Finance Act 2007

(317A) Sections 56B to 56D of the Taxes Management Act 1970 (procedure) shall apply (with any necessary modifications) to applications under this Part as to appeals.

• (8) In section 318(1) (interpretation)—

• (a) after the definition of “corporation tax” insert—

“HMRC” means the Commissioners for Her Majesty's Revenue and Customs;

and

• (b) after the definition of “reference number” insert—

“the Special Commissioners” has the meaning given by section 4 of the Taxes Management Act 1970;

.

• (9) In section 98C of TMA 1970 (notifications under Part 7 of FA 2004)—

• (a) in subsection (2), at the end insert—

, and (e) sections 313A and 313B (duty of promoter to respond to inquiry).

, and

• (b) after that subsection insert—

(2A) Where a failure to comply with a provision mentioned in subsection (2) concerns a proposal or arrangements in respect of which an order has been made under section 306A of the Finance Act 2004 (doubt as to notifiability), the amount specified in subsection (1)(b) above shall be increased to the prescribed sum. (2B) Where a failure to comply with a provision mentioned in subsection (2) concerns a proposal or arrangements in respect of which an order has been made under section 314A of the Finance Act 2004 (order to disclose), the amount specified in subsection (1)(b) above shall be increased to the prescribed sum in relation to days falling after the prescribed period. (2C) In subsection (2A) and (2B)— (a) “the prescribed sum” means a sum prescribed by the Treasury by regulations, and (b) “the prescribed period” means a period beginning with the date of the order under section 314A and prescribed by the Commissioners by regulations. (2D) The making of an order under section 314A of that Act does not of itself mean that, for the purposes of section 118(2) of this Act, a person either did or did not have a reasonable excuse for non-compliance before the order was made. (2E) Where an order is made under section 314A of that Act then for the purposes of section 118(2) of this Act— (a) the person identified in the order as the promoter of the proposal or arrangements cannot, in respect of any time after the end of the period mentioned in subsection (2B), rely on doubt as to notifiability as an excuse for failure to comply with section 308 of that Act, and (b) any delay in compliance with that section after the end of that period is unreasonable unless attributable to something other than doubt as to notifiability. (2F) Regulations under subsection (2C)— (a) may include incidental or transitional provision, (b) shall be made by statutory instrument, (c) in the case of regulations under subsection (2C)(a), shall not be made unless a draft has been laid before and approved by resolution of the House of Commons, and (d) in the case of regulations under subsection (2C)(b), shall be subject to annulment in pursuance of a resolution of the House of Commons.

• (10) The amendments made by this section come into force on the passing of this Act; and—

• (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (b) a power under Part 7 of FA 2004 as amended by this section may be exercised in relation to, or by virtue of, matters arising wholly or partly before the passing of this Act.

Meaning of “recognised stock exchange” etc

109

Schedule 26 contains—

• (a) new definitions of “recognised stock exchange” for the purposes of the Tax Acts and TCGA 1992,

• (b) provision for the valuation for the purposes of TCGA 1992 of certain shares or securities listed on recognised stock exchanges,

• (c) provision for the valuation for the purposes of Chapter 8 of Part 4 of ITTOIA 2005 of strips and securities exchanged for strips, and

• (d) minor and consequential amendments in relation to stock exchanges.

Mergers Directive: regulations

110

• (1) The Treasury may by regulations make provision about—

• (a) the tax consequences of a merger to form an SE or SCE,

• (b) the tax consequences of a merger where—

• (i) each party to the merger is resident in a member State, and

• (ii) the parties are not all resident in the same member State,

• (c) the tax consequences of a transfer between companies of a business or part of a business, where—

• (i) each party to the transfer is resident in a member State, and

• (ii) the parties are not all resident in the same member State,

• (d) the tax consequences of a share exchange to which section 135 of TCGA 1992 (exchange of securities) applies where companies A and B are resident in different member States,

• (e) the residence of an SE or SCE.

• (2) Regulations may, in particular, make provision—

• (a) about the taxation of chargeable gains (including conferring relief from taxation in relation to transfers or mergers which satisfy specified conditions),

• (b) conferring relief from taxation on a distribution of a company which satisfies specified conditions,

• (c) about the treatment of securities issued on a transfer or merger,

• (d) about the treatment of loan relationships,

• (e) about the treatment of derivative contracts,

• (f) about the treatment of intangible fixed assets, and

• (g) about capital allowances.

• (3) Regulations may make provision only if the Treasury think it necessary or expedient for the purposes of complying with the United Kingdom's obligations under the Mergers Directive.

• (4) In this section—

• “the Mergers Directive” means Council Directive 2009/133/EC,

• “SCE” means an SCE formed in accordance with Council Regulation (EC) 1435/2003 on the Statute for a European Cooperative Society, and

• “SE” means an SE formed in accordance with Council Regulation (EC) 2157/2001 on the Statute for a European Company.

• (5) Regulations under this section may—

• (a) amend the Taxes Acts,

• (b) make incidental or consequential amendments of enactments other than the Taxes Acts,

• (c) make provision having retrospective effect,

• (d) make provision generally or only for specified cases or circumstances,

• (e) make different provision for different cases or circumstances,

• (f) make incidental, consequential or transitional provision.

• (6) In this section “the Taxes Acts” has the meaning given by section 118(1) of TMA 1970.

Excise duties: small consignment relief

111

• (1) The Excise Duties (Small Non-Commercial Consignments) Relief Regulations 1986 (S.I. 1986/938) are revoked.

• (2) The revocation made by subsection (1) does not apply in relation to goods consigned before the day on which this Act is passed.

Updating references to Standing Committees

112

• (1) In section 1(4)(b) of the Provisional Collection of Taxes Act 1968 (c. 2) (circumstances in which a resolution affecting income tax etc ceases to have effect), for “Standing Committee” substitute “ Public Bill Committee ”.

• (2) In section 50(2)(a) of FA 1973 (corresponding provision for stamp duty), for “Standing Committee” substitute “ Public Bill Committee ”.

Part 8 — Final provisions

Interpretation

113

• (1) In this Act—

• “BGDA 1981” means the Betting and Gaming Duties Act 1981 (c. 63),

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

• “CEMA 1979” means the Customs and Excise Management Act 1979 (c. 2),

• “CRCA 2005” means the Commissioners for Revenue and Customs Act 2005 (c. 11),

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

• “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 (c. 3),

• “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),

• “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), and

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

• (2) In this Act—

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

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

Repeals

114

Schedule 27 contains repeals.

Short title

115

This Act may be cited as the Finance Act 2007.

SCHEDULE 1

Part 1 — Imposition of duty

1

The sections set out below are to be inserted in Part 2 of BGDA 1981 (gaming duties) before section 26A (which is renumbered 26N).

