Finance Act 2006

• (1) In Schedule 6 to FA 2000 (climate change levy) for the Table in paragraph 42(1) (amount payable by way of levy) substitute—

Taxable commodity supplied	Rate at which levy payable if supply is neither a half-rate supply nor a reduced-rate supply
Electricity	£0.00441 per kilowatt hour
Gas supplied by a gas utility or any gas supplied in a gaseous state that is of a kind supplied by a gas utility	£0.00154 per kilowatt hour
Any petroleum gas, or other gaseous hydrocarbon, supplied in a liquid state	£0.00985 per kilogram
Any other taxable commodity	£0.01201 per kilogram

• (2) This section has effect in relation to supplies treated as taking place on or after 1st April 2007.

Abolition of half-rate supplies etc

172

• (1) For the purposes of climate change levy, no supply made on or after 1st April 2006 is a half-rate supply.

• (2) Subsections (3) to (6) have effect for determining when a supply is to be regarded as made for the purposes of subsection (1).

• (3) A supply—

• (a) of electricity, or

• (b) of gas that is in a gaseous state and is of a kind supplied by a gas utility,

is to be regarded as made at the time when the electricity or gas is actually supplied.

• (4) In the case of a supply of a taxable commodity not falling within subsection (3) by a person who is resident in the United Kingdom—

• (a) if the commodity is to be removed, the supply is to be regarded as made at the time of the removal,

• (b) if the commodity is not to be removed, the supply is to be regarded as made when the commodity is made available to the person to whom it is supplied.

This subsection does not apply if subsection (6) (deemed self-supply) applies in the case of the supply.

• (5) In the case of a supply of a taxable commodity not falling within subsection (3) by a person who is not resident in the United Kingdom, the supply is to be regarded as made—

• (a) when the commodity is delivered to the person to whom it is supplied, or

• (b) if earlier, when it is made available in the United Kingdom to that person.

This subsection does not apply if subsection (6) (deemed self-supply) applies in the case of the supply.

• (6) In any case where, by virtue of paragraph 23(3) of Schedule 6 to FA 2000, a person is, for the purposes of that Schedule, deemed to make a supply to himself of a quantity of a taxable commodity—

• (a) which he has produced, and

• (b) which does not fall within subsection (3),

the supply is to be regarded as made at the time when he produced that particular quantity of the taxable commodity.

• (7) In paragraph 34 of Schedule 6 to FA 2000 (deemed supplies of commodities other than electricity and certain gas), in sub-paragraph (2) omit the words “(or, in the case of electricity, consumed)” (which are unnecessary, because the paragraph does not apply in the case of electricity).

• (8) In consequence of subsection (1), Schedule 6 to FA 2000 (climate change levy) is amended as follows.

• (9) In paragraph 37 (supplies of electricity or gas spanning change of rate etc) in sub-paragraph (1)(c) omit “half-rate supplies or”.

• (10) In paragraph 38 (other supplies spanning change of rate etc) in sub-paragraph (1)(c) omit “half-rate supplies or”.

• (11) In paragraph 42(1) (amount payable by way of levy)—

• (a) in paragraph (a), for “neither a half-rate supply nor” substitute “ not ”;

• (b) omit paragraph (b);

• (c) in paragraph (c), for “neither a half-rate supply nor” substitute “ not ”;

• (d) in the Table (and in the Table substituted for it by section 171 of this Act), in the heading to column (2), for “neither a half-rate supply nor” substitute “ not ”.

• (12) Paragraph 43 (half-rate for supplies to horticultural producers) shall cease to have effect.

• (13) In paragraph 62 (tax credits) in subsection (1)—

• (a) in paragraph (c)—

• (i) for “neither a half-rate supply nor” substitute “ not ”;

• (ii) omit “half-rate or”;

• (b) omit paragraph (d).

• (14) In paragraph 101 (civil penalties: incorrect notifications) in sub-paragraph (2)(a)—

• (a) at the end of sub-paragraph (ii) insert “ or ”;

• (b) omit sub-paragraph (iii).

• (15) In paragraph 147 (interpretation: general) omit the definition of “half-rate supply”.

• (16) Subsections (8) to (15) come into force on such day as the Treasury may by order made by statutory instrument appoint.

• (17) The power to make an order under subsection (16)—

• (a) may be exercised so as to bring a provision into force only in such cases as may be described in the order,

• (b) may be exercised so as to make different provision for different cases or descriptions of case,

• (c) includes power to make incidental, consequential, supplemental or transitional provision or savings.

International tax arrangements

International tax enforcement arrangements

173

• (1) If Her Majesty by Order in Council declares that—

• (a) arrangements relating to international tax enforcement which are specified in the Order have been made in relation to any territory or territories outside the United Kingdom, and

• (b) it is expedient that those arrangements have effect,

those arrangements have effect (and do so in spite of anything in any enactment or instrument).

• (2) For the purposes of subsection (1) arrangements relate to international tax enforcement if they relate to any or all of the following—

• (a) the exchange of information foreseeably relevant to the administration, enforcement or recovery of any UK tax or foreign tax;

• (b) the recovery of debts relating to any UK tax or foreign tax;

• (c) the service of documents relating to any UK tax or foreign tax.

• (3) In this section—

• “UK tax” means any tax or duty imposed under the domestic law of the United Kingdom, and

• “foreign tax” means any tax or duty imposed under the law of the territory, or any of the territories, in relation to which the arrangements have been made.

