Finance Act 2006

• (2) The existing provision becomes sub-paragraph (1).

• (3) After that provision insert—

(2) The Commissioners for Her Majesty's Revenue and Customs may by regulations provide that, in circumstances prescribed by the regulations, paragraphs (a), (b) and (c) of sub-paragraph (1) have effect as if the references in those paragraphs to the pension scheme were to either the pension scheme or such other pension scheme as is prescribed by the regulations. (3) Regulations under sub-paragraph (2) may include provision having effect in relation to times before they are made.

Abatement

33

In section 279(1) (definitions), in the definition of “abatement”—

• (a) after “scheme pension” insert “ to which a person has become entitled ”, and

• (b) for “re-employment” substitute “ the person's employment ”.

Amendments and transitionals

34

• (1) Section 281 (minor and consequential amendments) is amended as follows.

• (2) After subsection (2) insert—

(2A) The Treasury may by order make in any relevant enactment such amendments (including repeals and revocations) as may appear appropriate in consequence of, or otherwise in connection with, any amendment (or repeal or revocation) made in this Part by any enactment contained in an Act passed after this Act (an “amending Act”). (2B) For this purpose a relevant enactment is— (a) an enactment contained in an Act passed, or (b) an instrument made, before the passing of the amending Act or in the Session in which the amending Act is passed.

• (3) In subsection (3), after “(2)” insert “ or (2A) ”.

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

35

• (1) Section 283 (transitionals and savings) is amended as follows.

• (2) After subsection (3) insert—

(3A) The Treasury may by order make any transitional provision which may appear appropriate in consequence of, or otherwise in connection with, any amendment (or repeal or revocation) made in this Part by any enactment contained in an Act passed after this Act (an “amending Act”). (3B) An order under subsection (3A) may, in particular, include savings from the effect of any amendment (or repeal or revocation) made by the amending Act. (3C) An order under subsection (2) or (3A) may include provision having effect in relation to times before it is made if it does not increase any person's liability to tax.

• (3) In subsections (4) and (5), after “(2)” insert “ or (3A) ”.

Transitional provision: uncrystallised rights under paragraph 9 to include separate lump sums

36

• (1) Paragraph 9 of Schedule 36 (uncrystallised rights under arrangement under pension scheme within paragraph 1(1)(a) to (d)) is amended as follows.

• (2) In sub-paragraph (3), insert at the end “ as increased, in a case where sub-paragraph (5A) applies, in accordance with sub-paragraph (5B). ”

• (3) After sub-paragraph (5) insert—

(5A) This sub-paragraph applies where, in the case of an arrangement under a pension scheme which immediately before 6th April 2006 was within section 611A(1)(a) of ICTA— (a) a lump sum could be paid to the individual on 5th April 2006 under the pension scheme otherwise than by commutation of pension, and (b) that lump sum could not be exchanged (in whole or in part) for an increased pension. (5B) Where sub-paragraph (5A) applies, the amount arrived at under sub-paragraph (3) is the aggregate of what it otherwise would be and so much of the amount of the lump sum as could not be so exchanged.

Transitional protection: taking account of death benefits

37

Schedule 36 (transitional provisions) is amended as follows.