2

Those sections are—

(26A) (1) For the purposes of remote gaming duty “remote gaming” means gaming in which persons participate by the use of— (a) the internet, (b) telephone, (c) television, (d) radio, or (e) any other kind of electronic or other technology for facilitating communication. (2) For the purposes of remote gaming duty the expressions listed below shall be construed (for the whole of the United Kingdom) in accordance with the Gambling Act 2005.

Expression	Defining provision of Gambling Act 2005
Provision of facilities	Section 5(1) to (3)
Remote gambling equipment	Section 36(4) and (5)
Remote operating licence	Section 67

(3) In relation to remote gaming duty “P” means a person who provides facilities for remote gaming. (4) The Treasury may by order amend the definition of “remote gaming” in subsection (1) (and an order may include incidental, consequential or transitional provision). (26B) A duty of excise to be known as remote gaming duty shall be charged on the provision of facilities for remote gaming if— (a) the facilities are provided in reliance on a remote operating licence, or (b) at least one piece of remote gambling equipment used in the provision of the facilities is situated in the United Kingdom (whether or not the facilities are provided for use wholly or partly in the United Kingdom). (26C) (1) Remote gaming duty is chargeable at the rate of 15% of P's remote gaming profits for an accounting period. (2) P's remote gaming profits for an accounting period are— (a) the amount of P's remote gaming receipts for the period (calculated in accordance with section 26E), minus (b) the amount of P's expenditure for the period on remote gaming winnings (calculated in accordance with section 26F). (26D) (1) The following are accounting periods for the purposes of remote gaming duty— (a) the period of three months beginning with 1st January, (b) the period of three months beginning with 1st April, (c) the period of three months beginning with 1st July, and (d) the period of three months beginning with 1st October. (2) The Commissioners may agree with P for specified periods to be treated as accounting periods, instead of those described in subsection (1), for purposes of remote gaming duty relating to P. (3) The Commissioners may by direction make transitional arrangements for the periods to be treated as accounting periods where— (a) P becomes registered, or ceases to be registered, under section 26J, or (b) an agreement under subsection (2) begins or ends. (26E) (1) The amount of P's remote gaming receipts for an accounting period is the aggregate of— (a) amounts falling due to P in that period in respect of entitlement to use facilities for remote gaming provided by P, and (b) amounts staked, or falling due to be paid, in that period by a user of facilities for remote gaming provided by P, if or in so far as responsibility for paying any amount won by the user falls on P (or a person with whom P is connected or has made arrangements). (2) Amounts in respect of VAT shall be ignored for the purposes of subsection (1). (3) The Treasury may by order provide that where a person who uses facilities (U) relies on an offer which waives payment or permits payment of less than the amount which would have been required to be paid without the offer, U is to be treated for the purposes of this section as having paid that amount. (26F) (1) The amount of P's expenditure on remote gaming winnings for an accounting period is the aggregate of the value of prizes provided by P in that period which have been won (at any time) by persons using facilities for remote gaming provided by P. (2) Prizes provided by P to one user on behalf of another are not to be treated as prizes provided by P. (3) A reference to providing a prize to a user (U) includes a reference to crediting money in respect of gaming winnings by U to an account if U is notified that— (a) the money is being held in the account, and (b) U is entitled to withdraw it on demand. (4) The return of a stake is to be treated as the provision of a prize. (5) Where P participates in arrangements under which a number of persons who provide facilities for remote gaming contribute towards a fund which is wholly used to provide prizes in connection with the use of those facilities (sometimes described as arrangements for “linked progressive jackpot games ”)— (a) the making by P of a contribution which relates to the provision by P of facilities for remote gaming shall be treated as the provision of a prize, and (b) the award of a prize from the fund shall not be treated as the provision of a prize by P. (6) Where P credits the account of a user of facilities provided by P (otherwise than as described in subsection (3)), the credit shall be treated as the provision of a prize; but the Commissioners may direct that this subsection shall not apply in a specified case or class of cases. (7) Subsections (2) to (6) of section 20 shall apply (with any necessary modifications) for the purpose of remote gaming duty as for the purpose of bingo duty. (26G) Where the calculation of P's remote gaming profits for an accounting period produces a negative amount, it may be carried forward in reduction of the profits of one or more later accounting periods. (26H) (1) Remote gaming duty shall not be charged in respect of the provision of facilities for remote gaming if and in so far as— (a) the provision is charged with another gambling tax, or (b) the use of the facilities is charged with another gambling tax. (2) Remote gaming duty shall not be charged in respect of the provision of facilities for remote gaming if and in so far as— (a) the provision would be charged with another gambling tax but for an express exception, or (b) the use of the facilities would be charged with another gambling tax but for an express exception. (3) In this section “gambling tax” means— (a) amusement machine licence duty, (b) bingo duty, (c) gaming duty, (d) general betting duty, (e) lottery duty, and (f) pool betting duty. (4) The Treasury may by order— (a) confer an exemption from remote gaming duty, or (b) remove or vary (whether or not by textual amendment) an exemption under this section. (5) In calculating P's remote gaming profits for an accounting period, no account shall be taken of amounts or prizes if, or in so far as, they relate to the provision of facilities to which an exemption applies under or by virtue of this section. (26I) (1) P is liable for any remote gaming duty charged on P's remote gaming profits for an accounting period. (2) If P is a body corporate, P and P's directors are jointly and severally liable for any remote gaming duty charged on P's remote gaming profits for an accounting period. (3) The Commissioners may make regulations about payment of remote gaming duty; and the regulations may, in particular, make provision about— (a) timing; (b) instalments; (c) methods of payment; (d) when payment is to be treated as made; (e) the process and effect of assessments by the Commissioners of amounts due. (4) Subject to regulations under subsection (3), section 12 of the Finance Act 1994 (assessment) shall apply in relation to liability to pay remote gaming duty. (26J) (1) The Commissioners shall maintain a register of persons who provide facilities for remote gaming in respect of which remote gaming duty may be chargeable. (2) A person may not provide facilities for remote gaming in respect of which remote gaming duty may be chargeable without being registered. (3) The Commissioners may make regulations about registration; in particular, the regulations may include provision (which may include provision conferring a discretion on the Commissioners) about— (a) the procedure for applying for registration; (b) the timing of applications; (c) the information to be provided; (d) notification of changes; (e) de-registration; (f) re-registration after a person ceases to be registered. (4) The regulations may require a registered person to give notice to the Commissioners before applying for a remote operating licence. (5) The regulations may permit the Commissioners to make registration, or continued registration, of a foreign person conditional; and the regulations may, in particular, permit the Commissioners to require— (a) the provision of security for payment of remote gaming duty; (b) the appointment of a United Kingdom representative with responsibility for discharging liability to remote gaming duty. (6) In subsection (5) “foreign person” means a person who— (a) in the case of an individual, is not usually resident in the United Kingdom, (b) in the case of a body corporate, does not have an established place of business in the United Kingdom, and (c) in any other case, does not include an individual who is usually resident in the United Kingdom. (7) The regulations may include provision for the registration of groups of persons; and may provide for the modification of the provisions of this Part about remote gaming duty in their application to groups. (8) The regulations— (a) may make provision which applies generally or only for specified purposes, and (b) may make different provision for different purposes. (26K) (1) The Commissioners may make regulations requiring persons who provide facilities for remote gaming in respect of which remote gaming duty may be chargeable to make returns to the Commissioners in respect of their activities. (2) The regulations may, in particular, make provision about— (a) liability to make a return; (b) timing; (c) form; (d) content; (e) method of making; (f) declarations; (g) authentication; (h) when a return is to be treated as made. (3) The regulations— (a) may make provision which applies generally or only for specified purposes, and (b) may make different provision for different purposes. (26L) (1) Contravention of a provision made by or by virtue of sections 26I to 26K— (a) is conduct to which section 9 of the Finance Act 1994 applies (penalties), and (b) attracts daily penalties under that section. (2) A person who is knowingly concerned in, or in taking steps with a view to, the fraudulent evasion of remote gaming duty commits an offence. (3) A person guilty of an offence under subsection (2) shall be liable on summary conviction to— (a) a penalty of— (i) the statutory maximum, or (ii) if greater, three times the duty which is unpaid or the payment of which is sought to be avoided, (b) imprisonment for a term not exceeding six months, or (c) both. (4) A person guilty of an offence under subsection (2) shall be liable on conviction on indictment to— (a) a penalty of any amount, (b) imprisonment for a term not exceeding seven years, or (c) both. (26M) (1) Sections 14 to 16 of the Finance Act 1994 (review and appeal) shall apply in relation to liability to pay remote gaming duty. (2) Sections 14 to 16 of that Act shall also apply to the decisions listed in subsection (3) below. (3) Those decisions are— (a) a decision to refuse a request for an agreement under section 26D(2), (b) a decision to give a direction under section 26D(3), (c) a decision not to give a direction under section 26D(3), (d) a decision to direct that section 26F(6) shall not apply in a specified case, (e) a decision under regulations by virtue of section 26J(3), and (f) a decision about security by virtue of section 26J(5)(a). (4) A decision of a kind specified in subsection (3) shall be treated as an ancillary matter for the purposes of sections 14 to 16 of the Finance Act 1994.