• (4) Where any arrangements have effect by virtue of this section, no obligation of secrecy (whether imposed by statute or otherwise) prevents a public authority or anyone acting on its behalf from making a disclosure to the Commissioners for Her Majesty’s Revenue and Customs —

• (a) for the purpose of giving effect, or enabling effect to be given, to the arrangements, or

• (b) which is authorised in accordance with the arrangements.

• (4A) Where any arrangements have effect by virtue of this section, no obligation of secrecy (whether imposed by statute or otherwise) prevents the Commissioners for Her Majesty’s Revenue and Customs or any other authorised Revenue and Customs official from making a disclosure to a person outside the United Kingdom—

• (a) for the purpose of giving effect, or enabling effect to be given, to the arrangements, or

• (b) which is authorised in accordance with the arrangements.

• (5) But information may not be disclosed by virtue of subsection (4A) unless the person making the disclosure is satisfied that the recipient of the information—

• (a) will only use the information in a manner consistent with the purposes of the arrangements, and

• (b) is bound by, or has undertaken to observe, rules of confidentiality with respect to the information which are not less strict than those applying to it in the United Kingdom.

• (6) An Order in Council made under this section revoking an earlier such Order may contain any transitional provisions that appear appropriate.

• (7) An Order under this section is not to be submitted to Her Majesty in Council unless a draft of the Order has been laid before and approved by a resolution of the House of Commons.

• (8) Any provisions which—

• (a) are included in an Order in Council made under any of the provisions specified in subsection (10),

• (b) are in force immediately before the passing of this Act, and

• (c) could have been included in an Order in Council under this section had the Order in Council been made after that time,

have effect after that time as if included in an Order in Council under this section.

• (9) If any such provisions relate to arrangements covering UK taxes or foreign taxes (or both) other than those in relation to which the Order in Council had effect, the provisions also have effect after the passing of this Act (by virtue of subsection (8)) in relation to those other UK taxes or foreign taxes (or both).

• (10) The provisions referred to in subsection (8)(a) are—

• (a) sections 788 and 815C of ICTA (international arrangements relating to income tax, corporation tax and capital gains tax and analogous foreign taxes), and

• (b) sections 158 and 220A of IHTA 1984 (international arrangements relating to inheritance tax and analogous foreign taxes).

• (11) In this section “Revenue and Customs official” has the same meaning as in section 18 of the Commissioners for Revenue and Customs Act 2005 (c. 11) (confidentiality).

Arrangements under section 173: information powers

174

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

Arrangements under section 173: recovery of debts

175

• (1) The Treasury may by regulations make provision for the recovery in the United Kingdom of debts relating to any relevant foreign tax pursuant to arrangements having effect by virtue of section 173.

• (2) “Relevant foreign tax” means any tax or duty—

• (a) imposed under the law of a territory in relation to which such arrangements have been made, and

• (b) covered by the arrangements.

• (3) Regulations under this section may make provision for the taking of action to recover debts relating to any relevant foreign tax by way of legal proceedings, distress, diligence or otherwise.

• (4) Such provision may in particular be made by applying, with any appropriate modifications, any enactment or rule of law that applies in relation to the recovery of any tax or duty imposed under the domestic law of the United Kingdom (including any enactment relating to penalties or interest on unpaid amounts).

• (5) The power to make regulations under this section is exercisable by statutory instrument.

• (6) A statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of the House of Commons.

Double taxation agreements: procedure

176

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

Disclosure of information

Disclosure of information

177

• (1) After section 352 of the Gambling Act 2005 (c. 19) (disclosure of information: data protection) insert—

(352A) (1) Where the Commissioners for Her Majesty's Revenue and Customs provide information to a person under this Act, section 19 of the Commissioners for Revenue and Customs Act 2005 (wrongful disclosure) shall apply to the disclosure of the information by the person as it applies to the disclosure of information in contravention of a provision of that Act. (2) But section 19 shall not apply to disclosure— (a) in accordance with this Act, (b) in accordance with another enactment, or (c) in circumstances specified in section 18(2)(c), (d), (e) or (h) of that Act. (3) In subsection (1)— (a) information provided to a person shall be treated as being provided both to him and to any person on whose behalf he acts or by whom he is employed, and (b) the reference to disclosure by the person to whom information was provided includes a reference to disclosure by any person acting on behalf of, or employed by, the person to whom the information was provided (or a person to whom it is treated as being provided by virtue of paragraph (a)). (4) In the application of section 18(2)(c) and (d) of that Act by virtue of subsection (2)(c) above a reference to functions of the Revenue and Customs shall be taken as a reference to functions of the person making the disclosure. (5) In the application of section 19 of that Act by virtue of subsection (1) above “revenue and customs information” means information provided by the Commissioners (but subject to the express exclusion in section 19(2)). (6) Section 19 of that Act shall, in so far as it applies by virtue of this section, be treated for the purposes of section 28 of this Act as an offence under this Act.

• (2) Section 352A of the Gambling Act 2005 (c. 19) as inserted by subsection (1) above shall come into force on the passing of this Act.

Part 10 — Supplementary provisions

Repeals

178

• (1) The enactments mentioned in Schedule 26 (which include provisions that are spent or of no practical utility) are repealed to the extent specified.