38

After paragraph 11 insert—

(11A) (1) This paragraph applies where— (a) paragraph 7 makes provision for the operation of a lifetime allowance enhancement factor in relation to an individual immediately before the individual's death (and any calculation required by paragraph 11 does not mean that there is then no longer a primary protection factor), (b) a person is paid a defined benefits lump sum death benefit or an uncrystallised funds lump sum death benefit in respect of the individual, and (c) notice of intention to rely on this paragraph is given to an officer of Revenue and Customs by that person in accordance with regulations made by the Commissioners for Her Majesty's Revenue and Customs. (2) If the value of the individual's pre-commencement rights to death benefits (see paragraphs 11B to 11D) exceeds RR (as adjusted under paragraph 11, where that paragraph applies), the primary protection factor is to be recalculated. (3) The re-calculation involves taking RR to be the value of the individual's pre-commencement rights to death benefits and arriving at a revised primary protection factor. (4) The revised primary protection factor operates in relation to— (a) the benefit crystallisation event consisting of the payment of the lump sum death benefit, and (b) any other benefit crystallisation event consisting of the payment of a lump sum death benefit in respect of the individual. (11B) (1) This paragraph and paragraphs 11C and 11D specify the value of the individual's pre-commencement rights to death benefits. (2) Subject to paragraphs 11C and 11D, the value of the individual's pre-commencement rights to death benefits is the aggregate of the maximum amounts that could have been paid— (a) in respect of the individual as uncrystallised rights lump sum death benefits, and (b) under relevant pension arrangements relating to the individual, if the individual had died on 5th April 2006. (3) Lump sum death benefits are “uncrystallised rights lump sum death benefits” if they are attributable to rights in respect of which the individual had not, on 5th April 2006, become entitled to the present payment of benefits. (4) An arrangement is a “relevant pension arrangement” if it is an arrangement under a pension scheme within paragraph 1(1). (11C) (1) In arriving at the aggregate mentioned in paragraph 11B(2) the following amounts are to be left out of account— (a) in the case of any lump sum death benefit which could have been paid under a pension scheme in the case of which approval could have been withdrawn under section 591B, 620(7) or 650 of ICTA, any amount in excess of the permitted limit (see sub-paragraph (2)), and (b) in the case of any lump sum death benefit which could have been paid under an arrangement in the case of which rights to such a benefit are commuted into prospective rights to receive dependants' pensions, any dependants' pension proportion amount (see sub-paragraphs (3) and (4)). (2) An “amount in excess of the permitted limit” is so much (if any) of the maximum amount of any lump sum death benefit as could not have been paid without having given grounds for withdrawing approval of the pension scheme under section 591B, 620(7) or 650 of ICTA. (3) A “dependants' pension proportion amount” is so much (if any) of the maximum amount of any lump sum death benefit which could have been paid under the arrangement as is the dependants' pension proportion of the lump sum death benefit. (4) The dependants' pension proportion is— $$UTA-TAUTA$where—TA is the amount which, at the time when a defined benefits lump sum death benefit or uncrystallised funds lump sum death benefit is first paid in respect of the individual, is the aggregate of the maximum amounts of any defined benefits lump sum death benefits or uncrystallised funds lump sum death benefits which could be paid under the arrangement in respect of the individual, andUTA is what TA would be if no prospective rights to the payment of any of those lump sum death benefits had been commuted into prospective rights to receive dependants' pensions.$ (11D) (1) Sub-paragraph (2) applies where any of the lump sum death benefits mentioned in sub-paragraph (2) of paragraph 11B would have been payable under a policy of life insurance held for the purposes of a pension scheme and on 5th April 2006 the pension scheme either— (a) was not an occupational pension scheme, or (b) was an occupational pension scheme with fewer than 20 members. (2) The lump sum death benefit is only to be taken into account in arriving at the aggregate mentioned in that sub-paragraph if— (a) a sum was paid under the policy when the individual actually died, and (b) the terms of the policy had not been varied significantly during the period beginning with 5th April 2006 and ending with the death; and any exercise of rights conferred by the policy is to be regarded for this purpose as a variation. (3) Sub-paragraph (4) applies where any of the lump sum death benefits mentioned in sub-paragraph (2) of paragraph 11B would have been payable under an occupational pension scheme. (4) The lump sum death benefit is only to be taken into account in arriving at the aggregate mentioned in that sub-paragraph if— (a) the individual was employed by a person on 5th April 2006 and continued to be employed by that person or a person connected with that person until the time when the individual died, (b) that person was a sponsoring employer in relation to the pension scheme on 5th April 2006, and (c) the individual had not become entitled to the present payment of benefits in respect of rights under the pension scheme before the time when the individual died. (5) Section 839 of ICTA (connected persons) applies for the purposes of this paragraph.

39

In paragraph 14 (enhanced protection: relevant contributions), after sub-paragraph (2) insert—

(3) A contribution is not a relevant contribution for the purposes of paragraph 13(a) if— (a) it may only be applied for or towards the payment of premiums under a policy of insurance on the life of the individual, (b) the policy is issued, or issued in respect of insurances made, before 6th April 2006, (c) there is no right to surrender any rights under the policy, (d) the terms of the policy are not varied significantly during the period beginning with 6th April 2006 and ending with the individual's actual death so as to increase the benefits payable under the policy or extend the period during which benefits are so payable, and (e) no benefits are paid, or other payments made, under (or on the surrender of rights under) the policy except by reason of the individual's death; and any exercise of rights conferred by the policy is to be regarded for this purpose as a variation. (4) A contribution is not a relevant contribution for the purposes of paragraph 13(a) if it is paid— (a) by a sponsoring employer, (b) under a relevant hybrid arrangement, and (c) solely in respect of the provision in respect of the individual of lump sum death benefits which are defined benefits or cash balance benefits. (5) A “relevant hybrid arrangement” is a hybrid arrangement under an occupational pension scheme— (a) which subsequently becomes a money purchase arrangement that is not a cash balance arrangement, and (b) under which lump sum death benefits would have been payable in respect of the individual if the individual had died on 5th April 2006.

40

• (1) Paragraph 15 (enhanced protection: “the relevant crystallised amount”) is amended as follows.

• (2) In sub-paragraph (3), for “paragraph 16” substitute “ paragraphs 15A and 16 ”.

• (3) In sub-paragraph (4), for “is the greater” substitute “ is (subject to paragraph 15A) the greater ”.

• (4) In sub-paragraph (5), after “(4)(a)” insert “ and paragraph 15A(2)(a) ”.

• (5) In sub-paragraph (6), after “(4)(b)” insert “ and paragraph 15A(2)(b) ”.