Part 2 — Consequential amendments

3

In BGDA 1981, before section 26N (non-sterling amounts) (as renumbered by paragraph 1 above) insert the italic cross-heading “ General ”.

4

In section 31 of that Act (protection of officers), after “bingo duty” insert “ , remote gaming duty ”.

5

In section 32 of that Act (subordinate legislation), after subsection (2) insert—

(3) But in the case of an order under section 26H(4) which has the effect of adding to the class of activities in respect of which remote gaming duty is chargeable— (a) subsection (2) above shall not apply, and (b) the order may not be made unless a draft has been laid before and approved by resolution of the House of Commons.

6

In section 33(2) of that Act (no legalising effect), after “bingo duty” insert “ , remote gaming duty ”.

SCHEDULE 2

Introductory

1

Schedule 6 to FA 2000 (climate change levy) is amended as follows.

Reduced-rate supplies

2

In paragraph 4(2)(b) (taxable supplies: introduction), after “paragraph 24” insert “ or 45A ”.

3

In paragraph 5(3) (supplies of electricity), for “or 24” substitute “ , 24 or 45A ”.

4

In paragraph 6(2A) (supplies of gas), after “24” insert “ or 45A ”.

5

• (1) Paragraph 34 (other commodities: deemed supplies) is amended as follows.

• (2) In sub-paragraph (1)(b), for “or 24” substitute “ , 24 or 45A ”.

• (3) After sub-paragraph (3) insert—

(4) A supply that is deemed to be made under paragraph 45A is treated as taking place upon the later determination.

6

In paragraph 39(1)(c) (regulations as to time of supply), for “or 24” substitute “ , 24 or 45A ”.

7

For paragraph 44 substitute—

(44) (1) For the purposes of this Schedule, a taxable supply is a reduced-rate supply if— (a) the taxable commodity is supplied to a facility specified in a certificate given by the Secretary of State to the Commissioners as a facility which is to be taken as being covered by a climate change agreement for a period specified in the certificate, and (b) the supply is made at a time falling in that period. (2) Sub-paragraph (1) has effect subject to paragraph 45. (3) The Commissioners may by regulations make provision for giving effect to sub-paragraph (1). (4) Regulations under this paragraph may, in particular, include provision for determining whether any taxable commodity is supplied to a facility. (5) The provision that may be made by virtue of sub-paragraph (4) includes, in particular, provision for a taxable commodity of any description specified in the regulations to be taken as supplied to a facility only if the commodity is delivered to the facility.

8

• (1) Paragraph 45 (reduced-rate supplies: variation of notices under paragraph 44) is amended as follows.

• (2) Omit sub-paragraphs (2) to (4).

• (3) In sub-paragraph (5)—

• (a) in paragraph (b), for “the variation notice is published” substitute “ the variation certificate is given ”, and

• (b) for the words following that paragraph substitute “ the original certificate has effect as if the facility had never been specified in it ”.

• (4) In sub-paragraph (6)—

• (a) in paragraph (b), for “the variation notice is published” substitute “ the variation certificate is given ”, and

• (b) for the words following that paragraph substitute “ the original certificate has effect as if the last day of the period specified for the facility in the original certificate were the day on which the variation certificate is given ”.

• (5) In sub-paragraph (7), for the words from “the original notice” to the end substitute

the original certificate has effect as if the last day of the period specified for the facility in the original certificate were the later of— (a) the day on which the variation certificate is given, and (b) the day specified in the variation certificate.

• (6) The italic heading before that paragraph accordingly becomes “ Reduced-rate supplies: variation of certificates under paragraph 44 ”.

9

After that paragraph insert—

(45A) (1) This paragraph applies where— (a) a taxable supply has been made to any person (“the recipient”), (b) the supply was made on the basis that it was a reduced-rate supply, and (c) it is later determined that the supply was not a reduced-rate supply. (2) For the purposes of this Schedule— (a) the recipient is deemed to make a taxable supply to itself of the taxable commodity, and (b) the amount payable by way of levy on that deemed supply is 80 per cent. of the amount that would be payable if the supply were not a reduced-rate supply.

10

In paragraph 147 (interpretation), in the definition of “reduced-rate supply”—

• (a) for “44(3)” substitute “ 44(1) ”, and

• (b) for “44(4)” substitute “ 44(2) ”.

Notifications and certificates

11

• (1) Paragraph 11 (exemption: supply not for burning in UK) is amended as follows.

• (2) In sub-paragraph (1)—

• (a) omit “has, before the supply is made, notified the supplier”, and

• (b) omit “that he” (in both places).

• (3) In sub-paragraph (3)—

• (a) omit “has, before the supply is made, notified the supplier that”, and

• (b) omit “he”.

12

• (1) Paragraph 101 (civil penalties: incorrect notifications etc) is amended as follows.