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

Interpretation

179

In this Act—

• “ALDA 1979” means the Alcoholic Liquor Duties Act 1979 (c. 4);

• “CAA 2001” means the Capital Allowances Act 2001 (c. 2);

• "CTA 2009” means the Corporation Tax Act 2009;

• “FA”, followed by a year, means the Finance Act of that year;

• “F(No.2)A”, followed by a year, means the Finance (No.2) Act of that year;

• “HODA 1979” means the Hydrocarbon Oil Duties Act 1979 (c. 5);

• “ICTA” means the Income and Corporation Taxes Act 1988 (c. 1);

• “IHTA 1984” means the Inheritance Tax Act 1984 (c. 51);

• “ITA 2007” means the Income Tax Act 2007;

• “ITEPA 2003” means the Income Tax (Earnings and Pensions) Act 2003 (c. 1);

• “ITTOIA 2005” means the Income Tax (Trading and Other Income) Act 2005 (c. 5);

• “OTA 1975” means the Oil Taxation Act 1975 (c. 22);

• “TCGA 1992” means the Taxation of Chargeable Gains Act 1992 (c. 12);

• “TMA 1970” means the Taxes Management Act 1970 (c. 9);

• “VATA 1994” means the Value Added Tax Act 1994 (c. 23);

• “VERA 1994” means the Vehicle Excise and Registration Act 1994 (c. 22).

Short title

180

This Act may be cited as the Finance Act 2006.

SCHEDULE 1

Part 1 — Amendments of Chapter 4 of Part 10 of ICTA

Availability of relief

1

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

Limits on group relief

2

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

Relief for or in respect of non-resident companies within the charge to corporation tax

3

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

Relief in respect of overseas losses of non-resident companies

4

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

Interpretation of Chapter 4 of Part 10 of ICTA

5

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

Group relief: equity holders and profits or assets available for distribution

6

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

Meaning of conditions in section 403F etc

7

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

Part 2 — Amendments of other enactments

Claims for group relief

8

After paragraph 77 of Schedule 18 to FA 1998 (joint amended returns) insert—

(77A) (1) This paragraph applies if a claim for group relief is made in respect of any loss or other amount as a result of the condition in section 402(2A) of the Taxes Act 1988 being satisfied (relief in respect of overseas losses of non-resident companies). (2) In relation to the surrendering company, this Part of this Schedule applies as if— (a) references to the relief being surrendered were to the EEA amount and to the relief being claimed, and (b) references to its accounting period were to its deemed accounting period under Part 2 of Schedule 18A to the Taxes Act 1988. (3) Notice of consent of the surrendering company— (a) is to be given to the officer of the Board under paragraph 70(3)(b) by the claimant company (and not by the surrendering company), and (b) is to be given to the officer to whom the claimant company makes its company tax returns. (4) If the surrendering company is not within the charge to income or corporation tax, the requirement under paragraph 71(1)(e) for notice of consent by the surrendering company to contain details of its tax district reference is not to apply. (5) If notice of consent is withdrawn under paragraph 71, the notice of the withdrawal is to be given to the officer of the Board by the claimant company (and not by the surrendering company). (6) If notice of consent is withdrawn under paragraph 75— (a) the notice of withdrawal, and any copy of any new notice of consent, is to be sent to an officer of Revenue and Customs by the claimant company (and not by the surrendering company), and (b) any notice containing directions by an officer of Revenue and Customs under sub-paragraph (4) of that paragraph is to be given to the claimant company (and not to the surrendering company). (7) The remaining provisions of that paragraph, and the rest of this Part of this Schedule, are, accordingly, to be read with the appropriate modifications (so that, in particular, it is the claimant company (and not the surrendering company) which can bring an appeal under paragraph 75(7)). (8) A notice under paragraph 27 (notice to produce documents etc for purposes of an enquiry) given to the claimant company may require the claimant company— (a) to explain why the EEA amount meets the conditions mentioned in subsection (2)(a) to (d) of section 403F of the Taxes Act 1988 and is not prevented from being surrendered by section 403G of that Act, and (b) to provide details of the recalculation required under Part 2 of Schedule 18A to that Act in relation to the EEA amount. (9) Except where expressly indicated, requirements imposed under this paragraph are in addition to those imposed apart from this paragraph. (10) In this paragraph “the EEA amount” has the same meaning as in Part 2 of Schedule 18A to the Taxes Act 1988.

.

Part 3 — Commencement

Commencement

9

• (1) The amendments made by this Schedule, other than those made by paragraphs 4(2) and 5, have effect—

• (a) in relation to any accounting period of a claimant company beginning on or after 1st April 2006, and

• (b) in relation to any period (“the loss period”) beginning on or after 1st April 2006 in which any loss or other amount arises to a non-resident company.

• (2) If an accounting period (a “straddling period”) of a claimant company begins before 1st April 2006 and ends on or after that date—

• (a) so much of the straddling period as falls before 1st April 2006, and

• (b) so much of the straddling period as falls on or after that date,

are to be treated as separate accounting periods for the purposes of the amendments made by this Schedule other than those made by paragraphs 4(2) and 5.

• (3) The amount of the claimant company's profits for the straddling period is to be attributed, on an apportionment in accordance with this paragraph, to those separate accounting periods.

• (4) If the loss period of the non-resident company begins before 1st April 2006 and ends on or after that date—

• (a) so much of the loss period as falls before 1st April 2006, and

• (b) so much of the loss period as falls on or after that date,

are to be treated as separate periods for the purposes of the amendments made by this Schedule other than those made by paragraphs 4(2) and 5.

• (5) The amount of the loss or other amount of the non-resident company for the loss period is to be attributed, on an apportionment in accordance with this paragraph, to those separate periods.

• (6) Any apportionment under this paragraph is to be made on a just and reasonable basis.