41

After that paragraph insert—

(15A) (1) This paragraph applies where— (a) a person is paid a defined benefits lump sum death benefit or an uncrystallised funds lump sum death benefit in respect of the individual under the arrangement, and (b) notice of intention to rely on this paragraph is given to an officer of Revenue and Customs by that person in accordance with regulations made by the Commissioners for Her Majesty's Revenue and Customs. (2) For the purposes of paragraph 13(b), if the amount yielded by sub-paragraph (3) is greater than what would otherwise be the appropriate limit in relation to a relevant event which consists of— (a) the payment of the lump sum death benefit, or (b) the payment of any other lump sum death benefit in respect of the individual under the arrangement or another cash balance arrangement or defined benefits arrangement related to the arrangement, that greater amount is the appropriate limit in relation to such a relevant event. (3) The amount yielded by this sub-paragraph is the greater of— (a) the value of the individual's pre-commencement rights to death benefits, as increased by the relevant indexation percentage (see sub-paragraph (5) of paragraph 15), or (b) what would be the value of the individual's pre-commencement rights to death benefits on the assumptions specified in sub-paragraph (6) of that paragraph (but subject to the modifications in sub-paragraph (7) of this paragraph). (4) The value of the individual's pre-commencement rights to death benefits is the aggregate of the maximum amounts that could have been paid in respect of the individual as uncrystallised rights lump sum death benefits under— (a) the arrangement, or (b) any other cash balance arrangement or defined benefits arrangement related to the arrangement, if the individual had died on 5th April 2006. (5) Lump sum death benefits are “uncrystallised rights lump sum death benefits” if they are attributable to rights in respect of which the individual had not, on 5th April 2006, become entitled to the present payment of benefits. (6) Paragraphs 11C and 11D apply in arriving at the aggregate mentioned in sub-paragraph (4) as in arriving at that mentioned in paragraph 11B(2) but as if— (a) each of the references to paragraph 11B(2) were to sub-paragraph (4) of this paragraph, and (b) in paragraph 11D(1), for “of a pension scheme” there were substituted “ of any arrangement within paragraph 15A(4) under a pension scheme ”. (7) In their operation for the purposes of this paragraph sub-paragraphs (6) to (11) of paragraph 15 have effect as if— (a) for the references in sub-paragraphs (6)(a) and (7)(a) and (10) to the time of the first relevant event there were substituted a reference to the time immediately before the individual's death, and (b) the words in parentheses in sub-paragraph (6)(a) were omitted.

42

In section 256(1) (enhanced lifetime allowance regulations)—

• (a) in paragraph (d), after “7(1)(b)” insert “ or 11A(1)(c) ”, and

• (b) in paragraph (e), after “12(1)” insert “ or 15A(1)(b) ”.

Transitional protection: right to take benefits before normal pension age

43

• (1) Paragraph 22 of Schedule 36 (right to take benefits before normal minimum pension age: schemes within paragraph 1(1)(a) to (e) of Schedule 36) is amended as follows.

• (2) In sub-paragraph (7), for paragraph (b) substitute—

(b) in a case where on 5th April 2006 the member had an actual or prospective right under the pension scheme to any benefit from an age of less than 50, Condition 1 is met or, in any other case, Condition 2 or 3 is met.

• (3) After that sub-paragraph insert—

(7A) Condition 1 is met if— (a) the member is not, after becoming entitled to the benefits mentioned in sub-paragraph (7)(a), employed by a person who is a sponsoring employer in relation to the pension scheme and with whom the member is connected, and (b) the member's becoming entitled to those benefits is not part of an arrangement the main purpose (or one of the main purposes) of which is the avoidance of tax or national insurance contributions. (7B) Condition 2 is met if— (a) the member is not, after becoming entitled to the benefits mentioned in sub-paragraph (7)(a), employed by a person specified in sub-paragraph (7C), and (b) the member's becoming entitled to those benefits is not part of an arrangement the main purpose (or one of the main purposes) of which is the avoidance of tax or national insurance contributions. (7C) The persons referred to in sub-paragraph (7B)(a) are— (a) any person who was a sponsoring employer in relation to the pension scheme at any time during the period of six months ending with the day on which the member became entitled to the benefits mentioned in sub-paragraph (7)(a) and by whom the member was employed at any time during that period, (b) any person who is connected with any such person, or (c) any person who is a sponsoring employer in relation to the pension scheme and with whom the member is connected. (7D) If the member has become entitled to the benefits payable under arrangements under the pension scheme by reason of service in the armed forces of the Crown, any employment on compulsory recall is to be disregarded for the purposes of sub-paragraph (7B)(a). (7E) Condition 3 is met if — (a) paragraph (a) of sub-paragraph (7B) is not satisfied but one of the re-employment conditions is met, and (b) paragraph (b) of that sub-paragraph is satisfied. (7F) The re-employment conditions are— (a) that the member is not employed as mentioned in sub-paragraph (7B)(a) during the period of six months beginning with the day on which the member becomes entitled to the benefits mentioned in sub-paragraph (7)(a), and (b) that the member is not employed as mentioned in sub-paragraph (7B)(a) during the period of one month beginning with that day, but is so employed during the period of five months beginning at the end of that period, and either the pension abatement condition or the materially different employment condition is met. (7G) The pension abatement condition is met if— (a) the pension scheme is a public service pension scheme, and (b) the member's benefits under the scheme consist of or include a scheme pension which is liable to reduction by abatement while the member is employed as mentioned in sub-paragraph (7B)(a) and is under the age of 55. (7H) The materially different employment condition is met— (a) in a case where the member is employed as mentioned in sub-paragraph (7B)(a) in more than one employment during the period of five months mentioned in sub-paragraph (7F)(b), if each of those employments, and (b) otherwise, if the employment in which the member is so employed during that period, is materially different in nature from the employment in which the member was employed immediately before becoming entitled to the benefits mentioned in sub-paragraph (7)(a). (7I) For the purposes of sub-paragraph (7D) “employment on compulsory recall” means permanent service— (a) under Part 4 of the Reserve Forces Act 1996, (b) under Part 5 of that Act, (c) under a call-out or recall order made under that Act, (d) having been called out or recalled under the Reserve Forces Act 1980, or (e) because of any other call-out or recall obligation of an officer. (7J) Section 839 of ICTA (connected persons) applies for the purposes of this paragraph.