• (2) Omit sub-paragraph (1).

• (3) In sub-paragraph (2)—

• (a) after “paragraphs” insert “ 11, ” and

• (b) after “the certificate is” insert “ (or becomes) ”.

• (4) In sub-paragraph (3)—

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

• (b) omit “notification or”.

• (5) In sub-paragraph (4)—

• (a) for “notification or certificate” substitute “ certificate (or not revoking or varying it) ”,

• (b) for “the person who gave it” substitute “ the person concerned ”, and

• (c) for the words from “there is” to the end substitute “ the person has a reasonable excuse ”.

• (6) In sub-paragraph (5)—

• (a) for “notification or certificate” substitute “ certificate (or not revoking or varying it) ”, and

• (b) for “the giving of the notification or certificate” substitute “ that ”.

• (7) The italic heading before paragraph 101 accordingly becomes “ Civil penalties: incorrect certificates ”.

Commencement

13

• (1) Paragraphs 2 to 10 come into force on such day as the Treasury may by order made by statutory instrument appoint.

• (2) But any power to make regulations under any provision inserted or amended by any of those paragraphs may be exercised at any time after this Act is passed.

• (3) The power to make an order under sub-paragraph (1)—

• (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.

SCHEDULE 3

Part 1 — Amendments of ITEPA 2003

1

ITEPA 2003 is amended as follows.

2

In section 7(5) (meaning of “employment income” etc), for paragraph (a) substitute—

(a) Chapters 7 to 9 of this Part (agency workers, workers under arrangements made by intermediaries, and workers providing services through managed service companies),

.

3

In section 48(2) (workers under arrangements made by intermediaries: scope of Chapter) for “or” at the end of paragraph (a) substitute—

(aa) applies to services provided by a managed service company (within the meaning of Chapter 9 of this Part), or

.