SCHEDULE 2

Amendments to Schedule 20 to FA 2000

1

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

Amendments to Schedule 12 to FA 2002

2

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

Amendments to Schedule 13 to FA 2002

3

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

SCHEDULE 3

Introductory

1

Schedule 18 to FA 1998 (company tax returns, assessments and related matters) is amended as follows.

Claims to be included in return

2

• (1) Paragraph 10 (other claims and elections to be included in return) is amended as follows.

• (2) In sub-paragraph (2) (claims to which Part 8, 9 or 9A of Schedule 18 applies) for “R&D tax credit” substitute “ R&D tax relief ”.

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

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

Claims for R&D tax relief

3

In paragraph 83A (Part 9A: introduction) for “claims for R&D tax credits” substitute “ claims for R&D tax relief ”.

4

In each of the following provisions for “claim for an R&D tax credit” substitute “ claim to which this Part of this Schedule applies ”

• (a) paragraph 83B(1) (claim to be included in company tax return);

• (b) paragraph 83C (content of claim);

• (c) paragraph 83D (amendment or withdrawal of a claim);

• (d) paragraph 83E(1) (time limit for claims).

5

In the title of Part 9A, “R&D tax credit” becomes “ R&D tax relief ”.

Claims for relief under Schedule 12 to FA 2002

6

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

Claims for relief under Schedule 13 to FA 2002

7

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

8

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

9

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

Commencement and transitional provision

10

The amendments made by paragraphs 2 to 9 have effect in relation to accounting periods ending on or after 31st March 2006.

11

• (1) This paragraph applies where a company is entitled to relief under Schedule 20 to FA 2000 or Schedule 12 or 13 to FA 2002 for any accounting period of the company falling within sub-paragraph (2).

• (2) An accounting period of a company falls within this sub-paragraph if it ends on a day falling after 31st March 2002 but before 31st March 2006.

• (3) Sub-paragraphs (4) and (5) apply to any claim by the company for such relief for an accounting period falling within sub-paragraph (2), other than a claim by the company for—

• (a) an R&D tax credit under Schedule 20 to FA 2000, or

• (b) a tax credit under Schedule 13 to FA 2002.

• (4) A claim to which this sub-paragraph applies may be made, amended or withdrawn by the company at any time up to and including 31st March 2008.

• (5) A claim to which this sub-paragraph applies may be made, amended or withdrawn by the company at a later date if an officer of Revenue and Customs allows it.

SCHEDULE 4

Films to which this Schedule applies

1

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

Activities treated as separate trade

2

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

When the trade begins

3

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

Pre-trading expenditure

4

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

Costs of the film

5

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

Income from the film

6

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

Calculation of profit or loss

7

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

Estimates

8

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

When costs are taken to be incurred

9

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

Exclusion of expenditure relieved under other provisions

10

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

SCHEDULE 5

...

Introduction

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

Additional deduction in computing profits of trade

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

Qualifying expenditure

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

Amount of additional deduction

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

Rate of enhancement

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

Film tax credits

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

Amount of credit

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

Payable credit rate

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

Payment in respect of film tax credit

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

Payment in respect of film tax credit not income

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

Trading loss reduced by amount surrendered for film tax credit

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

No account to be taken of amounts if unpaid

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

Artificially inflated claims for deduction or film tax credit

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

Interpretation

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

Part 2 — Certification of British films for purposes of film tax relief

15

For section 6 of the Films Act 1985 (c. 21) (certification of master negatives, tapes and discs for purposes of section 72 of FA 1982) substitute)—

(6) Schedule 1 to this Act has effect with respect to the certification by the Secretary of State of a film as a British film for the purposes of film tax relief.

.

16

For the heading to Schedule 1 to that Act substitute “ Certification of British films for purposes of film tax relief ”.

17

For paragraph 1 of that Schedule substitute—

(1) (1) In this Schedule— - “film” includes any record, however made, of a sequence of visual images that is capable of being used as a means of showing that sequence as a moving picture; - “film production company” has the same meaning as in Chapter 3 of Part 3 of the Finance Act 2006 (see section 32 of that Act). (2) For the purposes of this Schedule each part of a series of films is treated as a separate film, unless— (a) the films form a series with not more than 26 parts, (b) the combined playing time is not more than 26 hours, and (c) the series constitutes a self-contained work or is a series of documentaries with a common theme, in which case the films are treated as a single film. (3) References in this Schedule to a film include the film soundtrack. (4) For the purposes of this Schedule a film is completed when it is first in a form in which it can reasonably be regarded as ready for copies of it to be made and distributed for presentation to the general public.

.

18

For paragraph 2 of that Schedule substitute—

(2) (1) The film production company may apply to the Secretary of State for the certification of a film as a British film. (2) The application may be for an interim or final certificate. (3) An interim certificate is a certificate granted before the film is completed that the film, if completed in accordance with the proposals set out in the application, will be a British film. (4) A final certificate is a certificate granted after the film is completed that the film is a British film. (5) The applicant must— (a) produce to the Secretary of State such books or other documents relating to the application, and (b) provide the Secretary of State with such other information with respect to it, as the Secretary of State may require for the purposes of determining the application. (6) The Secretary of State may require information provided for the purposes of the application to be accompanied by a statutory declaration, by the person providing it, as to the truth of the information.

.

