Legalize / United Kingdom / Public General Act

Finance Act 2008

Type Public General Act

Publication 2008-07-21

Last updated 2025-05-01

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

Reform history JSON API

Part 1 — Charges, rates, allowances, reliefs etc

Income tax

Charge and main rates for 2008-09

1

(1) Income tax is charged for the tax year 2008-09.

(2) For that tax year—

(a) the basic rate is 20%, and

(b) the higher rate is 40%.

Personal allowance for those aged under 65

2

(1) For the tax year 2008-09 the amount specified in—

(a) section 35 of ITA 2007, ...

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(personal allowance for those aged under 65) is replaced with “ £6,035 ”.

(2) Accordingly—

(a) section 57 of ITA 2007, so far as relating to the amount specified in section 35 of that Act, ...

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(indexation) do not apply for the tax year 2008-09.

(3) This section does not require a change to be made in the amounts deductible or repayable under PAYE regulations before 7 September 2008.

Tax credits for certain foreign distributions

3

(1) For the tax year 2008-09—

(a) the amount specified in section 36(1) of ITA 2007 ... (personal allowance for those aged 65 to 74) is replaced with “ £9,030 ”, and

(b) the amount specified in section 37(1) of ITA 2007 ... (personal allowance for those aged 75 and over) is replaced with “ £9,180 ”.

(2) Accordingly—

(a) section 57 of ITA 2007, so far as relating to the amounts specified in sections 36(1) and 37(1) of that Act, ...

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(indexation) do not apply for the tax year 2008-09.

Gas refuelling stations

4

(1) In section 10 of ITA 2007 (income charged at main rates: individuals), for subsection (5) substitute—

(5) The basic rate limit is £34,800.

(2) The amendment made by subsection (1) has effect for the tax year 2008-09 and subsequent tax years.

(3) But until 7 September 2008 for the purpose of ascertaining the amounts deductible or repayable under PAYE regulations it may be assumed that the figure specified in section 10(5) of ITA 2007 for the tax year 2008-09 is £36,000.

Existing long-life asset expenditure treated as special rate expenditure

5

(1) Section 6 of ITA 2007 (rates at which income tax is charged) is amended as follows.

(2) In subsection (1), omit paragraph (a).

(3) In subsection (2), omit “starting rate,”.

(4) In subsection (3), for paragraph (a) substitute—

(a) section 7 (starting rate for savings),

(5) Accordingly, in the heading omit “starting rate,”.

(6) The amendments made by this section have effect for the tax year 2008-09 and subsequent tax years.

(7) Schedule 1 contains provision in connection with—

(a) the abolition of the starting rate and the savings rate, and

(b) the creation of the starting rate for savings.

Corporation tax

Correction and amendment of tax returns

6

(1) Corporation tax is charged for the financial year 2009.

(2) For that year the rate of corporation tax is—

(a) 28% on profits of companies other than ring fence profits, and

(b) 30% on ring fence profits of companies.

(3) In subsection (2) “ring fence profits” has the meaning given by section 276 of CTA 2010.

Small companies' rates and fractions for financial year 2008 etc

7

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Capital gains tax

EU emissions trading: criminal offences

8

(1) In TCGA 1992, for section 4 substitute—

(4) The rate of capital gains tax is 18%.

(2) Schedule 2 contains further provision for and in connection with the reform of capital gains tax.

(3) The amendment made by subsection (1) has effect for the tax year 2008-09 and subsequent tax years.

Power of Treasury to make payments

9

Schedule 3 contains provision for and in connection with entrepreneurs' relief.

Inheritance tax

Aviation duty

10

Schedule 4 contains provisions about the transfer of unused nil-rate band between spouses and civil partners for the purposes of the charge to inheritance tax etc.

Alcohol and tobacco

Interpretation

11

(1) ALDA 1979 is amended as follows.

(2) In section 5 (rate of duty on spirits), for “£19.56” substitute “ £21.35 ”.

(3) In section 36(1AA)(a) (standard rate of duty on beer), for “£13.71” substitute “ £14.96 ”.

(4) In section 62(1A) (rates of duty on cider)—

(a) in paragraph (a) (rate of duty per hectolitre in the case of sparkling cider of a strength exceeding 5.5 per cent), for “£172.33” substitute “ £188.10 ”,

(b) in paragraph (b) (rate of duty per hectolitre in the case of cider of a strength exceeding 7.5 per cent which is not sparkling cider), for “£39.73” substitute “ £43.37 ”, and

(5) For the table in Schedule 1 substitute—

Description of wine or made-wine	Rates of duty per hectolitre
	£
Wine or made-wine of a strength not exceeding 4 per cent	59.87
Wine or made-wine of a strength exceeding 4 per cent but not exceeding 5.5 per cent	82.32
Wine or made-wine of a strength exceeding 5.5 per cent but not exceeding 15 per cent and not being sparkling	194.28
Sparkling wine or sparkling made-wine of a strength exceeding 5.5 per cent but less than 8.5 per cent	188.10
Sparkling wine or sparkling made-wine of a strength of 8.5 per cent or of a strength exceeding 8.5 per cent but not exceeding 15 per cent	248.85
Wine or made-wine of a strength exceeding 15 per cent but not exceeding 22 per cent	259.02
Description of wine or made-wine	Rates of duty per litre of alcohol in the wine or made-wine
---	---
	£
Wine or made-wine of a strength exceeding 22 per cent	21.35

(6) The amendments made by this section are treated as having come into force on 17 March 2008.

Rates of tobacco products duty

12

(1) For the table in Schedule 1 to TPDA 1979 substitute—

1. Cigarettes	An amount equal to 22 per cent of the retail price plus £112.07 per thousand cigarettes
2. Cigars	£163.22 per kilogram
3. Hand-rolling tobacco	£117.32 per kilogram
4. Other smoking tobacco and chewing tobacco	£71.76 per kilogram

(2) The amendment made by subsection (1) is treated as having come into force at 6pm on 12 March 2008.

Fuel duties

Rates and rebates: simplification

13

(1) HODA 1979 is amended as follows.