Transitional provisions: minor corrections

44

Schedule 36 (transitional provisions) is amended as follows.

45

In paragraphs 9(4)(a) and 26(3)(a) (primary protection: maximum permitted pension and maximum permitted lump sum), for “611(1)(a)” substitute “ 611A(1)(a) ”.

46

In paragraph 54(1)(b) (benefits taxable under Chapter 2 of Part 6 of ITEPA 2003 where contributions taxed pre-commencement: old schemes), for “1st September 1993” substitute “ 1st December 1993 ”.

SCHEDULE 24

Introduction

1

Schedule 15 to FA 2003 (stamp duty land tax: partnerships) is amended as follows.

Transfer of chargeable interest to a partnership

2

• (1) In paragraph 10 (transfer of chargeable interest to a partnership: general), for sub-paragraphs (2) to (4) substitute—

(2) The chargeable consideration for the transaction shall (subject to paragraph 13) be taken to be equal to— $$MV×(100-SLP)%$where—MV is the market value of the interest transferred, andSLP is the sum of the lower proportions.$

• (2) In sub-paragraph (6) of that paragraph, omit “(instead of sub-paragraphs (2) to (5))”.

3

In paragraph 11 (transfer of chargeable interest to a partnership: chargeable consideration including rent), for sub-paragraphs (2) to (7) substitute—

(2) Schedule 5 (amount of tax chargeable: rent) has effect with the modifications set out in sub-paragraphs (2A) to (2C). (2A) In paragraph 2— (a) for “the net present value of the rent payable over the term of the lease” substitute “ the relevant chargeable proportion of the net present value of the rent payable over the term of the lease ”, and (b) for “the net present values of the rent payable over the terms of all the leases” substitute “ the relevant chargeable proportions of the net present values of the rent payable over the terms of all the leases ”. (2B) In paragraph 9(2A)— (a) for “the annual rent” substitute “ the relevant chargeable proportion of the annual rent ”, and (b) for “the total of the annual rents” substitute “ the relevant chargeable proportion of the total of the annual rents ”. (2C) For paragraph 9(4) substitute— (4) Tax chargeable under this Schedule is in addition to any tax chargeable under section 55 as it has effect by virtue of paragraph 10 of Schedule 15. (2D) For the purposes of sub-paragraphs (2A) and (2B) the relevant chargeable proportion is— $$(100-SLP)%$where SLP is the sum of the lower proportions.$

4

• (1) In paragraph 13 (transfer of chargeable interest to a partnership consisting wholly of bodies corporate), in sub-paragraph (3), for “sub-paragraphs (2) to (5)” substitute “ sub-paragraphs (2) and (5) ”.

• (2) For sub-paragraphs (4) to (7) of that paragraph substitute—

(4A) In paragraph 11(2), for “sub-paragraphs (2A) to (2C)” substitute “ sub-paragraph (2C) ”. (5) In paragraph 11, omit sub-paragraphs (2A), (2B), (2D) and (8).

Transfer of chargeable interest from a partnership

5

• (1) In paragraph 18 (transfer of chargeable interest from a partnership: general), for sub-paragraphs (2) to (4) substitute—

(2) The chargeable consideration for the transaction shall (subject to paragraph 24) be taken to be equal to— $$MV×(100-SLP)%$where—MV is the market value of the interest transferred, andSLP is the sum of the lower proportions.$

• (2) In sub-paragraph (6) of that paragraph, omit “(instead of sub-paragraphs (2) to (5))”.

6

In paragraph 19 (transfer of chargeable interest from a partnership: chargeable consideration including rent), for sub-paragraphs (2) to (7) substitute—

(2) Schedule 5 (amount of tax chargeable: rent) has effect with the modifications set out in sub-paragraphs (2A) to (2C). (2A) In paragraph 2— (a) for “the net present value of the rent payable over the term of the lease” substitute “ the relevant chargeable proportion of the net present value of the rent payable over the term of the lease ”, and (b) for “the net present values of the rent payable over the terms of all the leases” substitute “ the relevant chargeable proportions of the net present values of the rent payable over the terms of all the leases ”. (2B) In paragraph 9(2A)— (a) for “the annual rent” substitute “ the relevant chargeable proportion of the annual rent ”, and (b) for “the total of the annual rents” substitute “ the relevant chargeable proportion of the total of the annual rents ”. (2C) For paragraph 9(4) substitute— (4) Tax chargeable under this Schedule is in addition to any tax chargeable under section 55 as it has effect by virtue of paragraph 18 of Schedule 15. (2D) For the purposes of sub-paragraphs (2A) and (2B) the relevant chargeable proportion is— $$(100-SLP)%$where SLP is the sum of the lower proportions.$

7

• (1) In paragraph 24 (transfer of chargeable interest from a partnership consisting wholly of bodies corporate), in sub-paragraph (3), for “sub-paragraphs (2) to (5)” substitute “ sub-paragraphs (2) and (5) ”.

