old period by reason only that the oil was not delivered in that period, and

• (b) would not (apart from this subsection) fall to be brought into account for the purposes of that provision in the first new period by reason only that the date on which the oil is to be regarded by virtue of section 12A of that Act as delivered falls in the last old period,

the date on which the oil is to be taken for the purposes of section 2(5)(b) of that Act to have been delivered is instead to be the first business day of the first new period.

• (7) Any power to make regulations that is conferred under or by virtue of any of the amendments made by section 146 or Schedule 18 includes power to make regulations having effect for, or in relation to,—

• (a) the first new period, or

• (b) for the purpose mentioned in subsection (2), the last old period,

notwithstanding that the period in question has begun or ended before the making of the regulations.

• (8) Any regulations made by virtue of subsection (7) must be made before 31st December 2006.

Attribution of blended crude oil

Crude oil: power to make regulations

148

• (1) In section 2(5) of OTA 1975 (profits from oil field) for “subsection (5A)” substitute “ subsections (5A) and (5B) ”.

• (2) After section 2(5A) of that Act insert—

(5B) The Board may by regulations make provision for the purposes of subsection (5)(a) to (c) for determining to which fields and in what proportions blended oil to which subsection (5C) applies is attributable. (5C) This subsection applies to blended oil within the meaning of section 63(1A) of the Finance Act 1987 (other than light gases) which— (a) is not gaseous at a temperature of 15 degrees Centigrade and a pressure of one atmosphere, and (b) is not normally disposed of crude by deliveries in quantities of 25,000 metric tonnes or less. (5D) Regulations under subsection (5B)— (a) may apply generally or only to specified cases or circumstances, (b) may make different provision for different cases or circumstances, (c) may make incidental, consequential, or transitional provision, (d) shall be made by statutory instrument, and (e) may not be made unless a draft has been laid before and approved by resolution of the House of Commons.

• (3) Regulations under section 2(5B) of OTA 1975 (inserted by subsection (2) above) may have effect for the purpose of calculating profits in relation to a chargeable period ending at any time on or after 1st July 2006.

Nomination scheme

Nomination scheme

149

• (1) Section 61 of FA 1987 (oil taxation: nominations) shall be amended as follows.

• (2) In subsection (1) omit “, supplies and appropriations”.

• (3) For subsections (3) and (4) substitute—

(3) If the market value of a relevant delivery ascertained in accordance with Schedule 3 to the principal Act exceeds a participator's delivery proceeds of a relevant delivery (within the meaning given by Schedule 10), the excess shall be brought into account by him in accordance with section 2(5)(e) of the principal Act. (4) If a relevant delivery is a delivery of blended oil within the meaning of section 63, regulations under section 2(5B) of the principal Act shall apply for the purposes of determining the proportion of the excess attributable to a field. (4A) For each month in which a participator makes a relevant delivery, his monthly excess is the sum of his excesses (if any) calculated in accordance with subsection (3). (4B) For each chargeable period of an oil field “the excess of nominated proceeds for the period” means, in relation to a participator in the oil field, that proportion of the sum of his monthly excesses for the chargeable period (if any) which is attributable to the field.

• (4) Subsections (6) and (7) shall cease to have effect.

• (5) In subsection (8) for “9th February 1987” substitute “ 1st July 2006 ”.

• (6) In subsection (9)—

• (a) omit “subsection (7) or”, and

• (b) after “shall” insert “ (unless otherwise expressly provided) ”.

• (7) This section shall have effect in relation to chargeable periods ending on or after 1st July 2006.

Amendment of Schedule 10 to FA 1987

150

• (1) Schedule 10 to FA 1987 (oil taxation: nominations) shall be amended as follows.

• (2) In paragraph 1—

• (a) in sub-paragraph (1)—

• (i) omit “, “proposed supply” and “proposed appropriation””,

• (ii) for “paragraph 3 below” substitute “ paragraph 12A below ”, and

• (iii) for “paragraphs (a) to (c)” substitute “ paragraph (a) ”, and

• (b) omit sub-paragraph (2).