19

For paragraph 3 of that Schedule substitute—

(3) (1) If the Secretary of State is satisfied that the requirements are met for interim or final certification of a film as a British film, he shall certify the film accordingly. (2) If the Secretary of State is not satisfied that those requirements are met, he shall refuse the application. (3) An interim certificate— (a) may be given subject to conditions, and (unless the Secretary of State directs otherwise) is of no effect if the conditions are not met; (b) may be expressed to expire after a specified period, and (unless the Secretary of State directs otherwise) ceases to have effect at the end of that period; and (c) ceases to have effect when a final certificate is issued. (4) If it appears to the Secretary of State that a film certified by him under this Schedule ought not to have been certified, he shall revoke its certification. Unless the Secretary of State directs otherwise, a certificate that is revoked is treated as never having had effect.

.

20

In paragraph 4 of that Schedule (British films for purposes of the Schedule), for sub-paragraphs (1) to (3) substitute—

(1) A film is a British film for the purposes of this Schedule if it passes the relevant cultural test (see paragraph 4A, 4B or 4C).

.

21

• (1) Paragraph 5 of that Schedule (excluded films) is amended as follows.

• (2) For sub-paragraph (1) substitute—

(1) A film must not be certified as a British film for the purposes of this Schedule if parts of the film whose playing time exceeds 10% of the total playing time of the film are derived from a previous film, unless— (a) the two films have the same film production company or producer, and (b) the previous film has not been certified under this Schedule.

.

• (3) After sub-paragraph (2) insert—

(3) For the purposes of this paragraph— (a) the film soundtrack shall be left out of account; (b) “producer” means the person by whom the arrangements necessary for the making of the film are undertaken; (c) in relation to certification before the commencement of Chapter 3 of Part 3 of the Finance Act 2006, references to certification of a film shall be read as references to certification of the master negative, tape or disc of the film.

.

22

In paragraph 9 of that Schedule (determination of disputes) for the words from “any decision of the Secretary of State” to “may” substitute “ any decision of the Secretary of State under paragraph 3 may ”.

23

In paragraph 10 of that Schedule (regulations and orders)—

• (a) in sub-paragraph (1)(c), for “2(4)” substitute “ 2(6); ”

• (b) in sub-paragraph (2), for “4 to 8” substitute “ 4 to 5 ”.

Confidentiality of information

24

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

Wrongful disclosure

25

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

Part 3 — Consequential amendments

Interest

26

• (1) Section 826 of ICTA (interest on tax overpaid etc) is amended as follows.

• (2) In subsection (1) (payments that carry interest) after paragraph (e) insert—

; or (f) a payment of film tax credit falls to be made to a company.

.

• (3) After subsection (3B) insert—

(3C) In relation to a payment of film tax credit the material date is whichever is the later of— (a) the filing date for the company's company tax return for the accounting period for which the tax credit is payable, and (b) the date on which the company tax return or amended company tax return containing the claim for payment is delivered to an officer of Revenue and Customs. For this purpose “the filing date”, in relation to a company tax return, has the same meaning as in Schedule 18 to the Finance Act 1998.

.

• (4) In subsection (8A) (recovery of overpaid amounts)—

• (a) in paragraph (a), for “or (e)” substitute “ , (e) or (f) ”;

• (b) in paragraph (b)(ii) after “life assurance company tax credit” insert “ or film tax credit ”.

• (5) In subsection (8B) after “life assurance company tax credit” (twice) insert “ or film tax credit ”.

Claim to be made in tax return

27

In Schedule 18 to FA 1998 (company tax returns), in paragraph 10 (other claims etc to be included in return), after sub-paragraph (3) insert—

(4) A claim to which Part 9D of this Schedule applies (claims for film tax relief) can only be made by being included in a company tax return (see paragraph 83T).

.

Recovery of excessive film tax credit

28

In paragraph 52 of that Schedule (recovery of excessive repayments etc)—

• (a) in sub-paragraph (2) (excessive repayments etc to which paragraphs 41 to 48 apply), after paragraph (bc) insert—

(bd) film tax credit,

;

• (b) in sub-paragraph (5) (connection of assessment for excessive payment to an accounting period), after paragraph (ad) insert—

(ae) an amount of film tax credit paid to a company for an accounting period,

;

• (c) in the closing words of that sub-paragraph, after “(ad)” insert “ , (ae) ”.

Claims for film tax credits

29

After Part 9C of that Schedule insert—

(83S) This Part of this Schedule applies to claims for film tax relief. (83T) (1) A claim to which this Part of this Schedule applies must be made by being included in the claimant company's tax return for the accounting period for which the claim is made. (2) It may be included in the return originally made or by amendment. (83U) A claim to which this Part of this Schedule applies must specify the amount of the relief claimed, which must be an amount quantified at the time the claim is made. (83V) A claim to which this Part of this Schedule applies may be amended or withdrawn by the claimant company only by amending its company tax return. (83W) (1) A claim to which this part of this Schedule applies may be made, amended or withdrawn at any time up to the first anniversary of the filing date for the company tax return of the claimant company for the accounting period for which the claim is made. (2) The claim may be made, amended or withdrawn at a later date if an officer of Revenue and Customs allows it. (83X) (3) The company is liable to a penalty where it— (a) fraudulently or negligently makes a claim for a film tax credit that is incorrect, or (b) discovers that a claim for a film tax credit made by it (neither fraudulently nor negligently) is incorrect and does not remedy the error without unreasonable delay. (4) The penalty is an amount not exceeding the excess film tax credit claimed, that is, the difference between— (a) the amount (if any) of the film tax credit to which the company is entitled for the accounting period to which the claim relates, and (b) the amount of the film tax credit claimed by the company for that period.

.

...