• (2) For sub-paragraphs (4) to (8) of that paragraph substitute—

(4A) In paragraph 19(2), for “sub-paragraphs (2A) to (2C)” substitute “ sub-paragraph (2C) ”. (5) In paragraph 19, omit sub-paragraphs (2A), (2B), (2D) and (8).

Transfer of chargeable interest from a partnership to a partnership

8

In paragraph 23 (transfer of chargeable interest from a partnership to a partnership), for sub-paragraphs (2) and (3) substitute—

(2) Paragraphs 10(2) and 18(2) do not apply. (2A) The chargeable consideration for the transaction shall be taken to be what it would have been if paragraph 10(2) had applied or, if greater, what it would have been if paragraph 18(2) had applied. (3) Where the whole or part of the chargeable consideration for the transaction is rent— (a) paragraphs 11 and 19 do not apply; (b) the tax chargeable in respect of so much of the chargeable consideration as consists of rent shall be taken to be what it would have been if paragraph 11 had applied or, if greater, what it would have been if paragraph 19 had applied; (c) the disapplication of the 0% band provided for by paragraph 9(2) of Schedule 5 has effect if— (i) it would have had effect if paragraph 11(2B) of this Schedule had applied, or (ii) it would have had effect if paragraph 19(2B) of this Schedule had applied.

Transfer of partnership interest: restriction of charge to property-investment partnerships

9

• (1) In paragraph 14 (transfer of partnership interest: consideration given and chargeable interest held), for the heading substitute—

.

• (2) In sub-paragraph (1)(a) of that paragraph, before “partnership” insert “ property-investment ”.

• (3) After sub-paragraph (7) of that paragraph insert—

(8) In this paragraph— - “property-investment partnership” means a partnership whose sole or main activity is investing or dealing in chargeable interests (whether or not that activity involves the carrying out of construction operations on the land in question); - “construction operations” has the same meaning as in Chapter 3 of Part 3 of the Finance Act 2004 (see section 74 of that Act).

Prevention of double charge where money etc withdrawn from partnership

10

In paragraph 17A (withdrawal of money etc from partnership after transfer of chargeable interest), after sub-paragraph (7) insert—

(8) Where— (a) a qualifying event gives rise to a charge under this paragraph, and (b) the same event gives rise to a charge under paragraph 14 (transfer for consideration of interest in property-investment partnership), the amount of the charge under this paragraph is reduced (but not below nil) by the amount of the charge under that paragraph.

Commencement

11

• (1) Paragraphs 2 to 8 have effect in relation to any transfer of which the effective date is on or after the day on which this Act is passed.

• (2) Paragraph 9 has effect in relation to any transfer that has (or, but for the amendment made by that paragraph, would have) an effective date which is on or after that day.

• (3) Paragraph 10 has effect in relation to any qualifying event of which the effective date is on or after that day.

• (4) In this paragraph “effective date” has the same meaning as in Part 4 of FA 2003.

SCHEDULE 25

Introduction

1

Schedule 17A (stamp duty land tax: further provisions relating to leases) is amended as follows.

Agricultural tenancies variable under statutory provisions

2

• (1) In paragraph 7 (variable or uncertain rent), after sub-paragraph (4) insert—

(4A) For the purposes of this paragraph and paragraph 8, the cases where the amount of rent payable under a lease is uncertain or unascertained include cases where there is a possibility of that amount being varied under— (a) section 12, 13 or 33 of the Agricultural Holdings Act 1986, (b) Part 2 of the Agricultural Tenancies Act 1995, (c) section 13, 14, 15 or 31 of the Agricultural Holdings (Scotland) Act 1991, or (d) section 9, 10 or 11 of the Agricultural Holdings (Scotland) Act 2003.

• (2) In paragraph 13(2), for the words after “increase of rent” substitute

in pursuance of— (a) a provision contained in the lease, or (b) a provision mentioned in any of paragraphs (a) to (d) of paragraph 7(4A).

Backdated lease granted to tenant holding over

3

• (1) After paragraph 9 insert—

(9A) (1) This paragraph applies where— (a) the tenant under a lease continues in occupation after the date on which, under its terms, the lease terminates (“the contractual termination date”), (b) he is granted a new lease of the same or substantially the same premises, and (c) the term of the new lease is expressed to begin on or immediately after the contractual termination date. (2) The term of the new lease is treated for the purposes of this Part as beginning on the date on which it is expressed to begin. (3) The rent payable under the new lease in respect of any period falling— (a) after the contractual termination date, and (b) before the date on which the new lease is granted, is treated for the purposes of this Part as reduced by the amount of taxable rent that is payable in respect of that period otherwise than under the new lease. (4) For the purposes of sub-paragraph (3) rent is “taxable” if or to the extent that it is taken into account in determining liability to stamp duty land tax. (5) Sub-paragraph (3) does not have effect so as to require the rent payable under the new lease to be treated as a negative amount.