• (3) In paragraph 2 omit—

• (a) sub-paragraph (1)(b), (c) and (d), and

• (b) the words following sub-paragraph (1)(d).

• (4) Omit paragraph 3.

• (5) In paragraph 4—

• (a) for sub-paragraph (1) substitute—

(1) If a nomination is made during business hours it shall be effective only if— (a) it is made within the period of two hours beginning with the transaction base time, and (b) it satisfies the requirements of paragraph 5. (1A) If a nomination is made outside business hours it shall be effective only if— (a) it is made within the period of two hours beginning with the transaction base time, and (b) it satisfies the requirements of paragraph 5 or 5A. (1B) For the purposes of this paragraph— (a) the transaction base time of a proposed transaction is such time on such date as the Board shall prescribe by regulations, and (b) “business hours” means the period beginning with 09.00 and ending with 17.00 (UK time) on a business day (within the meaning of the Bills of Exchange Act 1882 (c. 61)).

,

• (b) omit sub-paragraphs (2) and (2A),

• (c) in sub-paragraph (3)—

• (i) for “transaction base date” substitute “ transaction base time ”, and

• (ii) for “date” in each place substitute “ time ”, and

• (d) omit sub-paragraph (4).

• (6) In paragraph 5—

• (a) in sub-paragraph (1) for “A nomination of a proposed transaction shall not be effective unless it specifies, in respect to that transaction” substitute “ The requirements of this paragraph for a nomination in respect of a proposed transaction are ”,

• (b) in sub-paragraph (1)(b) omit “in the case of a proposed sale”,

• (c) in sub-paragraph (1)(c) and (d) omit “or relevantly appropriated”,

• (d) in sub-paragraph (1)(d) for “supplied” substitute “ delivered ”,

• (e) for sub-paragraph (1)(g) substitute—

(g) the transaction base time; and

,

• (f) in sub-paragraph (2) after “A nomination” insert “ made under this paragraph ”, and

• (g) in sub-paragraph (3) after “a nomination” insert “ made under this paragraph ”.

• (7) After paragraph 5 insert—

(5A) (1) The requirements of this paragraph for a nomination in respect of a proposed transaction are— (a) the name of the participator or of the group of which the participator is a member; (b) the name of the person to whom the oil is to be sold, or the name of the group of which that person is a member; (c) the blend or grade of oil to be delivered; (d) the nominated price of the oil to be delivered; (e) the nominal volume of the oil; (f) the proposed delivery month; (g) the transaction base time; and (h) such other information as may be prescribed by the Board. (2) In sub-paragraph (1) “group” has the meaning given by section 53 of the Companies Act 1989. (5B) (1) A nomination of a transaction shall not be effective unless oil is delivered pursuant to a contract at arm's length the terms of which incorporate the information specified in the nomination in accordance with paragraph 5(1) or 5A(1). (2) But— (a) a contract need not refer to the transaction base time, and (b) the nomination shall be effective whether or not delivery takes place in the proposed delivery month specified in the nomination and the contract.

• (8) In paragraph 6—

• (a) in sub-paragraph (1) omit “Subject to sub-paragraph (3) below,”, and

• (b) omit sub-paragraphs (2) and (3).

• (9) Omit paragraph 7(2) and (5).

• (10) After paragraph 7(5) insert—

(6) The Board may by regulations prescribe that in specified circumstances the nominal volume in relation to a delivery shall be treated as greater or less than the nominal volume ascertained in accordance with the preceding provisions of this paragraph. (7) Regulations under sub-paragraph (6)— (a) shall be made by statutory instrument, and (b) may not be made unless a draft has been laid before and approved by resolution of the House of Commons.

• (11) Omit paragraphs 8 to 11.

• (12) In paragraph 12(1) omit “, supply or appropriation”.

• (13) After paragraph 12 insert—

(12A) For the purposes of section 61 and this Schedule— (a) a reference to the proposed delivery month in relation to a proposed transaction is a reference to the month in which delivery is to take place, (b) “relevant delivery” means a delivery of oil under a contract made at arm's length in respect of which there has been no effective nomination, and (c) “delivery proceeds” means the price received for a relevant delivery.