Introduction

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

Certification as a British film

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

The UK expenditure condition

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

Whether film a limited-budget film

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

Time limit for amendments and assessments

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

SCHEDULE 6

Repeal of rent factoring provisions

1

• (1) Sections 43A to 43G of ICTA (rent factoring) shall cease to have effect.

• (2) The amendment made by this paragraph has effect in relation to transactions entered into on or after 6th June 2006.

Dividend stripping: subsequent sales etc of rights to receive dividends etc

2

• (1) Section 730 of ICTA (transfers of rights to receive distributions in respect of shares) is amended as follows.

• (2) Omit subsection (3) (proceeds of subsequent sales etc of rights to receive distributions not to be regarded as income of the seller etc).

• (3) The amendment made by this paragraph has effect in relation to sales or other realisations on or after 20th January 2006.

Deemed interest: cash collateral under stock lending arrangements

3

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

Quasi-stock lending arrangements and quasi-cash collateral

4

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

Multiple holders of securities subject to sale and repurchase agreement: no relief for deemed manufactured payments

5

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

Structured finance arrangements: factoring of income receipts etc

6

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

Rent factoring of leases of plant or machinery

7

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

Transactions associated with loans or credit

8

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

Structured finance arrangements: chargeable gains treatment of acquisitions and disposals

9

• (1) After section 263D of TCGA 1992 (gains accruing to persons paying manufactured dividends) insert—

(263E) (1) This section applies if— (a) section 774B of the Taxes Act (disregard of intended effects of arrangement involving disposals of assets) applies in relation to a structured finance arrangement, (b) the borrower or a person connected with the borrower makes a disposal of any security at any time under the arrangement to or for the benefit of the lender or a person connected with the lender, and (c) condition A or B is met. (2) Condition A is that the person making the disposal subsequently acquires under the arrangement the asset disposed of by that disposal. (3) Condition B is that— (a) the asset disposed of by that disposal subsequently ceases to exist at any time, and (b) that asset was held by the lender, or a person connected with the lender, from the time of the disposal until that time. (4) The disposal of the security by the borrower or a person connected with the borrower is to be disregarded for the purposes of this Act. (5) Any subsequent acquisition by the person making the disposal of the asset disposed of by that disposal is to be disregarded for the purposes of this Act. (6) In this section— - “the borrower”, in relation to a structured finance arrangement, means the person who is the borrower under the arrangement for the purposes of section 774A of the Taxes Act, - “the lender”, in relation to a structured finance arrangement, means the person who is the lender under the arrangement for the purposes of that section, - “security” means any such asset as is mentioned in subsection (2)(c) and (d) of that section. (7) For the purposes of this section— (a) references to a person connected with the borrower do not include the lender, and (b) references to a person connected with the lender do not include the borrower.

.

• (2) The amendment made by this paragraph has effect in relation to disposals made on or after 6th June 2006.

• (3) The amendment made by this paragraph also has effect in relation to any disposal made by a person before that date if the person makes a claim to that effect under this sub-paragraph.

Loan relationships: mandatory convertibles

10

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

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

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

• (4) The following provisions of this paragraph apply for the purposes of TCGA 1992 if—

• (a) a company is a party to a relationship on 22nd March 2006,

• (b) the relationship becomes a loan relationship on that date for the purposes of Chapter 2 of Part 4 of FA 1996 as a result of the amendments made by this paragraph,

• (c) the relationship is a creditor relationship of the company, and

• (d) immediately before that date the asset representing the relationship was a chargeable asset in relation to the company.

• (5) The company is treated as if—

• (a) it had made a disposal of the asset representing the relationship immediately before 22nd March 2006, and

• (b) the disposal had been for a consideration equal to the fair value of the asset at that time (within the meaning given by section 103(1) of FA 1996).

• (6) Any chargeable gain or loss accruing to the company on the disposal is treated as accruing to the company when it ceases to be a party to the relationship.

• (7) For the purposes of this paragraph an asset is a chargeable asset in relation to the company at any time if any gain accruing to it on the disposal of the asset at that time would be a chargeable gain for the purposes of TCGA 1992.

Loan relationships: computation in accordance with generally accepted accounting practice

11

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

Loan relationships: amounts not fully recognised for accounting purposes

12

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

Shares treated as loan relationships: shares subject to outstanding third party obligations

13

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

Shares treated as loan relationships: application of rules to non-qualifying shares

14

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

Shares treated as loan relationships: redeemable shares

15

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

Creditor relationships and benefit derived by connected persons

16

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

Loan relationships: money debts etc not arising from the lending of money

17

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

Loan relationships: meaning of “fair value” in Chapter 2 of Part 4 of FA 1996

18

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

Loan relationships: continuity of treatment of groups etc

19

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

Loan relationships: repo and stock-lending arrangements

20

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

Derivative contracts: computation in accordance with generally accepted accounting practice

21

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

Derivative contracts: transactions within groups

22

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

Derivative contracts: transactions within groups (fair value accounting)

23

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

Derivative contracts: meaning of “fair value” in Schedule 26 to FA 2002

24

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

SCHEDULE 7

Income and Corporation Taxes Act 1988

Amendments of ICTA: introductory

1

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

Section 741: application subject to sections 741B and 741C

2

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

Exemption from sections 739 and 740: new provision

3

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

Application of sections 741 and 741A

4

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

Just and reasonable apportionment in certain cases

5

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

Section 742: interpretation of the Chapter

6

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

ITTOIA 2005

Gains from contracts for life insurance etc

7

• (1) In ITTOIA 2005, section 468 (gains from contracts of life insurance etc: non-UK resident trustees and foreign institutions) is amended as follows.