• (2) In paragraph 7(3), for the words after “but disregard” substitute

paragraphs 9(2) and 9A(3) (deemed reduction of rent, where further lease granted, for period during which rents overlap) .

Disapplication of “single lease” treatment where agreement for lease followed by grant

4

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

5

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

Disapplication of “new lease” treatment for certain rent increases after fifth year

6

• (1) In paragraph 13 (increase in rent treated as grant of new lease: variation of lease), in the heading, after “variation of lease” insert “ in first five years ”.

• (2) In sub-paragraph (1) of that paragraph, after “to increase the amount of the rent” insert “ as from a date before the end of the fifth year of the term of the lease ”.

Abnormal rent increase after fifth year

7

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

8

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

Commencement

9

• (1) Paragraph 2 has effect in relation to any lease granted or treated as granted on or after commencement day.

• (2) Paragraph 3 has effect in relation to any case where—

• (a) the grant of the old lease was chargeable to stamp duty land tax, and

• (b) the new lease is granted on or after commencement day.

“The old lease” and “the new lease” mean the leases referred to in sub-paragraphs (1)(a) and (1)(b), respectively, of paragraph 9A of Schedule 17A to FA 2003 (inserted by paragraph 3).

• (3) Paragraphs 4 and 5 have effect in relation to any agreement that is substantially performed on or after commencement day.

• (4) Paragraph 6 has effect in relation to any variation of a lease made on or after commencement day.

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

• (6) In this paragraph “commencement day” means the day on which this Act is passed.

SCHEDULE 26

Part 1 — Excise duties

Part 2 — Value added tax

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

Part 4 — Real Estate Investment Trusts

Part 5 — Oil

Part 6 — Inheritance tax

Part 7 — Stamp taxes

Part 8 — Miscellaneous provisions

Rates of tobacco products duty

Rate of duty on beer

Rates of duty on wine and made-wine

Repeal of provisions of ALDA 1979 of no practical utility etc

Rates until 1st September 2006

Rates from 1st September 2006

Road vehicles

Rates of gaming duty

Classes of machine and rates of duty

Rates

Reduced pollution certificates

Gaming machines

Buildings and land

Missing trader intra-community fraud

Directions to keep records where belief VAT might not be paid

Charge and rates for 2006-07

Charge and main rate for financial year 2007

Group relief where surrendering company not resident in UK

Meaning of “film” and related expressions

Trade profits

Extension of restrictions on gift aid payments by close companies

Other avoidance involving losses accruing to companies

Restrictions on effect of elections under section 266 of CAA 2001

Computer equipment

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

Restrictions on effect of elections under section 266 of CAA 2001

Insurance companies

Amendment of section 30 of the Energy Act 2004

Repeal of s.106 of TCGA 1992

Accountancy change: spreading of adjustment

Joint ventures

Nomination scheme

Leases of plant or machinery

Disposal of plant or machinery subject to lease where income retained

PAYE: retrospective notional payments

Insurance companies

Settlements, etc: chargeable gains

Profit share agency

Diminishing shared ownership

Diminishing shared ownership

Partnerships

Amendment of section 30 of the Energy Act 2004

Alternative finance

Movement of assets out of ring-fence

Reliefs for certain company acquisitions

New basis for determining the market value of oil

Effect of deemed disposal and re-acquisition

Distributions: liability to tax

New basis for determining the market value of oil

Rate of landfill tax

126A

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Availability of group reliefs

Climate change levy: rates

Abolition of half-rate supplies etc

Abolition of half-rate supplies etc

Repeals

International tax enforcement arrangements

Amendment of Schedule 10 to FA 1987

Nomination excesses and corporation tax

Election to defer capital allowances

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

Raising of thresholds

Taxable property held by investment-regulated pension schemes

Reliefs for certain company acquisitions

Partnerships

Reallocation of trust property as between beneficiaries

Demutualisation of insurance companies

Alternative finance

Reliefs for certain company acquisitions

Rate of landfill tax

Climate change levy: rates

Abolition of half-rate supplies etc

International tax enforcement arrangements

Repeals

Availability of relief

Limits on group relief

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

Relief in respect of overseas losses of non-resident companies

Interpretation of Chapter 4 of Part 10 of ICTA

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

Meaning of conditions in section 403F etc

Claims for group relief

Commencement

Amendments to Schedule 20 to FA 2000

Amendments to Schedule 12 to FA 2002

Amendments to Schedule 13 to FA 2002

Introductory

Claims to be included in return

Claims for R&D tax relief

Claims for relief under Schedule 12 to FA 2002

Claims for relief under Schedule 13 to FA 2002

Commencement and transitional provision

Films to which this Schedule applies

Activities treated as separate trade

When the trade begins

Pre-trading expenditure

Costs of the film

Income from the film

Calculation of profit or loss

Estimates

When costs are taken to be incurred

Exclusion of expenditure relieved under other provisions

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

Confidentiality of information

Wrongful disclosure

Interest

Claim to be made in tax return

Recovery of excessive film tax credit

Claims for film tax credits

Introduction

Certification as a British film

The UK expenditure condition

Whether film a limited-budget film

Time limit for amendments and assessments

Repeal of rent factoring provisions

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

Deemed interest: cash collateral under stock lending arrangements

Quasi-stock lending arrangements and quasi-cash collateral

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

Structured finance arrangements: factoring of income receipts etc

Rent factoring of leases of plant or machinery

Transactions associated with loans or credit

Structured finance arrangements: chargeable gains treatment of acquisitions and disposals