(2) In section 1 (hydrocarbon oil), omit—

(a) subsections (3A) and (3B),

(b) in subsection (3C), “; and petrol is “leaded petrol” if it is not unleaded petrol”, and

(3) In section 6 (hydrocarbon oil: rates of duty), for subsection (1A) substitute—

(1A) The rates are— (a) £0.5035 a litre in the case of unleaded petrol, (b) £0.6007 a litre in the case of light oil other than unleaded petrol, and (c) £0.5035 a litre in the case of heavy oil.

(4) In section 6AB(5) (duty on bioblend), omit the words from “of the description” to the end.

(5) In section 11(1) (rebate on heavy oil), omit—

(a) in paragraph (b), “which is not ultra low sulphur diesel”, and

(b) paragraph (ba).

(6) In section 13AA(6) (restrictions on use of rebated kerosene), omit “which is not ultra low sulphur diesel or sulphur-free diesel”.

(7) Omit section 13A (rebate on unleaded petrol).

(8) In section 20AAA(4)(a) (mixing of rebated oil), for “section 6(1A)(d)” substitute “ section 6A(1A)(c) ”.

(9) In section 27(1) (interpretation)—

(a) in the definition of “rebate”, omit “13A,”,

(b) omit the definitions of “sulphur-free diesel”, “sulphur-free petrol”, “ultra low sulphur diesel” and “ultra low sulphur petrol”, and

(10) In Article 21(7) of the Renewable Transport Fuel Obligations Order 2007 (S.I.2007/3072), for “sulphur-free petrol” substitute “ unleaded petrol ”.

(11) In consequence of this section, omit—

(a) in FA 1987, section 1(2) and (3),

(b) in FA 1997, section 7(5)(a) and (b) and (8)(b),

(d) in FA 2001, section 2(1), and

(e) in FA 2004, section 7(2), (5) to (7) and (8)(a).

(12) The amendments made by this section are treated as having come into force on 1 April 2008.

Biodiesel and bioblend

14

Schedule 5 contains provision about biodiesel and bioblend.

Rates and rebates: increase from 1 October 2008

15

(1) HODA 1979 is amended as follows.

(2) In section 6(1A) (main rates)—

(a) in paragraph (a) (unleaded petrol), for “£0.5035” substitute “ £0.5235 ”,

(b) in paragraph (b) (light oil other than unleaded petrol), for “£0.6007” substitute “ £0.6207 ”, and

(3) In section 6AA(3) (rate of duty on biodiesel), for “£0.3035” substitute “ £0.3235 ”.

(4) In section 6AD(3) (rate of duty on bioethanol), for “£0.3035” substitute “ £0.3235 ”.

(5) In section 8(3) (road fuel gas)—

(a) in paragraph (a) (natural road fuel gas), for “£0.1370” substitute “ £0.1660 ”, and

(b) in paragraph (b) (other road fuel gas), for “£0.1649” substitute “ £0.2077 ”.

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

(a) in paragraph (a) (fuel oil), for “£0.0929” substitute “ £0.0966 ”, and

(b) in paragraph (b) (gas oil), for “£0.0969” substitute “ £0.1007 ”.

(7) In section 14(1) (rebate on light oil for use as furnace fuel), for “£0.0929” substitute “ £0.0966 ”.

(8) In section 14A(2) (rebate on certain biodiesel), for “£0.0969” substitute “ £0.1007 ”.

(9) The amendments made by this section come into force on 1 October 2008.

Fuel for aircraft and boats, heating oil and fuel for certain engines

16

(1) In section 6(1A) of HODA 1979 (main rates)—

(a) after paragraph (a) insert—

(aa) £0.3103 a litre in the case of aviation gasoline,

, and

(b) in paragraph (b), after “petrol” insert “ or aviation gasoline ”.

(2) The amendments made by subsection (1) come into force on 1 November 2008.

(3) Schedule 6 contains—

(a) in Part 1, provision consequential on subsection (1) and provision about fuel used for private pleasure-flying or private pleasure craft, and

(b) in Part 2, provision about certain heavy oil used for heating or as fuel for certain engines.

Environmental taxes and duties

Rates of vehicle excise duty

17

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

(2) In paragraph 1 (general)—

(a) in sub-paragraph (2) (vehicle not covered elsewhere in Schedule otherwise than with engine cylinder capacity not exceeding 1,549cc), for “£180” substitute “ £185 ”, and

(b) in sub-paragraph (2A) (vehicle not covered elsewhere in Schedule with engine cylinder capacity not exceeding 1,549cc), for “£115” substitute “ £120 ”.

(3) In paragraph 1B (graduated rates for light passenger vehicles), for the table substitute—

CO₂ emissions figure	CO₂ emissions figure	Rate	Rate
(1)	(2)	(3)	(4)
Exceeding	Not exceeding	Reduced rate	Standard rate
g/km	g/km	£	£
100	120	15	35
120	150	100	120
150	165	125	45
165	185	150	170
185	225	195	210
225		385	400

The table has effect in relation to vehicles first registered before 23 March 2006 as if— (a) in column (3), in the last row, “ 195 ” were substituted for “385”, and (b) in column (4), in the last row, “ 210 ” were substituted for “400”.

(4) In paragraph 1J (light goods vehicles)—

(a) in sub-paragraph (a) (vehicle which is not lower-emission van), for “£175” substitute “ £180 ”, and

(b) in sub-paragraph (b) (lower-emission van), for “£115” substitute “ £120 ”.

(5) In paragraph 2(1) (motorcycles)—

(a) in paragraph (b) (motorbicycle and engine's cylinder capacity more than 150cc but not more than 400cc), for “£32” substitute “ £33 ”,

(b) in paragraph (c) (motorbicycle and engine's cylinder capacity more than 400cc but not more than 600cc), for “£47” substitute “ £48 ”, and

(6) The amendments made by this section have effect in relation to licences taken out on or after 13 March 2008.

Standard rate of landfill tax

18

(1) In section 42(1)(a) and (2) of FA 1996 (amount of landfill tax), for “£32” substitute “ £40 ”.

(2) The amendments made by subsection (1) come into force on 1 April 2009 and have effect in relation to disposals made (or treated as made) on or after that date.