• (2) In subsection (2) (section 740 of ICTA to apply with the modifications in subsection (3) or (4))—

• (a) for “Section 740” substitute “ Sections 739 and 740 ”,

• (b) for “prevents” substitute “ prevent ”,

• (c) for “applies” substitute “ apply ”.

• (3) In subsection (3) (cases within subsection (1)(a)) for “section 740 applies” substitute “ sections 739 and 740 apply ”.

• (4) In subsection (4) (cases within subsection (1)(b)) for “section 740 applies” substitute “ sections 739 and 740 apply ”.

• (5) The amendments made by this paragraph apply in relation to gains treated as arising on or after 5th December 2005.

SCHEDULE 8

Part 1 — Capital allowances

Introductory

1

CAA 2001 is amended as follows.

Use for other qualifying activity of plant or machinery previously used for long funding leasing

2

After section 13 (use for qualifying activity of plant or machinery provided for other purposes) insert—

(13A) (1) This section applies if a person who has been using plant or machinery for the purpose of leasing it under a long funding lease (see Chapter 6A)— (a) ceases to use the plant or machinery for that purpose without ceasing to use it for the purposes of a qualifying activity carried on by him, and (b) on the date of the cessation, owns the plant or machinery as a result of having incurred capital expenditure on its provision for the purposes of the qualifying activity. (2) The person is to be treated— (a) as having incurred capital expenditure (“notional expenditure”) on the provision of the plant or machinery for the purposes of the qualifying activity on the day after the cessation, (b) as owning the plant or machinery as a result of having incurred that expenditure, and (c) as if the plant or machinery on and after that day were different plant or machinery from the plant or machinery before that day. (3) The amount of the notional expenditure is an amount equal to the termination amount, determined in accordance with section 70YG, in the case of the long funding lease under which the plant or machinery was last leased before the cessation.

.

Expenditure on plant or machinery for long funding leasing not to be qualifying expenditure

3

After section 34 insert—

(34A) Expenditure is not qualifying expenditure if it is incurred on the provision of plant or machinery for leasing under a long funding lease (see Chapter 6A).

.

General exclusions applying to certain sections

4

• (1) Section 46 is amended as follows.

• (2) In subsection (2) (the general exclusions) in general exclusion 8—

• (a) for “Either” substitute

Any , and

• (b) after the entry relating to section 13 insert— “ section 13A (use for other purposes of plant or machinery provided for long funding leasing); ”.

Commencement of leasing under long funding lease: disposal events and disposal values

5

• (1) Section 61 (disposal events and disposal values) is amended as follows.

• (2) In subsection (1) (disposal events) after paragraph (e) insert—

(ee) the plant or machinery begins to be leased under a long funding lease (see Chapter 6A);

.

• (3) In subsection (2) (disposal values) in the Table (disposal event, disposal value) after item 5 insert—

5A. Commencement of the term of a long funding finance lease of the plant or machinery.	An amount equal to that which would fall to be recognised as the lessor's net investment in the lease if accounts were prepared in accordance with generally accepted accounting practice on the date on which the lessor's net investment in the lease is first recognised in the books or other financial records of the lessor.
5B. Commencement of the term of a long funding operating lease of the plant or machinery.	An amount equal to the market value of the plant or machinery at the commencement of the term of the lease.

.

• (4) In item 6 in that Table (which refers to the occurrence of an event within items 1 to 5) for “5” substitute “ 5B ”.

Lessee under long funding lease: capital allowances, disposal events and disposal values

6

In Chapter 6 of Part 2 (hire-purchase etc and plant or machinery provided by lessee) after section 70 insert—