Loan relationships: mandatory convertibles

Loan relationships: computation in accordance with generally accepted accounting practice

Loan relationships: amounts not fully recognised for accounting purposes

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

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

Shares treated as loan relationships: redeemable shares

Creditor relationships and benefit derived by connected persons

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

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

Loan relationships: continuity of treatment of groups etc

Loan relationships: repo and stock-lending arrangements

Derivative contracts: computation in accordance with generally accepted accounting practice

Derivative contracts: transactions within groups

Derivative contracts: transactions within groups (fair value accounting)

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

Income and Corporation Taxes Act 1988

Amendments of ICTA: introductory

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

Exemption from sections 739 and 740: new provision

Application of sections 741 and 741A

Just and reasonable apportionment in certain cases

Section 742: interpretation of the Chapter

ITTOIA 2005

Gains from contracts for life insurance etc

Introductory

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

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

General exclusions applying to certain sections

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

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

Interpretation of provisions relating to long funding leases

Cases in which short-life asset treatment is ruled out

Fixtures

Introductory

Special rules for long funding leases

Introductory

Special rules for long funding leases

Application of Chapter 10A for calculating the profits of a property business

Commencement

Election for lease to be treated as long funding lease for tax purposes

Excepted leases

Extended time limit: the additional conditions

Events beyond the control of the parties etc

Pre-existing heads of agreement relating to two or more assets

Expenditure incurred before passing of this Act where lease is not an excepted lease

When expenditure is incurred for the purposes of paragraph 21

When a lease is “finalised”

When an asset is “under construction”

Combined assets and constituent assets

Mixed leases

Interpretation of this Part

Income and Corporation Taxes Act 1988

Petroleum extraction activities: sale and leaseback

Supplementary charge in respect of ring fence trades

Leased assets: special cases

Taxation of Chargeable Gains Act 1992

Long funding leases: deemed disposals and re-acquisitions

Restriction of losses: long funding leases of plant or machinery

Definition of market value

Finance Act 1997

Leasing arrangements

Finance Act 2000

Tonnage tax: introductory

Meaning of “finance costs”

Capital allowances: ship leasing

Capital Allowances Act 2001

Withdrawal of first year allowances for lessors of certain plant or machinery

Plant or machinery treated as owned by person entitled to benefit of contract etc

Phasing out of overseas leasing rules

Anti-avoidance: meaning of “finance lease”

Capital allowances: allocation of expenditure to a chargeable period

Contents of Schedule

Commencement

Income and matching expense in different accounting periods

Amount of income and expense

No carry back of the expense

Meaning of “business of leasing plant or machinery”

Provision for the purposes of condition A in paragraph 6

Provision for the purposes of condition B in paragraph 6

Meaning of “associated company”

Meaning of “a qualifying change of ownership” in relation to a company

Qualifying 75% subsidiaries

Consortium relationships

No qualifying change of ownership in the case of certain intra-group reorganisations

Meaning of “company owned by a consortium” etc

Meaning of qualifying 75% or 90% subsidiary etc

The amount of the income: the basic amount

Meaning of “PM” in paragraph 16

Meaning of “TWDV” in paragraph 16

Amount to be nil if basic amount negative

Adjustment to basic amount: qualifying 75% subsidiaries

Adjustment to the basic amount: consortium relationships

Migration

Change in company's interest in business: income treated as received etc

Amount of income and expense

Meaning of “business of leasing plant or machinery”

Meaning of “associated company”

Meaning of “qualifying change” in company's interest in a business

Determining the percentage share in the profits or loss of business

The amount of the income: the basic amount

Amount to be nil if basic amount negative

Adjustment of basic amount

Amount of expense

Income and matching expense in different accounting periods

Amount of income and expense

No carry back of the expense

Amount of the income

Meaning of “profits” etc

Anti-avoidance

38A

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38B

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Relief for expense under paragraph 3 , 23(4A) or 33 otherwise giving rise to carried forward loss

Relationship of Schedule with section 228K of CAA 2001

Definitions for purposes of Schedule

Index of definitions

Consequential amendments

Continuing the effect of orders under section 431A(3) of ICTA

Section 432B apportionment: participating funds

Transfers of business: excess of assets or liabilities

Transfers of business: modification of s. 83(2B) of FA 1989

Surpluses of mutual and former mutual businesses

Receipts to be taken into account

Changes in value of assets brought into account: non-profit companies

Contingent loans

Basic trust concepts

Interests in settlements

Introduction

General

Residence of trustees

Sub-fund settlements

Amendments of other Acts

Enterprise investment scheme

Venture capital trusts

Corporate venturing scheme

Application of this Part of this Schedule

Spreading of adjustment income

Effect of cessation of business

Election to accelerate charge

Liability of personal representatives

Meaning of “business”