Rates of climate change levy

19

(1) In Schedule 6 to FA 2000 (climate change levy), for the table in paragraph 42(1) substitute—

Taxable commodity supplied	Rate at which levy payable if supply is not a reduced-rate supply
Electricity	£0.00470 per kilowatt hour
Gas supplied by a gas utility or any gas supplied in a gaseous state that is of a kind supplied by a gas utility	£0.00164 per kilowatt hour
Any petroleum gas, or other gaseous hydrocarbon, supplied in a liquid state	£0.01050 per kilogram
Any other taxable commodity	£0.01281 per kilogram

(2) The amendment made by subsection (1) has effect in relation to supplies treated as taking place on or after 1 April 2009.

Rate of aggregates levy

20

(1) In section 16(4) of FA 2001 (rate of aggregates levy), for “£1.95” substitute “ £2 ”.

(2) The amendment made by subsection (1) has effect in relation to aggregate subjected to commercial exploitation on or after 1 April 2009.

Carbon reduction trading scheme: charges for allocations

21

(1) The Treasury may impose charges by providing for carbon reduction trading scheme allowances to be allocated in return for payment.

(2) The charges may only be imposed by regulations.

(3) The regulations may make any other provision about allocations of allowances which the Treasury consider appropriate, including (in particular)—

(a) provision as to the imposition of fees, and as to the making and forfeiting of deposits, in connection with participation in the allocations,

(b) provision as to the persons by whom allocations are to be conducted,

(d) provision for the imposition and recovery of penalties for failure to comply with the terms of a scheme made under subsection (4),

(e) provision for and in connection with the recovery of payments due in respect of allowances allocated (including provision as to the imposition and recovery of interest and penalties), and

(f) provision conferring rights of appeal against decisions made in allocations, the forfeiting of deposits and the imposition of penalties (including provision specifying the person, court or tribunal to hear and determine appeals).

(4) The Treasury may make schemes about the conduct and terms of allocations (to have effect subject to any regulations under this section); and schemes may in particular include provision about—

(a) who may participate in allocations,

(b) the allowances to be allocated, and

(5) In this section—

“carbon reduction trading scheme allowances” means tradeable allowances that—are provided for in a relevant trading scheme, andrepresent the right to carry on a specified amount of activities that consist of the emission of greenhouse gas or that cause or contribute, directly or indirectly, to such emissions;

“relevant trading scheme” means a trading scheme that—is made under Part 3 of the Climate Change Act 2008,applies to persons by reference to their consumption of electricity (whether or not by reference to other matters as well), andapplies only to persons who consume electricity—for business or charitable purposes, orfor the performance of functions of a public nature,(whether or not they also consume electricity for other purposes);

“specified” means specified in the relevant trading scheme.

(6) Regulations under this section are to be made by statutory instrument.

(7) A statutory instrument containing the first regulations under this section may not be made unless a draft of the regulations has been laid before, and approved by a resolution of, the House of Commons.

(8) Any other statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of the House of Commons unless a draft of the regulations has been laid before, and approved by a resolution of, that House.

Gambling duties

Rates of gaming duty

22

(1) For the table in section 11(2) of FA 1997 substitute—

Part of gross gaming yield	Rate
The first £1,911,000	15 per cent
The next £1,317,000	20 per cent
The next £2,307,000	30 per cent
The next £4,869,500	40 per cent
The remainder	50 per cent

(2) The amendment made by subsection (1) has effect in relation to accounting periods beginning on or after 1 April 2008.

Amusement machine licence duty

23

(1) In section 23(2) of BGDA 1981 (amount of duty payable on amusement machine licence), for the table substitute—

Months for which licence granted	Category A	Category B1	Category B2	Category B3	Category B4	Category C
	£	£	£	£	£	£
1	455	230	180	180	165	70
2	905	450	355	355	320	135
3	1355	675	535	535	485	200
4	1805	905	710	710	645	265
5	2260	1130	890	890	805	335
6	2710	1355	1065	1065	965	400
7	3160	1580	1245	1245	1125	465
8	3610	1805	1420	1420	1290	530
9	4065	2030	1600	1600	1450	600
10	4515	2260	1775	1775	1610	665
11	4965	2485	1955	1955	1770	730
12	5160	2580	2030	2030	1840	760

(2) The amendment made by subsection (1) has effect in relation to cases where the application for the amusement machine licence is received by the Commissioners for Her Majesty's Revenue and Customs after 4pm on 14 March 2008.

Part 2 — Income tax, corporation tax and capital gains tax_general

Residence and domicile

Periods of residence

24

(1) Section 831 of ITA 2007 (foreign income of individuals in United Kingdom for temporary purpose) is amended as follows.

(2) In subsection (1), for paragraph (b) substitute—

(b) during the tax year in question the individual spends (in total) less than 183 days in the United Kingdom.

(3) After that subsection insert—

(1A) In determining whether an individual is within subsection (1)(b) treat a day as a day spent by the individual in the United Kingdom if (and only if) the individual is present in the United Kingdom at the end of the day. (1B) But in determining that issue do not treat as a day spent by the individual in the United Kingdom any day on which the individual arrives in the United Kingdom as a passenger if— (a) the individual departs from the United Kingdom on the next day, and (b) during the time between arrival and departure the individual does not engage in activities that are to a substantial extent unrelated to the individual's passage through the United Kingdom.

(4) In section 832 of that Act (employment income of individuals in United Kingdom for temporary purpose), after subsection (1) insert—

(1A) In determining whether an individual is within subsection (1)(b) treat a day as a day spent by the individual in the United Kingdom if (and only if) the individual is present in the United Kingdom at the end of the day. (1B) But in determining that issue do not treat as a day spent by the individual in the United Kingdom any day on which the individual arrives in the United Kingdom as a passenger if— (a) the individual departs from the United Kingdom on the next day, and (b) during the time between arrival and departure the individual does not engage in activities that are to a substantial extent unrelated to the individual's passage through the United Kingdom.

(5) Section 9 of TCGA 1992 (residence, including temporary residence) is amended as follows.