• (14) This section shall have effect in relation to a transaction whenever proposed, but shall not have effect in relation to a proposed transaction with a transaction base date (within the meaning given by regulations under paragraph 4 of Schedule 10 to FA 1987) on or before 30th June 2006.

• (15) Regulations under paragraph 4(1B) of Schedule 10 to FA 1987 (inserted by subsection (5) above) may have retrospective effect.

Nomination excesses and corporation tax

151

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

Ring fence trades

Increase in rate of supplementary charge

152

• (1) In section 501A of ICTA (supplementary charge in respect of ring fence trades), in subsection (1) (charge of 10 per cent on adjusted ring fence profits), for “10 per cent” substitute “ 20 per cent ”.

• (2) The amendment made by subsection (1) has effect in relation to any accounting period beginning on or after 1st January 2006 (but see also subsection (3)).

• (3) For the purpose of calculating the amount of the supplementary charge on a company for an accounting period (a “straddling period”) beginning before 1st January 2006 and ending on or after that date—

• (a) so much of the straddling period as falls before 1st January 2006, and so much of the straddling period as falls on or after that date, are treated as separate accounting periods, and

• (b) the company's adjusted ring fence profits for the straddling period are apportioned to the two separate accounting periods in proportion to the number of days in those periods.

• (4) The amount of the supplementary charge on the company for the straddling period is the sum of the amounts of supplementary charge that would, in accordance with subsection (3), be chargeable on the company for those separate accounting periods.

• (5) In the case of a company's straddling period—

• (a) the Instalment Payments Regulations apply as if the amendment made by subsection (1) had not been made, but

• (b) those Regulations also apply separately, in accordance with the following subsection, in relation to the increase in the amount of any supplementary charge on the company for that period that arises as a result of that amendment.

• (6) In that separate application of those Regulations as mentioned in subsection (5)(b), those Regulations have effect as if, for the purposes of those Regulations,—

• (a) the straddling period were an accounting period beginning on 1st January 2006,

• (b) supplementary charge were chargeable on the company for that period, and

• (c) the amount of that charge were equal to the increase in the amount of the supplementary charge for the straddling period that arises as a result of the amendment made by subsection (1).

• (7) Any reference in the Instalment Payments Regulations to the total liability of a company is, accordingly, to be read—

• (a) in their application as a result of subsection (5)(a), as a reference to the amount that would be the company's total liability for the straddling period if the amendment made by subsection (1) had not been made, and

• (b) in their application as a result of subsection (5)(b), as a reference to the amount of the supplementary charge on the company for the deemed accounting period under subsection (6)(a).

• (8) For the purposes of the Instalment Payments Regulations—

• (a) a company is to be regarded as a large company as respects the deemed accounting period under subsection (6)(a) if (and only if) it is a large company for those purposes as respects the straddling period, and

• (b) any question whether a company is a large company as respects the straddling period is to be determined as it would have been determined if the amendment made by subsection (1) had not been made.

• (9) If the Instalment Payments Regulations—

• (a) apply in relation to a company's liability to supplementary charge for the deemed accounting period under subsection (6)(a), and

• (b) would (but for this subsection) treat any instalment payment in respect of that liability as being due and payable on a date falling on or before 22nd March 2006,

those Regulations have effect as if the payment were due and payable instead at the end of the period of 14 days beginning with that date.

• (10) In this section—

• “adjusted ring fence profits” has the meaning given by section 501A of ICTA,

• “the Instalment Payments Regulations” means the Corporation Tax (Instalment Payments) Regulations 1998 (S.I. 1998/ 3175),

• “supplementary charge” means any sum chargeable under section 501A(1) of ICTA as if it were an amount of corporation tax.

Election to defer capital allowances

153

• (1) This section applies if—

• (a) a company carries on a ring fence trade in an accounting period beginning on or after 1st January 2006,

• (b) relevant expenditure is incurred for the purposes of or in relation to the ring fence trade (see subsections (4) to (7)), and

• (c) the relevant expenditure would (but for this section) be treated as incurred for the purposes of CAA 2001 in the period of 12 months ending with 31st December 2005.