4

After section 61 insert—

(61A) (1) This Chapter has effect with respect to the provision of services by a managed service company. (2) Nothing in this Chapter— (a) affects the operation of Chapter 7 of this Part (agency workers), or (b) applies to payments or transfers to which section 966(3) or (4) of ITA 2007 applies (visiting performers: duty to deduct and account for sums representing income tax). (61B) (1) A company is a “managed service company” if— (a) its business consists wholly or mainly of providing (directly or indirectly) the services of an individual to other persons, (b) payments are made (directly or indirectly) to the individual (or associates of the individual) of an amount equal to the greater part or all of the consideration for the provision of the services, (c) the way in which those payments are made would result in the individual (or associates) receiving payments of an amount (net of tax and national insurance) exceeding that which would be received (net of tax and national insurance) if every payment in respect of the services were employment income of the individual, and (d) a person who carries on a business of promoting or facilitating the use of companies to provide the services of individuals (“an MSC provider”) is involved with the company. (2) An MSC provider is “involved with the company” if the MSC provider or an associate of the MSC provider— (a) benefits financially on an ongoing basis from the provision of the services of the individual, (b) influences or controls the provision of those services, (c) influences or controls the way in which payments to the individual (or associates of the individual) are made, (d) influences or controls the company's finances or any of its activities, or (e) gives or promotes an undertaking to make good any tax loss. (3) A person does not fall within subsection (1)(d) merely by virtue of providing legal or accountancy services in a professional capacity. (4) A person does not fall within subsection (1)(d) merely by virtue of carrying on a business consisting only of placing individuals with persons who wish to obtain their services (including by contracting with companies which provide their services). (5) Subsection (4) does not apply if the person or an associate of the person— (a) does anything within subsection (2)(c) or (e), or (b) does anything within subsection (2)(d) other than influencing the company's finances or activities by doing anything within subsection (2)(b). (61C) (1) The Treasury may by order provide that persons of a prescribed description do not fall within section 61B(1)(d). (2) An order under subsection (1) may be made so as to have effect in relation to the whole of the tax year in which it is made. (3) In section 61B and this section, “company” means a body corporate or partnership. (4) References in section 61B to an associate of a person (“P”) include a person who, for the purpose of securing that the individual's services are provided by a company, acts in concert with P (or with P and other persons). (5) In section 61B(2)(e), “undertaking to make good any tax loss” means an undertaking (in any terms) to make good (in whole or in part, and by any means) any cost to the individual or an associate of the individual resulting from a relevant provision, or a particular kind of relevant provision, applying in relation to payments made to the individual or associate. (6) In subsection (5) “relevant provision” means— (a) a provision of the Tax Acts, (b) an enactment relating to national insurance, or (c) a provision of subordinate legislation made under any such provision or enactment. (61D) (1) This section applies if— (a) the services of an individual (“the worker”) are provided (directly or indirectly) by a managed service company (“the MSC”), (b) the worker, or an associate of the worker, receives (from any person) a payment or benefit which can reasonably be taken to be in respect of the services, and (c) the payment or benefit is not earnings (within Chapter 1 of Part 3) received by the worker directly from the MSC. (2) The MSC is treated as making to the worker, and the worker is treated as receiving, a payment which is to be treated as earnings from an employment (“the deemed employment payment”). (3) The deemed employment payment is treated as made at the time the payment or benefit mentioned in subsection (1)(b) is received. (4) In this Chapter— - “the worker” has the meaning given by subsection (1), - “the relevant services” means the services mentioned in that subsection, and - “the client” means the person to whom the relevant services are provided. (5) Section 61F supplements this section. (61E) (1) The amount of the deemed employment payment is the amount resulting from the following steps— Step 1 Find (applying section 61F) the amount of the payment or benefit mentioned in section 61D(1)(b). Step 2 Deduct (applying Chapters 1 to 5 of Part 5) the amount of any expenses met by the worker that would have been deductible from the taxable earnings from the employment if— (a) the worker had been employed by the client to provide the relevant services, and (b) the expenses had been met by the worker out of those earnings. If the result at this point is nil or a negative amount, there is no deemed employment payment. Step 3 Assume that the result of step 2 represents an amount together with employer's national insurance contributions on it, and deduct what (on that assumption) would be the amount of those contributions. The result is the deemed employment payment. (2) In step 2 of subsection (1), the reference to expenses met by the worker includes, where the MSC is a partnership and the worker is a member of the partnership, expenses met by the worker for and on behalf of the partnership. (3) In step 2 of subsection (1), the expenses deductible include the amount of any mileage allowance relief which the worker would have been entitled to in respect of the use of a vehicle falling within subsection (4) if— (a) the worker had been employed by the client to provide the relevant services, and (b) the vehicle had not been a company vehicle (within the meaning of Chapter 2 of Part 4). (4) A vehicle falls within this subsection if— (a) it is provided by the MSC for the worker, or (b) where the MSC is a partnership and the worker is a member of the partnership, it is provided by the worker for the purposes of the business of the partnership. (5) For the purposes of subsection (1) any necessary apportionment of payments or benefits that are referable partly to the provision of the relevant services and partly to other matters is to be made on a just and reasonable basis. (61F) (1) The following provisions apply for the purposes of sections 61D and 61E. (2) A “payment or benefit” means anything that, if received by an employee for performing the duties of an employment, would be general earnings from the employment. (3) The amount of a payment or benefit is taken to be— (a) in the case of a payment or cash benefit, the amount received, and (b) in the case of a non-cash benefit, the cash equivalent of the benefit. (4) The cash equivalent of a non-cash benefit is taken to be— (a) the amount that would be general earnings if the benefit were general earnings from an employment, or (b) in the case of living accommodation, whichever is the greater of that amount and the cash equivalent determined in accordance with section 398(2). (5) A payment or benefit is treated as received— (a) in the case of a payment or cash benefit, when payment is made of or on account of the payment or benefit; (b) in the case of a non-cash benefit, when it would have been treated as received for the purposes of Chapter 4 or 5 of this Part (see section 19 or 32) if— (i) the worker had been an employee, and (ii) the benefit had been provided by reason of the employment. (61G) (1) The Income Tax Acts (in particular, the PAYE provisions) apply in relation to the deemed employment payment as follows. (2) They apply as if— (a) the worker were employed by the MSC to provide the relevant services, and (b) the deemed employment payment were a payment by the MSC of earnings from that employment; but this is subject to subsection (3). (3) No deduction under Part 5 (deductions allowed from employment income) or section 232 (mileage allowance relief) may be made from the deemed employment payment. (4) The worker is not chargeable to tax in respect of the deemed employment payment if, or to the extent that, by reason of any combination of the factors mentioned in subsection (5), the worker would not be chargeable to tax if— (a) the worker were employed by the client to perform the relevant services, and (b) the deemed employment payment were a payment by the client of earnings from that employment. (5) The factors are— (a) the worker being resident, ordinarily resident or domiciled outside the United Kingdom, (b) the client being resident or ordinarily resident outside the United Kingdom, and (c) the relevant services being provided outside the United Kingdom. (6) Where the MSC is a partnership and the worker is a member of the partnership, the deemed employment payment is treated as received by the worker in the worker's personal capacity and not as income of the partnership. (7) Where— (a) the worker is resident in the United Kingdom, and (b) the relevant services are provided in the United Kingdom, the MSC is treated as having a place of business in the United Kingdom, whether or not it in fact does so. (61H) (1) A claim for relief may be made under this section where the MSC— (a) is a body corporate, (b) is treated as making a deemed employment payment in any tax year, and (c) either in that tax year (whether before or after that payment is treated as made), or in a subsequent tax year, makes a distribution (a “relevant distribution”). (2) A claim for relief under this section must be made— (a) by the MSC by notice to an officer of Revenue and Customs, and (b) within 5 years after 31st January following the tax year in which the distribution is made. (3) If on a claim being made an officer of Revenue and Customs is satisfied that relief should be given in order to avoid a double charge to tax, the officer must direct the giving of such relief by way of amending any assessment, by discharge or repayment of tax, or otherwise, as appears to the officer appropriate. (4) Relief under this section is given by setting the amount of the deemed employment payment against the relevant distribution so as to reduce the distribution. (5) In the case of more than one relevant distribution, an officer of Revenue and Customs must exercise the power conferred by this section so as to secure that so far as practicable relief is given by setting the amount of a deemed employment payment— (a) against relevant distributions of the same tax year before those of other years, (b) against relevant distributions received by the worker before those received by another person, and (c) against relevant distributions of earlier years before those of later years. (6) Where the amount of a relevant distribution is reduced under this section, the amount of any associated tax credit is reduced accordingly. (61I) (1) Subsections (2) to (4) apply for the purposes of this Chapter. (2) “Associate”, in relation to an individual, means— (a) a member of the individual's family or household, (b) a relative of the individual, (c) a partner of the individual, or (d) the trustee of any settlement in relation to which the individual, or a relative of the individual or member of the individual's family (living or dead), is or was a settlor. (3) “Associate”, in relation to a company, means a person connected with the company. (4) “Associate”, in relation to a partnership, means any associate of a member of the partnership. (5) If— (a) a managed service company (“the MSC”) is a partnership, and (b) a person is an associate of another person by virtue only of being a member of the partnership, the person is to be treated, for the purposes of this Chapter as it applies in relation to the MSC, as if the person were not an associate of that other person. (6) In subsection (2), “relative” means ancestor, lineal descendant, brother or sister. (7) For the purposes of subsection (2)— (a) a man and woman living together as husband and wife are treated as if they were married to each other, and (b) two persons of the same sex living together as if they were civil partners of each other are treated as if they were civil partners of each other. (61J) (1) In this Chapter— - “associate” has the meaning given by section 61I, - “business” means any trade, profession or vocation, - “the client” has the meaning given by section 61D(4), - “employer's national insurance contributions” means secondary Class 1 or Class 1A national insurance contributions, - “managed service company” has the meaning given by section 61B, - “national insurance contributions” means contributions under Part 1 of SSCBA 1992 or Part 1 of SSCB(NI)A 1992, - “PAYE provisions” means the provisions of Part 11 or PAYE regulations, - “the relevant services” has the meaning given by section 61D(4), and - “the worker” has the meaning given by section 61D(4). (2) Nothing in section 995 of ITA 2007 (meaning of control) applies for the purposes of this Chapter.

5

In section 218(1) (exclusion of lower-paid employments from parts of benefits code: calculation of earnings rate), in Step 1, at the end of paragraph (d) insert

and (e) in the case of an employment within section 61G(2) (deemed employment payment by managed service company), the total amount of deemed employment payments for the year.

6

After section 688 insert—

(688A) (1) PAYE regulations may make provision authorising the recovery from a person within subsection (2) of any amount that an officer of Revenue and Customs considers should have been deducted by a managed service company (“the MSC”) from a payment of, or on account of, PAYE income of an individual. (2) The persons are— (a) a director or other office-holder, or an associate, of the MSC, (b) an MSC provider, (c) a person who (directly or indirectly) has encouraged or been actively involved in the provision by the MSC of the services of the individual, and (d) a director or other office-holder, or an associate, of a person (other than an individual) who is within paragraph (b) or (c). (3) A person does not fall within subsection (2)(c) merely by virtue of— (a) providing legal or accountancy advice in a professional capacity, or (b) placing the individual with persons who wish to obtain the services of the individual (including by contracting with the MSC for the provision of those services). (4) The supplementary provision that may be made by the regulations includes provision as to the liability of one person within subsection (2) to another such person. (5) In this section— - “associate” has the meaning given by section 61I, - “director” has the meaning given by section 67, - “managed service company” has the meaning given by section 61B, and - “MSC provider” means an MSC provider who is involved with the MSC (within the meaning of section 61B). (6) Section 61C(4) (extended meaning of “associate”) applies for the purposes of subsection (2)(d). (7) The Treasury may by order amend this section (but not this subsection or subsection (8)). (8) The Treasury must not make an order under subsection (7) unless a draft of it has been laid before and approved by a resolution of the House of Commons.