(6) In subsection (3), for the words after “if and only if” substitute “ the individual spends (in total) at least 183 days in the United Kingdom. ”

(7) Insert at the end—

(5) In determining for the purposes of subsection (3) above whether an individual spends (in total) at least 183 days in the United Kingdom treat a day as a day spent by the individual in the United Kingdom if (and only if) the individual is present in the United Kingdom at the end of the day. (6) But in determining that issue for those purposes do not treat as a day spent by the individual in the United Kingdom any day on which the individual arrives in the United Kingdom as a passenger if— (a) the individual departs from the United Kingdom on the next day, and (b) during the time between arrival and departure the individual does not engage in activities that are to a substantial extent unrelated to the individual's passage through the United Kingdom.

(8) The amendments made by this section have effect for the tax year 2008-09 and subsequent tax years.

Remittance basis

25

Schedule 7 contains provision for and in connection with the revision of the remittance basis.

Research and development

Rates of R&D relief and vaccine research relief

26

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Qualifying expenditure: R&D relief and vaccine research relief

27

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Companies in difficulty: SME R&D relief and vaccine research relief

28

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Cap on R&D aid

29

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Vaccine research relief: declaration about effect of relief

30

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Venture capital schemes etc

Enterprise investment scheme: increase in amount of relief

31

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Venture capital schemes

32

Schedule 11 contains provision about venture capital schemes.

Enterprise management incentives: qualifying companies

33

(1) Part 3 of Schedule 5 to ITEPA 2003 (enterprise management incentives: qualifying companies) is amended as follows.

(2) In paragraph 8 (qualifying companies: introduction), omit the “and” at the end of the entry relating to paragraph 12, and after that entry insert— “ number of employees (see paragraph 12A), and ”.

(3) After paragraph 12 insert—

(12A) (1) The number of employees requirement in the case of a single company is that the full-time equivalent employee number for it is less than 250. (2) The number of employees requirement in the case of a parent company is that the sum of— (a) the full-time equivalent employee number for it, and (b) the full-time equivalent employee numbers for each of its qualifying subsidiaries, is less than 250. (3) The full-time equivalent employee number for a company is calculated as follows— Step 1 Find the number of full-time employees of the company. Step 2 Add, for each employee of the company who is not a full-time employee, such fraction as is just and reasonable. The result is the full-time equivalent employee number. (4) In this paragraph references to an employee— (a) include a director, but (b) do not include— (i) an employee on maternity or paternity leave, or (ii) a student on vocational training.

(4) In paragraph 16 (excluded activities), after paragraph (i) insert—

(ia) shipbuilding (see also paragraph 20A); (ib) producing coal (see also paragraph 20B); (ic) producing steel (see also paragraph 20C);

(5) After paragraph 20 insert—

(20A) In paragraph 16(ia) “shipbuilding” has the same meaning as in the Framework on state aid to shipbuilding (2003/C 317/06), published in the Official Journal on 30 December 2003. (20B) (1) This paragraph supplements paragraph 16(ib). (2) “Coal” has the meaning given by Article 2 of Council Regulation (EC) No. 1407/2002 (state aid to coal industry). (3) The production of coal includes the extraction of it. (20C) In paragraph 16(ic) “steel” means any of the steel products listed in Annex 1 to the Guidelines on national regional aid (2006/C 54/08), published in the Official Journal on 4 March 2006.

(6) The amendments made by this section have effect in relation to options granted on or after the day on which this Act is passed.

Other business and investment measures

Tax credits for certain foreign distributions

34

(1) Schedule 12 contains provision about tax credits for certain foreign distributions.

(2) The amendments made by that Schedule have effect for the tax year 2008-09 and subsequent tax years.

Small companies' relief: associated companies

35

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Company gains from investment life insurance contracts etc

36

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

(2) Schedule 14 contains amendments and repeals consequential on that Schedule etc.

Trade profits: changes in trading stock

37

(1) Schedule 15 contains provision about the effect of certain changes in trading stock on the calculation of profits of trades for the purposes of income tax or corporation tax.

(2) The amendments made by that Schedule have effect in relation to changes in trading stock occurring on or after 12 March 2008.

(3) In subsection (2) “change in trading stock” means—

(a) in relation to new section 172B of ITTOIA 2005, or paragraph 6 of Schedule 15, an appropriation of trading stock,

(b) in relation to new section 172C of ITTOIA 2005, or paragraph 7 of Schedule 15, a thing becoming trading stock,

(d) in relation to new section 172E of ITTOIA 2005, or paragraph 9 of Schedule 15, an acquisition of trading stock.

Non-residents: investment managers

38

Schedule 16 contains provision about—

(a) the eligibility of an investment manager to be the UK representative of a non-resident, or an agent of independent status in relation to a non-resident, and

(b) profits or income of non-residents that are to be disregarded if derived from certain investment transactions carried out by investment managers.

Dormant bank and building society accounts

39

(1) The Commissioners for Her Majesty’s Revenue and Customs may by regulations—

(a) modify Chapters 2 and 3 of Part 15 of ITA 2007 (deduction of income tax on interest payments at source) in relation to interest paid or credited in respect of a relevant dormant asset, and

(b) provide that, for the purposes of Chapter 2 of Part 4 of ITTOIA 2005 (charge to income tax on interest), such interest is to be treated as not being paid until the time (if any) at which the balance of the dormant asset is paid out following a claim made by virtue of—

(i) section 1(2)(b) or 2(2)(b) of the 2008 Act, or

(ii) section 2(2)(b), 5(2)(b), 5(3)(b), 8(2)(b), 12(2)(b), 14(2)(b) or 22(1) of the 2022 Act.

(2) A relevant dormant asset is an asset in respect of which an amount is to be, or has been, transferred by an institution—

(a) to an authorised reclaim fund, with the result that section 1 of the 2008 Act or section 2, 5, 8, 12 or 14 of the 2022 Act applies in relation to the asset, or

(b) to an authorised reclaim fund and one or more charities, with the result that section 2 of the 2008 Act applies in relation to the asset.

(3) Interest paid or credited in respect of a relevant dormant asset includes interest paid or credited by a person who administers the asset on behalf of an authorised reclaim fund after the balance has been transferred.