• (2) The company may elect for the relevant expenditure to be treated instead as if it were incurred on the first day of the company's first accounting period beginning on or after 1st January 2006.

• (3) The election—

• (a) has effect for the purposes of CAA 2001 other than those of section 45G (expenditure not first-year qualifying expenditure under section 45F if plant or machinery used for less than 5 years in a ring fence trade), and

• (b) must be made by notice given to an officer of Revenue and Customs on or before 31st December 2007.

• (4) Expenditure is relevant expenditure if it falls within any of Cases A to C.

• (5) Expenditure falls within Case A if—

• (a) it is first-year qualifying expenditure on the provision of plant or machinery under section 45F of CAA 2001 (expenditure on plant and machinery for use wholly in a ring fence trade), and

• (b) no disposal event (see subsection (8)) in relation to the plant or machinery occurs in the relevant period.

• (6) Expenditure falls within Case B—

• (a) if it is first-year qualifying expenditure under section 416B of CAA 2001 (mineral extraction allowances: expenditure incurred by a company for purposes of a ring fence trade),

• (b) if no disposal event in relation to any asset representing the expenditure occurs in the relevant period,

• (c) if (or so far as) it is expenditure to which no part of any capital sum received by the company in the relevant period is reasonably attributable under section 425(2) of CAA 2001, and

• (d) if no entitlement to a balancing allowance for a chargeable period in respect of the expenditure arises under any of sections 426 to 431 of CAA 2001 as a result of an event that occurs in the relevant period (as well as in that chargeable period).

The reference in paragraph (b) to any asset representing the expenditure is to be read in accordance with section 416B(4) of CAA 2001.

• (7) Expenditure falls within Case C if—

• (a) it is qualifying expenditure on research and development under Part 6 of CAA 2001 where the ring fence trade is the trade by reference to which the expenditure is qualifying expenditure, and

• (b) no disposal event in relation to any asset representing the expenditure occurs in the relevant period.

• (8) In this section—

• “disposal event”—in relation to first-year qualifying expenditure under section 45F of CAA 2001, means an event of a kind that requires a disposal value to be brought into account under Part 2 of that Act (whether under section 61(1) or otherwise),in relation to first-year qualifying expenditure under section 416B of CAA 2001, means an event of a kind that requires a disposal value to be brought into account under section 421 or 422 of that Act,in relation to qualifying expenditure on research and development under Part 6 of CAA 2001, means an event of a kind that requires a disposal value to be brought into account under section 443(1) of that Act,

• “the relevant period”, in relation to any expenditure for the purposes of or in relation to a company's ring fence trade, means the period—beginning with the day on which the expenditure would (but for this section) be treated as incurred for the purposes of CAA 2001, andending with the first day of the company's first accounting period beginning on or after 1st January 2006,

• “ring fence trade” means a ring fence trade in respect of which tax is chargeable under section 501A of ICTA (supplementary charge in respect of ring fence trades).

Ring fence expenditure supplement

154

• (1) Chapter 5 of Part 12 of ICTA (petroleum extraction activities) is amended as follows.

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

• (3) Schedule 19B (petroleum extraction activities: exploration expenditure supplement) is amended as follows.

• (4) In paragraph 1 (about the Schedule)—

• (a) in sub-paragraph (1) (entitlement of company to supplement), in the opening words, after “2004” insert “ but before 1st January 2006 ”,

• (b) in sub-paragraph (2) (condition that expenditure incurred on or after 1st January 2004), after “2004” insert “ but before 1st January 2006 ”.

• (5) In paragraph 3 (accounting periods)—

• (a) in sub-paragraph (1), in the definition of “post-commencement period”, after “2004” insert “ but before 1st January 2006 ”,

• (b) in sub-paragraph (1), in the definition of “pre-commencement period”, after “2004” insert “ but before 1st January 2006 ”,

• (c) at the end insert—

(3) In the case of an accounting period (a “straddling period”) of any qualifying company beginning before 1st January 2006 and ending on or after that date— (a) so much of the straddling period as falls before 1st January 2006, and (b) so much of the straddling period as falls on or after that date, are treated as separate accounting periods for the purposes of this Schedule. (4) Special provision is made elsewhere in this Schedule in relation to straddling periods (see paragraphs 16, 18A and 22).