7

In section 717(4) (orders and regulations not subject to negative procedure), insert at the end “ or section 688A(7) (PAYE regulations: managed service companies) ”.

8

In Part 2 of Schedule 1 (index of defined expressions), insert at the appropriate places—

associate (in Chapter 9 of Part 2)	section 61I (but see section 61C(4))
business (in Chapter 9 of Part 2)	section 61J
---	---
the client (in Chapter 9 of Part 2)	section 61D(4)
---	---
employer's national insurance contributions (in Chapter 9 of Part 2)	section 61J
---	---
managed service company (in Chapter 9 of Part 2)	section 61B
---	---
national insurance contributions (in Chapter 9 of Part 2)	section 61J
---	---
PAYE provisions (in Chapter 9 of Part 2)	section 61J
---	---
the relevant services (in Chapter 9 of Part 2)	section 61D(4)
---	---
the worker (in Chapter 9 of Part 2)	section 61D(4)
---	---

.

Part 2 — Calculation of profits of MSCs: deduction for deemed employment payments

Deduction for deemed employment payments for income tax purposes

9

In ITTOIA 2005, after section 164 insert—

(164A) (1) This section applies for the purpose of calculating the profits of a trade, profession or vocation carried on by a managed service company (“the MSC”) which is treated as making a deemed employment payment in connection with the trade, profession or vocation. (2) A deduction is allowed for— (a) the amount of the deemed employment payment, and (b) the amount of any employer's national insurance contributions paid by the MSC in respect of it. (3) The deduction is allowed for the period of account in which the deemed employment payment is treated as made. (4) The amount of the deduction allowed under subsection (2) is limited to the amount that reduces the profits of the firm for the tax year to nil. (5) No deduction in respect of— (a) the deemed employment payment, or (b) any employer's national insurance contributions paid by the MSC in respect of it, may be made except in accordance with this section. (6) In this section “deemed employment payment”, “employer's national insurance contributions” and “managed service company” have the same meaning as in Chapter 9 of Part 2 of ITEPA 2003.

Deduction for deemed employment payments for corporation tax purposes

10

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

SCHEDULE 4

Limit on amount of sideways relief and capital gains relief available in any tax year

1

• (1) In ITA 2007, before section 104 (and the italic cross-heading before it) insert—

(103C) (1) This section applies if an individual carries on one or more trades— (a) as a non-active partner in a firm during a tax year, or (b) as a limited partner in a firm at a time in that tax year, and the individual makes a loss in any of those trades (an “affected loss”) in that tax year. (2) There is a restriction on the amount of sideways relief and capital gains relief which (after applying the restrictions under the other provisions of this Chapter) may be given to the individual for any affected loss (but see subsections (6) and (7)). (3) The restriction is that the total amount of the sideways relief and capital gains relief given to the individual for all the affected losses must not exceed the cap for that tax year. (4) The cap for any tax year is £25,000. (5) The Treasury may by order amend the sum for the time being specified in subsection (4). (6) The restriction under this section does not apply to so much of any affected loss as derives from qualifying film expenditure (see section 103D). (7) The restriction under this section does not affect the giving of sideways relief for a loss made in a trade against the profits of that trade. (8) In this section “trade” does not include a trade which consists of the underwriting business of a member of Lloyd's (within the meaning of section 184 of FA 1993).

• (2) The amendment made by sub-paragraph (1) has effect in relation to any loss made by an individual in a trade in the tax year 2007-08 or any subsequent tax year.

• (3) But, in the case of a loss made by an individual in a trade in a tax year the basis period for which begins before 2nd March 2007 (a “straddling basis period”), the amount of that loss for the purposes of section 103C of ITA 2007 is—

• (a) the amount of sideways relief and capital gains relief which (after applying the restrictions under the other provisions of Chapter 3 of Part 4 of that Act) may be given to the individual for that loss, less

• (b) the amount (if any) of the pre-announcement loss.

• (4) “The pre-announcement loss” is determined as follows.

• (5) Calculate the profits or losses of the straddling basis period, but without regard to capital allowances and qualifying film expenditure (within the meaning of section 103D of ITA 2007).

• (6) If that calculation produces a loss and the individual has made a contribution of an amount as capital to the firm or LLP in question—

• (a) on or before the start of the straddling basis period, or

• (b) after the start of that period but before 2nd March 2007,

apportion the loss produced by that calculation to the part of the straddling basis period which begins with the relevant date and falls before 2nd March 2007 in proportion to the number of days in that part.

• (7) Calculate so much of the loss of the straddling basis period as derives from relevant pre-announcement capital expenditure.

• (8) The pre-announcement loss is the sum of—

• (a) the amount of the loss apportioned under sub-paragraph (6) (if any), and

• (b) so much of the loss of the straddling basis period (if any) as derives from relevant pre-announcement capital expenditure.

• (9) In sub-paragraph (6) “the relevant date” means—

• (a) in any case where a contribution was made on or before the start of the straddling basis period, the start of that period, and

• (b) in any other case, the date on which the contribution was made or, if more than one contribution was made, the date on which the first contribution was made.

• (10) For the purposes of this paragraph the amount of the loss of the straddling basis period that derives from relevant pre-announcement capital expenditure is determined on a just and reasonable basis.

• (11) In this paragraph “relevant pre-announcement capital expenditure” means—

• (a) any capital allowance in respect of expenditure paid before 2nd March 2007, and

• (b) any capital allowance in respect of expenditure paid on or after that date pursuant to an unconditional obligation in a contract made before that date,

and for this purpose “an unconditional obligation” means an obligation which may not be varied or extinguished by the exercise of any right conferred on the firm or LLP in question (whether or not under the contract).

• (12) For the purposes of this paragraph—

• (a) an amount of money is not to be taken as contributed as capital to a firm or LLP until the money is paid to the firm or LLP, and

• (b) a right or other asset is not to be taken as contributed as capital to a firm or LLP until it is transferred to the firm or LLP.

• (13) Section 62 of ITA 2007 (partners: losses of a tax year etc) applies for the purposes of this paragraph as it applies for the purposes of Chapter 3 of Part 4 of that Act.

Disregard of contributions made for purpose of accessing sideways relief and capital gains relief

2

• (1) In ITA 2007, before section 114 insert—

(113A) (1) An amount which an individual contributes to a firm as capital is to be excluded in calculating the individual's contribution to the firm for the purposes of section 104 or 110 if the contribution was made for a prohibited purpose (but see subsection (4)). (2) If— (a) an individual carries on a trade as a member of an LLP at a time in a tax year, (b) the individual does not devote a significant amount of time to the trade in the relevant period for that year, and (c) the individual contributes an amount to the LLP as capital at any time in that year, that amount is to be excluded in calculating the individual's contribution to the LLP for the purposes of section 107 if the contribution was made for a prohibited purpose (but see subsection (4)). (3) For the purposes of this section a contribution is made for a prohibited purpose if the main purpose, or one of the main purposes, of making the contribution is the obtaining of a reduction in tax liability by means of sideways relief or capital gains relief. (4) This section has no effect in relation to the application of any restriction under section 104, 107 or 110 to any loss that derives wholly from qualifying film expenditure.