(4) In this section—

“the 2008 Act” means the Dormant Bank and Building Society Accounts Act 2008;

“the 2022 Act” means the Dormant Assets Act 2022;

“asset” means an asset within the scope of the dormant assets scheme (see section 1(6) of the 2022 Act);

“authorised reclaim fund” has the same meaning as in the Dormant Assets Acts 2008 to 2022.

Individual investment plan regulations

40

In section 701 of ITTOIA 2005 (investment plan regulations: general and supplementary), insert at the end—

(4) They may include provision having effect in relation to times before they are made if the provision does not impose or increase any liability to tax. (5) They may make different provision for different cases or circumstances.

Offshore funds

Tax treatment of participants in offshore funds

41

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Regulations under section 41: supplementary

42

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Insurance companies and friendly societies

Insurance companies etc

43

Schedule 17 contains provisions relating to insurance companies etc.

Friendly societies

44

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Employment matters

Homes outside UK owned through company etc

45

(1) In ITEPA 2003, after section 100 insert—

(100A) (1) This Chapter does not apply to living accommodation outside the United Kingdom provided by a company for a director or other officer of the company (“D”) or a member of D's family or household if— (a) the company is wholly owned by D or D and other individuals (and no interest in the company is partnership property), and (b) the company has been the holding company of the property at all times after the relevant time. (2) The company is “the holding company of the property” when— (a) it owns a relevant interest in the property, (b) its main or only asset is that interest, and (c) the only activities undertaken by it are ones that are incidental to its ownership of that interest. (3) The company is also “the holding company of the property” when— (a) a company (“the subsidiary”) which is wholly owned by the company meets the conditions in paragraphs (a) to (c) of subsection (2), (b) the company's main or only asset is its interest in the subsidiary, and (c) the only activities undertaken by the company are ones that are incidental to its ownership of that interest. (4) “Relevant interest in the property” means an interest under the law of any territory that confers (or would but for any inferior interest confer) a right to exclusive possession of the property at all times or at certain times. (5) “The relevant time” is the time the company first owned a relevant interest in the property; but this is subject to subsection (6). (6) If— (a) none of D's interest in the company was acquired directly or indirectly from a person connected with D, and (b) the company owned a relevant interest in the property at the time D first acquired an interest in the company, “the relevant time” is the time D first acquired such an interest. (100B) (1) Section 100A(1) does not apply if subsection (2), (3) or (4) applies. (2) This subsection applies if— (a) the company's interest in the property was acquired directly or indirectly from a connected company at an undervalue, or (b) the company's interest in the property derives from an interest that was so acquired. (3) This subsection applies if, at any time after the relevant time— (a) expenditure in respect of the property has been incurred directly or indirectly by a connected company, or (b) any borrowing of the company directly or indirectly from a connected company has been outstanding (but see subsection (7)). (4) This subsection applies if the living accommodation is provided in pursuance of an arrangement the main purpose, or one of the main purposes, of which is the avoidance of tax or national insurance contributions. (5) In subsection (2) references to the acquisition of an interest include the grant of an interest. (6) For the purposes of that subsection, an interest is acquired at an undervalue if the total consideration for it is less than that which might reasonably have been expected to be obtained on a disposal of the interest on the open market; and “consideration” here means consideration provided at any time (and, for example, includes payments by way of rent). (7) For the purposes of subsection (3)(b), no account is to be taken of— (a) any borrowing at a commercial rate, or (b) any borrowing which results in D being treated under Chapter 7 (taxable benefits: loans) as receiving earnings. (8) In subsection (4) “arrangement” includes any scheme, agreement or understanding, whether or not enforceable. (9) In this section “connected company” means— (a) a company connected with D, with a member of D's family or with an employer of D, or (b) a company connected with such a company.

(2) The amendment made by subsection (1) is treated as always having had effect.

(3) Section 145 of ICTA (living accommodation provided for employee) is to be treated as never having applied to living accommodation outside the United Kingdom provided in circumstances in which, had it been provided on or after 6 April 2003, section 100A(1) of ITEPA 2003 would cause Chapter 5 of Part 3 of ITEPA 2003 (taxable benefits: living accommodation) not to apply.

In-work and return to work credits and payments

46

(1) In section 677(1) of ITEPA 2003 (UK social security benefits wholly exempt from tax), in Part 1 of Table B (benefits payable under primary legislation), insert at the appropriate places—

In-work credit	ETA 1973	Section 2
	ETA(NI) 1950	Section 1
In-work emergency discretion fund payment	ETA 1973	Section 2
In-work emergency fund payment	ETA(NI) 1950	Section 1

, and

Return to work credit	ETA 1973	Section 2
	ETA(NI) 1950	Section 1

(2) In Part 1 of Schedule 1 to that Act (abbreviations of Acts etc), insert at the appropriate places—

ETA(NI) 1950	The Employment and Training Act (Northern Ireland) 1950 (c. 29 (N.I.))

, and

ETA 1973	The Employment and Training Act 1973 (c. 50)

(3) The amendments made by this section have effect for the tax year 2008-09 and subsequent tax years.

Company cars: lower threshold for CO2 emissions figure

47

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

(2) In consequence of the amendment made by subsection (1), omit—

(a) in FA 2003, section 138(3), and

(b) in FA 2006, section 59(6).

(3) The amendments made by this section have effect for the tax year 2008-09 and subsequent tax years.

Van fuel benefit

48

(1) In section 239(3) of ITEPA 2003 (exemption in respect of payments and benefits connected with taxable cars and vans subject to section 149), insert at the end “ or section 160 (benefit of van fuel treated as earnings). ”

(2) In section 269(2) of that Act (exemption in respect of non-cash vouchers and credit-tokens where benefits or money obtained in connection with taxable car or subject to section 149)—

(a) for “, but see section 149(3)” substitute “ or van, but see section 149(3) or section 160(3) ”, and

(b) after “earnings)” insert “ or section 160 (benefit of van fuel treated as earnings) ”.

49

(1) In section 149AA of TCGA 1992 (restricted and convertible employment-related securities), after subsection (6) insert—

(7) In subsection (1) the reference to any amount that constituted earnings under Chapter 1 of Part 3 of ITEPA 2003 does not include any amount of exempt income (within the meaning of section 8 of that Act).