Application of provisions to partnerships

Cases where spreading already available

Application of this Part of this Schedule

Spreading of adjustment

Accounting periods of less than twelve months

Effect of other events bringing accounting period to an end

Election to accelerate charge

Meaning of “business” etc

Application of provisions to partnerships

Introduction

General modification

Conditions

Entering Real Estate Investment Trust Regime

Assets, etc

Profits

Capital gains

Leaving Real Estate Investment Trust Regime

Anti-avoidance

Manufactured dividends

Financial statements

Non-UK resident members

Takeovers

Demergers

34

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Introductory

Assessable profits and allowable losses

Allowance of exploration and appraisal expenditure

Interpretation

Date of delivery or appropriation for shipped oil not disposed of in sales at arm's length

“The Board”

Returns by participators

Gas fractionation

Aggregate market value of oil for purposes of section 2(5)

Power to make regulations

Finance (No. 2) Act 1987

The designated fraction for the month

Income and Corporation Taxes Act 1988

Valuation of oil disposed of or appropriated in certain circumstances.

The following is the Schedule to be inserted as Schedule 19C to ICTA—

Trusts for bereaved minors and Age 18-to-25 trusts

Section 71 of IHTA 1984 not to apply to property settled on or after 22nd March 2006

Section 71 of IHTA 1984 to cease to apply to certain settled property from 6th April 2008

Aggregation with person's estate of property in which interest in possession subsists

“Immediate post-death interests” and “transitional serial interests”

Disabled persons' trusts: meaning of “disabled person's interest” and “disabled person”

Commencement

Deemed disposition where omission to exercise a right increases value of another person's estate or of settled property not aggregated with a person's estate

Potentially exempt transfers: provision in consequence of section 71 of IHTA 1984 not applying to property settled on or after 22nd March 2006

Person's “estate” not to include certain interests in possession

Life assurance policies entered into before 22nd March 2006

Tax where interest in possession ends, or is treated as ending, during beneficiary's life

Non-aggregation with deceased person's estate of property in which he had interest in possession if property reverts to settlor or passes to settlor's spouse or civil partner etc

Rate of tax on ending of interest in possession in property settled during settlor's life

Property entering maintenance fund after death of person entitled to interest in possession

“Relevant property” not to include property held on trust for a bereaved child

“Relevant property” to include property held on employee trusts or newspaper trusts if certain interests in possession subsist in the property

Certain interests in possession to which a person becomes entitled on or after 22nd March 2006 not to be “qualifying interests in possession” for purposes of Chapter 3 of Part 3 of IHTA 1984

New meaning of “qualifying interest in possession” not to apply in section 72 of IHTA 1984

No charge under sections 71B, 71E etc where property held on trusts for bereaved child becomes held on trusts for charitable purposes etc

No postponement of commencement date of settlement where property settled on or after 22nd March 2006 unless settlor, or spouse or civil partner, has immediate post-death interest

Protective trusts

Alterations of capital etc of close company where participator holds shares etc in company as trustee of settled property in which an interest in possession subsists

Close company's interest in possession treated as interest of its participators

Distributions within two years of person's death out of property settled by his will

Interpretation of IHTA 1984

Introductory

Dispositions

Secured pension funds

Liability

Delivery of accounts

Payment

Interest

Interpretation

Rates of tax

Transitional

Introduction

Meaning of “pension credit member” etc: person dying before discharge of liability

Unauthorised payments: former members and sponsoring employers etc

“Bridging” pensions

Pension commencement lump sum: scheme pensions under money purchase arrangements

Short service refund lump sum: protected rights etc.

Refund of excess contributions lump sum: excess relief at source

Annuity protection lump sum death benefit: benefits from unsecured pension fund

Benefit crystallisation events: reaching 75 after designation for unsecured pension

Availability of individual's lifetime allowance: previous benefit crystallisation events

Overseas pension schemes: extension of migrant member relief

Abatement

Amendments and transitionals

Transitional provision: uncrystallised rights under paragraph 9 to include separate lump sums

Transitional protection: taking account of death benefits

Transitional protection: right to take benefits before normal pension age

Transitional provisions: minor corrections

Introduction

Transfer of chargeable interest to a partnership

Transfer of chargeable interest from a partnership

Transfer of chargeable interest from a partnership to a partnership

Transfer of partnership interest: restriction of charge to property-investment partnerships

Prevention of double charge where money etc withdrawn from partnership

Commencement

Introduction

Agricultural tenancies variable under statutory provisions

Backdated lease granted to tenant holding over

Disapplication of “single lease” treatment where agreement for lease followed by grant

Disapplication of “new lease” treatment for certain rent increases after fifth year

Abnormal rent increase after fifth year

Commencement

Editorial notes

[^c19091191]: S. 2(3) power fully exercised: 1.10.2006 appointed by {S.I. 2006/2367}, art. 2