• (2) The amendment made by sub-paragraph (1) has effect in relation to any amount contributed to a firm or LLP as capital on or after 2nd March 2007 (but see sub-paragraph (4)).

• (3) For this purpose—

• (a) an amount of money is not to be taken as contributed as capital to a firm or LLP until the money is paid to the firm or LLP, and

• (b) a right or other asset is not to be taken as contributed as capital to a firm or LLP until it is transferred to the firm or LLP.

• (4) The amendment made by sub-paragraph (1) has no effect in relation to any amount contributed by an individual on or after 2nd March 2007 if—

• (a) the amount is contributed pursuant to an obligation in a contract made before that date, and

• (b) the obligation may not be varied or extinguished by the exercise of any right conferred on the individual (whether or not under the contract).

Provision corresponding to paragraphs 1 and 2 for tax year 2006-07

3

• (1) ICTA has effect, in relation to any loss made by an individual in a trade in the tax year 2006-07 the basis period for which ends on or after 2nd March 2007, as if provision corresponding to section 103C of ITA 2007 were included in Chapter 7 of Part 4 of ICTA.

• (2) Sub-paragraphs (3) to (13) of paragraph 1 apply for the purposes of sub-paragraph (1) above.

• (3) ICTA has effect for the tax year 2006-07 as if provision corresponding to section 113A of ITA 2007 were included in that Chapter.

• (4) Sub-paragraphs (2) to (4) of paragraph 2 apply for the purposes of sub-paragraph (3) above.

• (5) The provisions which are treated by this paragraph as included in Chapter 7 of Part 4 of ICTA have effect as if—

• (a) any reference in section 103C of ITA 2007 to sideways relief were to relief under section 380 or 381 of ICTA,

• (b) any reference in section 103C of ITA 2007 to capital gains relief in relation to a loss were to the treatment of the loss as an allowable loss by virtue of section 72 of FA 1991,

• (c) any reference in section 103C or 113A of ITA 2007 to any provision of Chapter 3 of Part 4 of ITA 2007 were to the corresponding provision of Chapter 7 of Part 4 of ICTA, and

• (d) any reference in section 113A of ITA 2007 to a contribution to a firm or an LLP were to a contribution to a trade carried on by the firm or LLP,

and references in paragraphs 1(3) to (13) and 2(2) to (4) to any of those expressions are to be read accordingly.

Consequential amendments

4

ITA 2007 is amended as follows.

5

In section 32 (liability not dealt with in the calculation), for “section 112(5)” substitute “ section 103B(5) ”.

6

In section 82(a) (exploitation of films), for “sections 115 and 116” substitute “ section 115 ”.

7

• (1) Section 102 (overview of Chapter 3 of Part 4) is amended as follows.

• (2) In subsection (1)—

• (a) in paragraph (a), for “104 to 106 and section 114)” substitute “ 103A, 103C to 105, 113A and 114) ”,

• (b) in paragraph (b), for “107 to 109 and section 114)” substitute “ 103C, 103D, 107 to 109, 113A and 114) ”, and

• (c) in paragraph (c), for “in an early tax year (see sections 110 to 114)” substitute “ (see sections 103B to 103D and 110 to 114) ”.

• (3) In subsection (2), for “sections 115 and 116” substitute “ section 115 ”.

8

After section 103 insert—

(103A) (1) In this Chapter “limited partner” means an individual who carries on a trade— (a) as a limited partner in a limited partnership registered under the Limited Partnerships Act 1907, (b) as a partner in a firm who in substance acts as a limited partner in relation to the trade (see subsection (2)), or (c) while the condition mentioned in subsection (3) is met in relation to the individual. (2) An individual in substance acts as a limited partner in relation to a trade if the individual— (a) is not entitled to take part in the management of the trade, and (b) is entitled to have any liabilities (or those beyond a certain limit) for debts or obligations incurred for the purposes of the trade met or reimbursed by some other person. (3) The condition referred to in subsection (1)(c) is that— (a) the individual carries on the trade jointly with other persons, (b) under the law of a territory outside the United Kingdom, the individual is not entitled to take part in the management of the trade, and (c) under that law, the individual is not liable beyond a certain limit for debts or obligations incurred for the purposes of the trade. (4) In the case of an individual who is a limited partner as a result of subsection (1)(c), references in this Chapter to the individual's firm are to be read as references to the relationship between the individual and the other persons mentioned in subsection (3)(a). (103B) (1) For the purposes of this Chapter an individual carries on a trade as a non-active partner during a tax year if the individual— (a) carries on the trade as a partner in a firm at a time during the year, (b) does not carry on the trade as a limited partner at any time during the year, and (c) does not devote a significant amount of time to the trade in the relevant period for the year. (2) For the purposes of this Chapter an individual devotes a significant amount of time to a trade in the relevant period for a tax year if, in that period, the individual spends an average of at least 10 hours a week personally engaged in activities carried on for the purposes of the trade. (3) For this purpose “the relevant period” means the basis period for the tax year (unless the basis period is shorter than 6 months). (4) If the basis period for the tax year is shorter than 6 months, “the relevant period” means— (a) the period of 6 months beginning with the date on which the individual first started to carry on the trade (if the basis period begins with that date), or (b) the period of 6 months ending with the date on which the individual permanently ceased to carry on the trade (if the basis period ends with that date). (5) If— (a) any relief is given on the assumption that the individual devoted or will devote a significant amount of time to the trade in the relevant period for a tax year, but (b) the individual in fact failed or fails to do so, the relief is withdrawn by the making of an assessment to income tax under this section.

9

After section 103C (as inserted by paragraph 1(1) above) insert—

(103D) (1) For the purposes of this Chapter expenditure is qualifying film expenditure if— (a) it is deducted under a relevant film provision for the purposes of the calculation required by section 849 of ITTOIA 2005 (calculation of firm's profits or losses), or (b) it is incidental expenditure which (although not deducted under a relevant film provision) is incurred in connection with the production of a film, or the acquisition of the original master version of a film, in relation to which expenditure is so deducted. (2) Expenditure is incidental if it is on management, administration or obtaining finance. (3) The extent to which expenditure is within subsection (1)(b) is determined on a just and reasonable basis. (4) For the purposes of this Chapter the amount of any loss that derives from qualifying film expenditure is determined on a just and reasonable basis. (5) In this section— - “the acquisition of the original master version of a film” has the same meaning as in Chapter 9 of Part 2 of ITTOIA 2005 (see sections 130 and 132 of that Act), - “film” is to be read in accordance with paragraph 1 of Schedule 1 to the Films Act 1985, and - “a relevant film provision” means any one of sections 137 to 140 of ITTOIA 2005 (relief for certified master versions of films).