.

• (6) In paragraph 6 (qualifying E&A expenditure), in sub-paragraph (2) (condition that expenditure incurred on or after 1st January 2004), after “2004” insert “ but before 1st January 2006 ”.

• (7) In paragraph 15 (supplement in respect of a post-commencement period), in sub-paragraph (2) (supplement to be treated as a loss for the purposes of Corporation Tax Acts), for “this Schedule)” substitute “ this Schedule or Part 4 of Schedule 19C) ”.

• (8) In paragraph 16 (amount of post-commencement supplement for a post-commencement period), after sub-paragraph (2) (proportionate reduction of supplement if post-commencement period less than 12 months) insert—

(2A) But, if the post-commencement period is the deemed accounting period under paragraph 3(3) ending before 1st January 2006, sub-paragraph (2) has no effect in relation to the amount of the supplement for that period.

.

• (9) After paragraph 18 (ring fence losses and non-qualifying losses) insert—

(18A) (1) This paragraph applies in any case where the period of the loss in which a ring fence loss is incurred is the deemed accounting period under paragraph 3(3) ending before 1st January 2006. (2) The following assumption shall be made for the purpose of calculating the amount of the qualifying E&A loss and the amount of the non-qualifying loss. (3) The assumption is that the loss made in the trade is taken to be the loss incurred in the accounting period beginning before 1st January 2006 and ending on or after that date (disregarding paragraph 3(3)). (4) The amount of the non-qualifying loss (found in accordance with that assumption) is then reduced (but not below nil) by the following amount. (5) The amount is the amount of the ring fence loss in the deemed accounting period beginning on 1st January 2006 determined under paragraph 18 of Schedule 19C for the purposes of Part 4 of that Schedule.

.

• (10) In paragraph 22 (reductions in respect of utilised ring fence profits), at the end insert—

(4) If the post-commencement period is the deemed accounting period under paragraph 3(3) ending before 1st January 2006 (“the deemed accounting period”), the amount of the profits of the deemed accounting period is determined as follows. (5) The amount of the profits of the straddling period is apportioned to the deemed accounting period in proportion to the number of days in the deemed accounting period that fall in the straddling period. (6) The apportioned amount is taken for the purposes of this paragraph to be the amount of the profits of the deemed accounting period. (7) In this paragraph “the straddling period”, in relation to a qualifying company, means an accounting period of the company beginning before 1st January 2006 and ending on or after that date (disregarding paragraph 3(3)).

.

• (11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part 6 — Inheritance tax

Future rates and bands

Rates and rate bands for 2008-09 and 2009-10

155

• (1) For the Table in Schedule 1 to IHTA 1984 (rates and rate bands), as it has effect in relation to chargeable transfers made on or after 6th April 2008, there shall be successively substituted—

• (a) the 2008-09 Table, which shall apply to any chargeable transfer made on or after 6th April 2008 (but before 6th April 2009), and

• (b) the 2009-10 Table, which shall apply to any chargeable transfer made on or after 6th April 2009.

• (2) Subsection (1)(b) is without prejudice to the application of section 8 of IHTA 1984 (indexation) by virtue of the difference between the retail prices index for the month of September in 2008 or any later year and that for the month of September in the following year.

• (3) The 2008-09 Table is—

Portion of value	Portion of value	Rate of tax
Lower limit (£)	Upper limit (£)	Per cent.
0	312,000	Nil
312,000		40

• (4) The 2009-10 Table is—

Portion of value	Portion of value	Rate of tax
Lower limit (£)	Upper limit (£)	Per cent.
0	325,000	Nil
325,000		40

• (5) Section 8(1) of IHTA 1984 (indexation of rate bands) shall not have effect as respects any difference between the retail prices index—

• (a) for the month of September 2006 and that for the month of September 2007, or

• (b) for the month of September 2007 and that for the month of September 2008.

Trusts

Rules for trusts etc

156

• (1) Schedule 20 contains—

• (a) amendments of provisions of IHTA 1984 relating to settled property,

• (b) amendments of provisions relating to property that, for purposes of that Act, is property subject to a reservation, and

• (c) related amendments of provisions relating to chargeable gains.