(2) ITEPA 2003 is amended as follows.

(3) In section 428(2)(b) as originally enacted (conditional interests in shares: amount of charge), insert at the end “ (other than an amount of exempt income) ”.

(4) In section 428(7)(b) (restricted securities: amount of charge), insert at the end “ (other than an amount of exempt income) ”.

(5) In section 446T(3)(b) (securities acquired for less than market value: amount of charge), insert at the end “ (other than an amount of exempt income) ”.

(6) In section 480(5)(a) (securities options: deductible amounts), insert at the end “ (other than an amount of exempt income) ”.

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

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

(9) The amendment made by subsection (1) has effect in relation to disposals made on or after 12 March 2008.

(10) The amendment made by subsection (3) has effect in relation to events within section 427(1)(a) or (b) of ITEPA 2003 (as originally enacted) occurring on or after that date.

(11) The amendments made by subsections (4) and (6) have effect in relation to chargeable events occurring on or after that date.

(12) The amendment made by subsection (5) has effect in relation to employment-related securities acquired (or treated as acquired) on or after that date.

(13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

50

(1) In ICTA, omit sections 138 and 139 (share acquisitions by directors and employees: shares acquired before 26 October 1987).

(2) In ITEPA 2003—

(a) in section 418 (other related provisions), omit subsection (4), and

(b) in Schedule 7 (transitionals and savings), omit paragraph 57.

(3) The amendments made by this section have effect for the tax year 2008-09 and subsequent tax years.

Armed forces: the Council Tax Relief

51

(1) In ITEPA 2003, after section 297A insert—

(297B) (1) No liability to income tax arises in respect of payments of the Council Tax Relief to members of the armed forces of the Crown. (2) Payments of the Council Tax Relief are payments designated as such by the Secretary of State.

(2) The amendment made by subsection (1) has effect in relation to payments made on or after 1 April 2008.

Greater London Authority: severance payments

52

(1) Section 291(2) of ITEPA 2003 (termination payments to MPs and others ceasing to hold office) is amended as follows.

(2) In paragraph (ea), omit “or”.

(3) At the end of paragraph (f) insert

, or (g) made under section 26A of the Greater London Authority Act 1999 (payments on ceasing to hold office as Mayor of London or as a member of the London Assembly).

(4) The amendments made by this section have effect in relation to payments made on or after 6 April 2008.

Charities etc

Gift aid: payments to charities

53

Schedule 19 contains provision for the Commissioners for Her Majesty's Revenue and Customs to make payments to charities which receive donations under the gift aid scheme.

Community investment tax relief

54

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

Leasing

Leases of plant or machinery

55

Schedule 20 contains provision about leases of plant or machinery.

Sale of lessor companies etc

56

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

Double taxation arrangements

Double taxation relief

57

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

UK residents and foreign partnerships

58

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

(2) In section 59 of TCGA 1992 (partnerships), insert at the end—

(4) For the purposes of subsections (2) and (3) the members of a partnership include any person entitled to a share of capital gains of the partnership.

(3) In section 858 of ITTOIA 2005 (resident partners and double taxation agreements), insert at the end—

(4) For the purposes of this section the members of a firm include any person entitled to a share of income of the firm.

(4) The amendments made by subsections (1) to (3) are treated as always having had effect.

(5) For the purposes of the predecessor provisions, the members of a partnership are to be treated as having included, at all times to which those provisions applied, a person entitled to a share of income or capital gains of the partnership.

(6) “The predecessor provisions” means—

(a) section 153(4) and (5) of the Income and Corporation Taxes Act 1970 (c. 10) (as it had effect under section 62(2) of F(No.2)A 1987), and

(b) sections 112(4) to (6) and 115(5) of ICTA.

UK residents and foreign enterprises

59

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

Other anti-avoidance provisions

Restrictions on trade loss relief for individuals

60

Schedule 21 contains provision restricting relief for losses made by individuals who, otherwise than in partnership, carry on trades in a non-active capacity.

Non-active partners

61

(1) In section 103B(2) of ITA 2007 (meaning of “non-active partner” for purposes of provisions restricting trade loss relief), for “carried on for the purposes of the trade” substitute

of the trade and those activities are carried on— (a) on a commercial basis, and (b) with a view to the realisation of profits as a result of the activities.

(2) The amendment made by subsection (1) has effect in relation to relevant periods ending on or after 12 March 2008.

Financial arrangements avoidance

62

Schedule 22 contains provision about avoidance involving financial arrangements.

Manufactured payments

63

(1) Schedule 23 contains anti-avoidance provisions about manufactured payments.

(2) The amendments made by that Schedule have effect in relation to manufactured payments (including deemed manufactured payments) made (or treated as made) on or after 31 January 2008.

Controlled foreign companies

64

(1) Chapter 4 of Part 17 of ICTA (controlled foreign companies) is amended as follows.

(2) In section 747 (imputation of chargeable profits of controlled foreign companies)—

(a) in subsection (6), before “and” at the end of paragraph (a) insert—

(aa) any reference in this Chapter to its chargeable profits for an accounting period includes (subject to subsections (7) to (9)) income which accrues during that accounting period to the trustees of a settlement in relation to which the company is a settlor or a beneficiary;

, and

(b) after that subsection insert—

(7) Where there is more than one settlor or beneficiary in relation to the settlement mentioned in subsection (6)(aa), the income is to be apportioned between the company and the other settlors or beneficiaries on a just and reasonable basis. (8) Where income within subsection (6)(aa) is included in the chargeable profits of a company, any dividend or other distribution received by the company which derives from that income is not included in the chargeable profits of the company to the extent that it is so derived. (9) Any income within subsection (6)(aa) which would (apart from this subsection)— (a) be included in the chargeable profits of a company which is a beneficiary in relation to a settlement and apportioned under subsection (3), and (b) be included in the chargeable profits of a company which is a settlor in relation to the settlement and apportioned under that subsection, is not to be included in the chargeable profits of the company which is a settlor.