10

In—

• (a) section 104(5) (restriction on reliefs for limited partners),

• (b) section 107(2) (restriction on reliefs for members of LLPs),

• (c) section 110(1)(a) (restriction on reliefs for non-active partners in early tax years), and

• (d) section 115(1)(d) (restrictions on relief for firms exploiting films),

omit “(see section 112)”.

11

In—

• (a) section 105(11) (meaning of “contribution to the firm” for purposes of section 104),

• (b) section 108(9) (meaning of “contribution to the LLP” for purposes of section 107), and

• (c) section 111(12) (meaning of “contribution to the firm” for purposes of section 110),

for the words from “any regulations” to “excluded” substitute “ section 113A and any regulations made under section 114 (exclusion of amounts ”.

12

Omit section 106 (meaning of “limited partner”).

13

In section 112 (meaning of “non-active partner” and “early tax year” etc)—

• (a) omit subsections (1) to (5), and

• (b) the heading accordingly becomes “ Meaning of “early tax year” ”.

14

Omit the italic-cross heading before section 114 (regulations: exclusion of amounts in calculating contribution to the firm or LLP) and for the heading of that section substitute “ Power to exclude other amounts ”.

15

In section 115 (restrictions on reliefs for firms exploiting films), for subsection (4) substitute—

(4) The restrictions under this section do not apply to so much of the loss (if any) as derives from qualifying film expenditure.

16

Omit section 116 (exclusion from restrictions under section 115: certain film expenditure).

17

In section 792 (partners claiming excess sideways or capital gains relief)—

• (a) in subsection (7), for “106” substitute “ 103A ”, and

• (b) in subsection (8), for “106(3)(a)” substitute “ 103A(3)(a) ”.

18

In section 809 (individuals in partnership claiming relief for licence-related trading losses: other definitions)—

• (a) in subsection (1), for “112” substitute “ 103B ”, and

• (b) in subsection (2), for “112(1)(b)” substitute “ 103B(1)(b) ”.

19

In paragraph 148(3)(b) of Schedule 2 (transitionals and savings: tax avoidance)—

• (a) for “106” substitute “ 103A ”, and

• (b) for “112” substitute “ 103B ”.

20

In Schedule 4 (index of defined expressions)—

• (a) in the definition of “limited partner”, for “106” substitute “ 103A ”,

• (b) in the definition of “non-active partner”, for “112” substitute “ 103B ”, and

• (c) after the definition of “qualifying donation (in Chapter 2 of Part 8)” insert—

qualifying film expenditure (in Chapter 3 of Part 4)	section 103D

.

21

The amendments made by paragraphs 5 to 20 are deemed always to have had effect.

SCHEDULE 5

Amounts not forming part of a company’s income

1

• (1) ICTA is amended as follows.

• (2) In section 347A(1) (annual payments: general rule), as it had effect before ITA 2007, omit paragraph (b) together with the “and” before it (payment to which section applies not income of any company for corporation tax purposes).

• (3) The amendment made by sub-paragraph (2) has effect in relation to payments made on or after 6th December 2006 but before 6th April 2007.

• (4) Omit section 347A (as amended by ITA 2007).

• (5) The amendment made by sub-paragraph (4) has effect in relation to payments made on or after 6th April 2007.

2

• (1) In section 660C of ICTA, omit subsection (4) (income which is income of settlor alone for income tax purposes by virtue of section 624 or 629 of ITTOIA 2005 not income of any company for corporation tax purposes).

• (2) The amendment made by sub-paragraph (1) has effect in relation to accounting periods ending on or after 6th March 2007.

• (3) But income which arises in an accounting period beginning before that date is to be chargeable to corporation tax as a result of that amendment only if it arises on or after that date.

Structured finance arrangements

3

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

4

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

5

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

6

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

7

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

8

• (1) Section 263E of TCGA 1992 (structured finance arrangements) is amended as follows.

• (2) In subsection (2) (condition A: person making disposal of asset subsequently acquires it), for the words from “subsequently” to the end substitute “ (and no-one else) has the right or obligation under the arrangement to acquire the asset disposed of by that disposal at any subsequent time (whether or not the right or obligation is subject to any conditions). ”

• (3) In subsection (3) (condition B: asset ceases to exist)—

• (a) in paragraph (a), for “subsequently ceases” substitute “ will subsequently cease ”, and

• (b) in paragraph (b), for “that asset was held” substitute “ it is intended that that asset will be held ”.

• (4) After subsection (4) insert—

(4A) If, at any time after that disposal, it becomes apparent that— (a) the person making the disposal will not subsequently acquire under the arrangement the asset disposed of by that disposal, or (b) that asset will not be held as mentioned in subsection (3)(b), that person is to be treated for the purposes of this Act as disposing of that asset at that time for a consideration equal to its market value at that time.

• (5) In subsection (5) (disregard of subsequent acquisitions), for “Any” substitute “ Except in a case falling within subsection (4A), any ”.

• (6) The amendments made by this paragraph have effect in relation to disposals made on or after 6th March 2007.

• (7) The amendments made by this paragraph also have 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.

Manufactured payments under arrangements having an unallowable purpose

9

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

Options and groups of companies

10

• (1) In section 171(2) of TCGA 1992 (exceptions to rule that disposals within the same group of companies produce neither a gain nor a loss), after paragraph (da) insert

or (db) a disposal by company A in fulfilment of its obligations under an option granted to company B at a time when those companies were not members of the same group;

.

• (2) The amendment made by sub-paragraph (1) has effect in relation to cases where the option is exercised on or after 6th March 2007 (whenever the option was granted).

Loan relationships: amounts not fully recognised for accounting purposes

11

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

Shares treated as loan relationships

12

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

13

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

14

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

Exchange gains and losses where loan not on arm’s length terms

15

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

Loan relationships and collective investment schemes

16

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

Plant or machinery subject to a lease and finance leaseback

17

• (1) Chapter 17 of Part 2 of CAA 2001 (plant and machinery allowances: anti-avoidance) is amended as follows.

• (2) In section 228A(2) (application of sections 228B to 228D in case of a lease and finance leaseback), for “Sections 228B to 228D” substitute “ Sections 228B and 228C ”.

• (3) In section 228F (lease and finance leaseback)—

• (a) in subsection (1), for “Sections 228B, 228C and 228D” substitute “ Sections 228B and 228C ”,

• (b) omit subsection (4), and

• (c) in subsection (8), for “sections 228B to 228D” substitute “ sections 228B and 228C ” and omit paragraph (b) (together with the “and” before it).

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

• (5) The amendments made by this paragraph have effect in relation to post-commencement rentals that fall to be taken into account in calculating for tax purposes the income or profits for any post-commencement period of account.

• (6) In this paragraph—

• “post-commencement period of account” means any period of account ending on or after 6th December 2006, and