• (2) Those amendments have effect as mentioned in that Schedule.

Purchase of interests in foreign trusts

157

• (1) Section 48 of IHTA 1984 (settled property: excluded property) is amended as follows.

• (2) In subsection (3) (circumstances in which settled property situated outside the United Kingdom is excluded property), after paragraph (b) insert— “ ; but this subsection is subject to subsection (3B) below. ”.

• (3) In subsection (3A) (circumstances in which a holding in an authorised unit trust or a share in an open-ended investment company comprised in settled property is excluded property), after paragraph (b) insert— “ ; but this subsection is subject to subsection (3B) below. ”.

• (4) After subsection (3A) insert—

(3B) Property is not excluded property by virtue of subsection (3) or (3A) above if— (a) a person is, or has been, beneficially entitled to an interest in possession in the property at any time, (b) the person is, or was, at that time an individual domiciled in the United Kingdom, and (c) the entitlement arose directly or indirectly as a result of a disposition made on or after 5th December 2005 for a consideration in money or money's worth. (3C) For the purposes of subsection (3B) above— (a) it is immaterial whether the consideration was given by the person or by anyone else, and (b) the cases in which an entitlement arose indirectly as a result of a disposition include any case where the entitlement arose under a will or the law relating to intestacy.

.

• (5) If, in consequence of the amendments made by this section, an amount of inheritance tax would (but for this subsection) fall due before the day on which this Act is passed, that amount is to be treated instead as falling due at the end of the period of 14 days beginning with that day.

• (6) This section is deemed to have come into force on 5th December 2005.

Part 7 — Pensions

Taxable property held by investment-regulated pension schemes

158

• (1) Schedule 21 (taxable property held by investment-regulated pension schemes) has effect.

• (2) This section and that Schedule are deemed to have come into force on 6th April 2006.

Recycling of lump sums

159

• (1) In Schedule 29 to FA 2004 (authorised lump sums), after paragraph 3 insert—

(3A) (1) Where this paragraph applies in relation to a pension commencement lump sum paid to the member, the pension scheme is to be treated as making to the member an unauthorised payment of the appropriate amount. (2) Subject to sub-paragraphs (3) and (4), this paragraph applies in relation to a pension commencement lump sum if— (a) because of the lump sum, the amount of the contributions paid by or on behalf of, or in respect of, the member to the pension scheme, or to any other registered pension scheme, is significantly greater than it otherwise would be, and (b) the member envisaged at the relevant time that that would be so. (3) This paragraph does not apply in relation to any lump sum paid to the member on any day if the amount of the lump sum, when added to any other pension commencement lump sum paid to the member within the period of 12 months ending with that day, does not exceed 1% of the standard lifetime allowance on that day. (4) This paragraph does not apply if the amount by which the contributions paid as mentioned in sub-paragraph (2)(a) is greater than it otherwise would be because of the lump sum does not exceed 30% of the amount of the lump sum. (5) “The appropriate amount” is so much of— (a) the amount crystallised by the benefit crystallisation event constituted by the payment of the lump sum, as does not exceed (b) the amount of the member's lifetime allowance which is available on it. (6) “The relevant time” is— (a) if paragraph (a) of sub-paragraph (2) is satisfied before the lump sum is paid, the time when that paragraph is first satisfied, and (b) otherwise, the time when the lump sum is paid.

• (2) This section is deemed to have come into force on 6th April 2006.

Inheritance tax

160

• (1) Schedule 22 (provisions about inheritance tax in relation to registered pension schemes) has effect.

• (2) This section and that Schedule are deemed to have come into force on 6th April 2006.

Miscellaneous

161

• (1) Schedule 23 (miscellaneous amendments relating to pension schemes etc) has effect.

• (2) This section and that Schedule are deemed to have come into force on 6th April 2006.