(3) In section 755D (meaning of control)—

(a) after subsection (1) insert—

(1A) For the purposes of this Chapter a person also controls a company if the person possesses, or is entitled to acquire, such rights as would— (a) if the whole of the income of the company were distributed, entitle the person to receive the greater part of the amount so distributed, (b) if the whole of the company's share capital were disposed of, entitle the person to receive the greater part of the proceeds of the disposal, or (c) in the event of the winding-up of the company or in any other circumstances, entitle the person to receive the greater part of the assets of the company which would then be available for distribution.

, and

(b) in subsection (2), after “above” insert “ or satisfy subsection (1A) above ”.

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

(5) In paragraph 6 of Schedule 25 (definition of exempt activities), after sub-paragraph (5B) insert—

(5C) For the purposes of this paragraph, the gross income of a holding company or a superior holding company during an accounting period includes— (a) any income which accrues during that period to the trustees of a settlement in relation to which the company is a settlor or a beneficiary, and (b) any income which accrues during that period to a partnership of which the company is a partner, apportioned between the company and the other partners on a just and reasonable basis. (5D) Where there is more than one settlor or beneficiary in relation to the settlement mentioned in sub-paragraph (5C)(a), the income is to be apportioned between the company and the other settlors or beneficiaries on a just and reasonable basis. (5E) In sub-paragraph (5C)(b) “partnership” includes an entity established under the law of a country or territory outside the United Kingdom of a similar character to a partnership; and “partner” is to be read accordingly.

(6) The amendments made by subsections (2) and (5) have effect in relation to income accruing on or after 12 March 2008.

(7) The amendments made by subsection (3) have effect for determining whether, at any time on or after 12 March 2008, a company is controlled by persons resident in the United Kingdom for the purposes of Chapter 4 of Part 17 of ICTA.

(8) The amendments made by subsection (4) have effect in relation to any dividend paid on or after 12 March 2008.

(9) In relation to an accounting period of a company beginning before, and ending on or after, 12 March 2008 (“the straddling period”), the amendments made by this section have effect as if, for the purposes of Chapter 4 of Part 17 of ICTA, so much of the period as falls before that date, and so much of the period as falls on or after that date, were separate accounting periods.

(10) The company's chargeable profits for the straddling period, and its creditable tax (if any) for that period, are to be apportioned to the two separate accounting periods on a just and reasonable basis.

(11) In this section “accounting period”, “chargeable profits” and “creditable tax” have the same meaning as in Chapter 4 of Part 17 of ICTA.

65

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

Repeal of obsolete anti-avoidance provisions

66

(1) In Part 17 of ICTA (tax avoidance)—

(a) in section 704 (cancellation of corporation tax advantages: the prescribed circumstances), omit—

(i) paragraph B (and the “OR” after it), and

(ii) in paragraph C(1), paragraph (b) (and the “or” before it),

(b) in section 709 (definitions), omit subsection (2A),

(d) omit section 736 (company dealing in securities: distribution materially reducing value of holding).

(2) In Part 13 of ITA 2007 (tax avoidance)—

(a) in section 684(2) (person liable to counteraction of income tax advantage), omit the entry relating to section 687 of that Act,

(b) omit section 687 (deductions from profits obtained following distribution or dealings), and

(i) in subsection (3), paragraph (b) (and the “or” before it), and

(ii) subsections (4), (5) and (9).

(3) In consequence of the amendments made by subsection (1)(a) and (b), omit—

(a) in FA 1997, section 73, and

(b) in ITA 2007, paragraph 155(4) and (5) and (6)(b) of Schedule 1.

(4) In consequence of the amendments made by subsection (1)(c) and (d), omit—

(a) in ICTA, sections 343(5) and 738,

(b) in FA 1990, section 53,

(d) in TCGA 1992, paragraph 14(40) and (41) of Schedule 10,

(e) in FA 1994, paragraph 17 of Schedule 16,

(f) in FA 1995, section 81,

(g) in FA 1996—

(i) paragraph 36 of Schedule 20, and

(ii) paragraph 9 of Schedule 38,

(h) in FA 1997, section 77,

(i) in F(No.2)A 1997—

(i) section 26, and

(ii) paragraph 14 of Schedule 6,

(j) in FA 2003, paragraph 6 of Schedule 38,

(k) in ITTOIA 2005, paragraphs 302 and 303 of Schedule 1,

(l) in ITA 2007—

(i) in section 64(8), paragraph (f) (and the “and” before it),

(ii) in section 72(5), paragraph (f) (and the “and” before it),

(iii) in section 448(3), “and section 451”,

(iv) in section 449(3), “and section 451”,

(v) section 451,

(vi) in section 505, in subsection (4) “and section 506” and, in subsection (5) “and in section 506”,

(vii) section 506, and

(viii) paragraphs 167 to 170 of Schedule 1, and

(m) in FA 2007, paragraph 6 of Schedule 14.

(5) The amendments made by subsections (1)(a) and (b), (2) and (3) have effect in relation to transactions in securities entered into on or after 1 April 2008.

(6) The amendment made by subsection (1)(c) has effect in relation to cases where the purchase by the first buyer (within the meaning of section 731(2) of ICTA) is made on or after that date.

(7) The amendment made by subsection (1)(d) has effect in relation to distributions made on or after that date.

(8) The amendments made by subsection (4) have effect in accordance with subsections (6) and (7).

Miscellaneous

Income of beneficiaries under settlor-interested settlements

67

(1) In section 685A of ITTOIA 2005 (settlor-interested settlements), after subsection (5) insert—

(5A) If the recipient of the annual payment is treated by subsection (3) as having paid income tax in respect of the annual payment, the amount of the payment is treated as the highest part of the recipient's total income for all income tax purposes except the purposes of sections 535 to 537 (gains from contracts for life insurance etc: top slicing relief). (5B) See section 1012 of ITA 2007 (relationship between highest part rules) for the relationship between— (a) the rule in subsection (5A), and (b) other rules requiring particular income to be treated as the highest part of a person's income.

(2) In section 1012(4) of ITA 2007 (relationship between rules on highest part of total income), after the entry relating to section 465A of ITOIA 2005 insert— “ section 685A(5A) of ITTOIA 2005 (payments from trustees of settlor-interested settlements to be treated as highest part of total income), ”.

(3) The amendments made by this section have effect for the tax year 2006-07 and subsequent tax years.