(70A) (1) This section applies if a person carrying on a qualifying activity incurs expenditure (whether or not of a capital nature) on the provision of plant or machinery for the purposes of the qualifying activity under a long funding lease. (2) In the application of this Part in the case of that person, the plant or machinery is to be treated as owned by him at any time when he is the lessee under the long funding lease. That is so whether or not the lease also falls to be regarded as a long funding lease in the application of this Part in the case of the lessor. (3) The person is to be treated for the purposes of this Part as having incurred capital expenditure on the provision of the plant or machinery as follows. (4) The capital expenditure is to be treated as incurred at the commencement of the term of the long funding lease. (5) The amount of the capital expenditure varies, according to whether the long funding lease is— (a) a long funding operating lease (subsection (6)), or (b) a long funding finance lease (subsection (7)). (6) If the long funding lease is a long funding operating lease, the amount of the capital expenditure is to be found in accordance with section 70B. (7) If the long funding lease is a long funding finance lease, the amount of the capital expenditure is to be found in accordance with section 70C. (8) See Chapter 6A for interpretation of this section. (70B) (1) This section applies by virtue of section 70A(6). (2) If the long funding lease is a long funding operating lease, the amount of the capital expenditure is the market value of the plant or machinery at the later of— (a) the commencement of the term of the lease; (b) the date on which the plant or machinery is first brought into use for the purposes of the qualifying activity. (3) This section is to be construed as one with section 70A. (70C) (1) This section has effect by virtue of section 70A(7) for the purpose of determining the amount of the capital expenditure in the case of a long funding finance lease. (2) If the lease is one which, under generally accepted accounting practice, falls (or would fall) to be treated as a loan, this section applies as if the lease were one which, under generally accepted accounting practice, fell to be treated as a finance lease. (3) The amount of the capital expenditure is the total of— (a) commencement PVMLP (see subsection (4)), and (b) if subsection (6) applies, the unrelievable pre-commencement rentals (“UPR”), but subject, in a case falling within subsection (7), to the restriction imposed by subsection (8). (4) Commencement PVMLP is the amount that would fall to be recognised as the present value, at the appropriate date, of the minimum lease payments (see section 70YE) if appropriate accounts were prepared by the person. (5) For the purposes of subsection (4)— - “appropriate accounts” are accounts prepared in accordance with generally accepted accounting practice on the date on which that amount is first recognised in the books or other financial records of the person; - “the appropriate date” is the later of— 1. the commencement of the term of the lease; 2. the date on which the plant or machinery is first brought into use for the purposes of the qualifying activity. (6) This subsection applies if— (a) the person has paid rentals under the lease before the commencement of the term of the lease, and (b) in the case of some or all of those rentals, relief otherwise than by virtue of this subsection— (i) is not available, and (ii) if the case is one where the plant or machinery was not used for the purposes of a qualifying activity in the period before the commencement of the term of the lease, would not have been available had the plant or machinery been used in that period for the purposes of a qualifying activity, and in any such case UPR is the amount of the rentals for which relief is not, and (in a case falling within paragraph (b)(ii)) would not have been, so available. (7) Subsection (8) applies if the main purpose, or one of the main purposes, of entering into— (a) the lease, (b) a series of transactions of which the lease is one, or (c) any of the transactions in such a series, is to obtain allowances under this Part in respect of an amount of capital expenditure that materially exceeds the market value of the leased asset at the commencement of the term of the lease. (8) In any such case, the amount of the capital expenditure described in subsection (3) is to be restricted to an amount equal to the market value of the asset at the commencement of the term of the lease. (9) In this section “relief” means relief by way of— (a) an allowance under this Act, (b) a deduction in computing profits for the purposes of income tax or corporation tax, (c) a deduction from total profits or total income for the purposes of either of those taxes. (10) This section is to be construed as one with section 70A. (70D) (1) This section applies where the following conditions are met— (a) a person is the lessee of plant or machinery under a long funding finance lease, (b) as a result of section 70A, the person falls to be regarded as having incurred qualifying expenditure on the provision of the plant or machinery, and (c) the lessor incurs expenditure in relation to the plant or machinery, (d) as a result of the lessor incurring the expenditure, there is in the case of the lessee an increase (the “relevant increase”) in the present value of the minimum lease payments. (2) If the lease is one which, under generally accepted accounting practice, falls (or would fall) to be treated as a loan, this section applies as if the lease were one which, under generally accepted accounting practice, fell to be treated as a finance lease. (3) The person is to be treated for the purposes of this Part as having incurred further capital expenditure on the provision of the plant or machinery as follows. (4) The person is to be treated as having incurred the expenditure on the date of first recognition. (5) The amount of the expenditure is the amount that would fall to be recognised as the amount of the relevant increase if appropriate accounts were prepared by the person. (6) For that purpose, “appropriate accounts” are accounts prepared in accordance with generally accepted accounting practice on the date of first recognition. (7) For the purposes of this section, the “date of first recognition” is the date on which the relevant increase is first recognised in the books or other financial records of the person. (8) This section is to be construed as one with section 70A. (70E) (1) This section applies where— (a) a person is the lessee of plant or machinery under a long funding lease, (b) as a result of section 70A, the person falls to be regarded as having incurred qualifying expenditure on the provision of the plant or machinery, and (c) the lease terminates. (2) In the case of that person— (a) the termination of the lease is a disposal event, and (b) the person is required to bring into account a disposal value for the chargeable period in which that disposal event occurs. (3) The amount of the disposal value varies according to whether the lease is— (a) a long funding operating lease (see subsections (4) to (6)), or (b) a long funding finance lease (see subsections (7) and (8)). (4) If the lease is a long funding operating lease, the disposal value is the sum of— (a) element A (see subsection (5)), and (b) element B (see subsection (6)). (5) Element A is the amount (if any) by which— (a) the market value of the plant or machinery at the later of— (i) the commencement of the term of the lease, (ii) the date on which the plant or machinery is first brought into use for the purposes of the qualifying activity, exceeds (b) the aggregate amount of the reductions that fell to be made under section 502K of ICTA or 148I of ITTOIA 2005 for periods of account in which the person was the lessee. (6) Element B is the sum of any amounts payable to the person which are calculated by reference to the termination value. (7) If, in the case of the person, the lease is a long funding finance lease, the amount of the disposal value is found by first finding the sum of— (a) any amounts payable to the person which are calculated by reference to the termination value, and (b) if the lease terminates before the end of the term, the amount that would fall to be recognised as the present value, immediately before the termination, of the balance of the minimum lease payments (see subsection (8)) if appropriate accounts were prepared by the person, and then reducing that sum (but not below nil) by subtracting from it any amount payable by the person to the lessor for or in consequence of the termination. (8) For the purposes of subsection (7)(b)— (a) the balance of the minimum lease payments is the amount by which MLP exceeds TMLP, where— - MLP is the amount of the minimum lease payments, and - TMLP is the amount that would have been the minimum lease payments if the term of the lease had been such as to expire on the day of the termination, and (b) “appropriate accounts” are accounts prepared in accordance with generally accepted accounting practice immediately before the termination of the lease. (9) If the termination of the lease gives rise to a disposal event in the case of the person apart from this section, that disposal event is to be ignored. (10) This section is to be construed as one with section 70A.

.

Interpretation of provisions relating to long funding leases

7

In Part 2, after Chapter 6 insert—