Part 8 — Stamp taxes

Stamp duty and stamp duty land tax: thresholds

Raising of thresholds

162

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

• (2) In Schedule 5 to FA 2003 (stamp duty land tax: amount of tax chargeable: rent), in paragraph 2(3) (calculation of tax chargeable in respect of rent), in Table A (bands and percentages for residential property), for “£120,000”, in both places, substitute “ £125,000 ”.

• (3) In Schedule 13 to FA 1999 (stamp duty: instruments chargeable and rates of duty), in paragraph 4 (bands and percentages for conveyance or transfer on sale of property other than stock or marketable securities), for “£120,000”, in both places, substitute “ £125,000 ”.

• (4) The amendments made by subsections (1) and (2) have effect in relation to any transaction of which the effective date (within the meaning of Part 4 of FA 2003) is after 22nd March 2006.

• (5) The amendment made by subsection (3) has effect in relation to instruments executed after 22nd March 2006.

Stamp duty land tax

Partnerships

163

Schedule 24 (amendments of Schedule 15 to FA 2003) has effect.

Leases

164

• (1) In section 77 of FA 2003 (notifiable transactions), for subsection (2A) substitute—

(2A) The assignment of a lease is notifiable if there is chargeable consideration for the assignment and either— (a) the lease is for a term of seven years or more, or (b) the consideration for the assignment is chargeable at a rate of 1% or higher, or would be so chargeable but for a relief.

• (2) In Schedule 5 to FA 2003 (amount of tax chargeable: rent), in paragraph 3 (net present value of rent payable over term of lease), for “in year i” substitute “ in respect of year i ”.

• (3) Subsection (1) has effect in relation to any assignment of which the effective date (within the meaning of Part 4 of FA 2003) is on or after the day on which this Act is passed.

• (4) Subsection (2) has effect in relation to any lease granted or treated as granted on or after that day.

• (5) Schedule 25 (amendments of Schedule 17A to FA 2003) has effect.

Reallocation of trust property as between beneficiaries

165

• (1) In Schedule 16 to FA 2003 (trusts and powers), after paragraph 7 insert—

(8) Where— (a) the trustees of a settlement reallocate trust property in such a way that a beneficiary acquires an interest in certain trust property and ceases to have an interest in other trust property, and (b) the beneficiary consents to ceasing to have an interest in that other property, the fact that he gives consent does not mean that there is chargeable consideration for the acquisition.

• (2) Subsection (1) has effect in relation to any acquisition of which the effective date (within the meaning of Part 4 of FA 2003) is on or after the day on which this Act is passed.

Unit trust schemes

166

• (1) Part 4 of FA 2003 (stamp duty land tax) is amended as follows.

• (2) Omit section 64A (initial transfer of assets to trustees of unit trust scheme).

• (3) In section 101 (unit trust schemes)—

• (a) in subsection (1) (application of Part (except for provisions mentioned in subsection (7)) to unit trust schemes) for “provisions” substitute “ provision ”, and

• (b) in subsection (7) (provisions for the purposes of which unit trust schemes not to be treated as companies) omit from “section 53” to “companies), or”.

• (4) This section has effect in relation to any land transaction of which the effective date is, or is after, 22nd March 2006 (but see subsections (5) and (6)).

• (5) This section does not have effect in relation to—

• (a) any land transaction which is effected in pursuance of a contract entered into and substantially performed before 2 p.m. on 22nd March 2006 (“the relevant time”), or

• (b) any other land transaction which is effected in pursuance of a contract entered into before the relevant time and which is not an excluded transaction.

• (6) For this purpose, a land transaction effected in pursuance of a contract is an excluded transaction if—

• (a) any provision of the contract has effect by reference to a unit trust scheme and the scheme is not established before the relevant time,

• (b) at or after the relevant time the contract is varied in a way that significantly affects the land transaction (see subsection (7)),

• (c) the subject-matter of the land transaction is not identified in the contract in a way that would have enabled its acquisition before the relevant time,

• (d) rights under the contract are assigned at or after the relevant time,

• (e) the land transaction is effected in consequence of the exercise, at or after the relevant time, of any option, right of pre-emption or similar right, or

• (f) at or after the relevant time there is an assignment, subsale or other transaction (relating to the whole or part of the contract's subject-matter) as a result of which a person other than the purchaser under the contract becomes entitled to call for a conveyance to him.

• (7) For the purposes of subsection (6)(b) the contract is varied in a way that significantly affects the land transaction if (and only if)—

• (a) it is varied so as to substitute a different purchaser in relation to the land transaction,

• (b) it is varied so as to alter the subject-matter of the land transaction, or

• (c) it is varied so as to alter the consideration for the land transaction.

• (8) Expressions which are used in Part 4 of FA 2003 and in this section have the same meaning in this section as in that Part.

Demutualisation of insurance companies

167

• (1) Schedule 7 to FA 2003 (stamp duty land tax: group relief etc) is amended as follows.

• (2) In paragraph 2 (restrictions on availability of group relief) in sub-paragraph (1) (no relief if arrangements by virtue of which a person has or could have control of purchaser but not vendor) at the end insert— “ For another exception to this, see sub-paragraph (3A). ”.

• (3) In that paragraph after sub-paragraph (3) (arrangements which are within sub-paragraph (2)(a)) insert—

(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 paragraph 4 (cases in which group relief not withdrawn under paragraph 3)—

• (a) after sub-paragraph (6) (the third case where the relief not withdrawn) insert—

(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.

, and

• (b) in sub-paragraph (7) (re-imposition of the withdrawal of the relief), in the opening words, after “in a case within sub-paragraph (6)” insert “ or (6A) ”.

• (5) The amendments made by this section have effect in relation to any transfer which takes place, or is intended to take place, after 22nd March 2006.

Alternative finance

168

• (1) In sections 71A to 73 of FA 2003 (alternative property finance) for “individual” substitute “ person ” (and for “an individual” substitute “ a person ”).

• (2) Sections 71A(6), 72(6), 72A(6) and 73(4) shall cease to have effect.

• (3) In section 73(3) after “chargeable” insert “ on a chargeable consideration that is not less than the market value of the interest and, in the case of the grant of a lease at a rent, the rent. ”

• (4) After section 73 insert—

(73A) Sections 71A to 73 do not apply to arrangements in which the first transaction is exempt from charge by virtue of Schedule 7.

• (5) This section shall have effect in relation to arrangements in which the effective date of the first transaction (within the meaning of sections 71A to 73 of FA 2003) is on or after the date on which this Act is passed; and section 119(1) of FA 2003 shall have effect for determining the effective date for the purposes of this subsection.

Stamp duty

Reliefs for certain company acquisitions

169

• (1) Part 3 of FA 1986 (stamp duty) is amended as follows.

• (2) In section 75 (relief for acquisition of target company's undertaking in pursuance of reconstruction scheme)—

• (a) in subsection (4) (condition as to registered office etc) omit “that the registered office of the acquiring company is in the United Kingdom and”, and

• (b) in subsection (5)(c) (condition that any shareholder holds the same proportion of shares in the companies) after “the same” insert “ , or as nearly as may be the same, ”.

• (3) In section 76 (other relief for acquisition of target company's undertaking), in subsection (3) (condition as to registered office etc) omit “that the registered office of the acquiring company is in the United Kingdom and”.

• (4) In section 77 (relief for acquisition of target company's share capital), in subsection (3) (conditions for relief),—

• (a) omit paragraph (a) (condition as to registered office),

• (b) in paragraph (g) (condition that the number of shares of any particular class bear to all the shares the same proportion) after “the same proportion” insert “ , or as nearly as may be the same proportion, ”, and

• (c) in paragraph (h) (condition that proportion of shares of any particular class held by any shareholder be the same) after “the same” insert “ , or as nearly as may be the same, ”.

• (5) The amendments made by this section have effect in relation to instruments executed after the day on which this Act is passed.

Part 9 — Miscellaneous provisions

Landfill tax

Rate of landfill tax

170

• (1) In section 42 of FA 1996 (amount of landfill tax) for the amount specified in subsection (1)(a), and the corresponding amount specified in subsection (2), substitute “ £21 ”.

• (2) The amendments made by this section have effect in relation to taxable disposals made, or treated as made, on or after 1st April 2006.

Climate change levy

Climate change levy: rates

171