Income charged at dividend upper rate

68

(1) In section 13(2) of ITA 2007 (income charged at dividend upper rate: individuals)—

(a) omit “and” at the end of paragraph (a), and

(b) at the end of paragraph (b) insert

, and (c) is not relevant foreign income charged in accordance with section 832 of ITTOIA 2005.

(2) The amendments made by subsection (1) have effect for the tax year 2008-09 and subsequent tax years.

Payments on account of income tax

69

(1) In section 964 of ITA 2007, omit subsection (5) (sums representing income tax deducted from annual payments not to be taken into account for the purpose of calculating amounts to be paid on account of income tax).

(2) The repeal made by subsection (1) has effect for the purpose of calculating the amount of any payments to be made under section 59A of TMA 1970 on account of liability to income tax for the tax year 2008-09 and subsequent tax years.

Allowances etc for non-resident nationals of an EEA state

70

(1) In section 278 of ICTA (non-residents eligible for reliefs)—

(a) in subsection (2)(a), omit “or an EEA national”, and

(b) omit subsection (9).

(2) In section 56(3) of ITA 2007 (non-UK residents eligible for personal allowances and tax reductions), before paragraph (a) insert—

(za) is a national of an EEA state,

(3) Accordingly, omit section 145 of FA 1996 (personal reliefs for non-resident EEA nationals).

(4) The amendments made by this section have effect for the tax year 2008-09 and subsequent tax years.

Part 3 — Capital allowances

Plant and machinery: qualifying expenditure

Thermal insulation of buildings

71

(1) Section 28 of CAA 2001 (thermal insulation of industrial buildings) is amended as follows.

(2) In subsection (1)—

(a) for “consisting of a trade” substitute “ other than an ordinary property business or an overseas property business ”,

(b) for “an industrial” substitute “ a ”, and

(3) In subsection (2), for “an industrial” substitute “ a ”.

(4) After that subsection insert—

(2A) Subsection (2) is subject to section 35 (expenditure on plant or machinery for use in dwelling-house not qualifying expenditure). (2B) This section does not apply to expenditure within subsection (2) if a deduction for that expenditure is allowable— (a) under section 31ZA of ICTA, or (b) under section 312 of ITTOIA 2005, (deductions for expenditure on energy-saving items). (2C) For the purposes of subsection (2B), whether such a deduction is allowable is to be determined without regard to subsection (1)(e) of the section in question.

(5) Omit subsection (3).

(6) In the heading, omit “industrial”.

(7) In section 23(2) of CAA 2001 (expenditure unaffected by sections 21 and 22), in the entry for section 28, omit “industrial”.

(8) The amendments made by this section have effect—

(a) for corporation tax purposes, in relation to expenditure incurred on or after 1 April 2008, and

(b) for income tax purposes, in relation to expenditure incurred on or after 6 April 2008.

Expenditure on required fire precautions

72

(1) In CAA 2001, omit section 29 (expenditure on required fire precautions).

(2) In section 23(2) of that Act, omit “section 29 (fire safety);”.

(3) In consequence of the amendment made by subsection (1)—

(a) in the Fire and Rescue Services Act 2004 (c. 21), omit paragraph 96 of Schedule 1, and

(b) in the Fire and Rescue Services (Northern Ireland) Order 2006 (S.I. 2006/1254 (N.I. 9)), omit paragraph 24 of Schedule 3 (and the entry relating to CAA 2001 in Schedule 4).

(4) The amendments made by subsections (1) and (2) have effect—

(a) for corporation tax purposes, in relation to expenditure incurred on or after 1 April 2008, and

(b) for income tax purposes, in relation to expenditure incurred on or after 6 April 2008.

Integral features

73

(1) In section 23 of CAA 2001 (expenditure unaffected by sections 21 and 22)—

(a) in subsection (2), after the entry for section 33 insert— “ section 33A (integral features); ”, and

(b) in subsection (4), in List C—

(i) in item 2, omit “Electrical systems (including lighting systems) and cold water,”,

(ii) omit item 3, and

(iii) in item 6, for “Lifts, hoists, escalators and moving walkways.” substitute “ Hoists. ”

(2) After section 33 of that Act insert—

(33A) (1) This section applies where a person carrying on a qualifying activity incurs expenditure on the provision or replacement of an integral feature of a building or structure used by the person for the purposes of the qualifying activity. (2) This Part (including in particular section 11(4)) applies as if— (a) the expenditure were capital expenditure on the provision of plant or machinery for the purposes of the qualifying activity, and (b) the person who incurred the expenditure owned plant or machinery as a result of incurring it. (3) If the expenditure is qualifying expenditure, it may not be deducted in calculating the income from the qualifying activity. (4) If the expenditure is not qualifying expenditure, whether it may be so deducted is to be determined without regard to this section. (5) For the purposes of this section each of the following is an integral feature— (a) an electrical system (including a lighting system), (b) a cold water system, (c) a space or water heating system, a powered system of ventilation, air cooling or air purification, and any floor or ceiling comprised in such a system, (d) a lift, an escalator or a moving walkway, (e) external solar shading. (6) The items listed in subsection (5) do not include any asset whose principal purpose is to insulate or enclose the interior of a building or to provide an interior wall, floor or ceiling which (in each case) is intended to remain permanently in place. (7) The Treasury may by order— (a) provide that subsection (5) does not include a feature of a building or structure specified in the order, expenditure on which would (if not within subsection (5)) be qualifying expenditure other than special rate expenditure, and (b) add to the list in subsection (5) a feature of a building or structure expenditure on the provision of which would not (apart from the order) be expenditure on the provision of plant or machinery. (8) An order under subsection (7) may make such incidental, supplemental, consequential and transitional provision as the Treasury thinks fit. (33B) (1) Expenditure to which this section applies is to be treated for the purposes of section 33A as expenditure on the replacement of an integral feature. (2) This section applies to expenditure incurred by a person on an integral feature if the amount of the expenditure is more than 50% of the cost of replacing the integral feature at the time the expenditure is incurred. (3) Subsection (4) applies where— (a) a person incurs expenditure (“initial expenditure”) on an integral feature which is not more than 50% of the cost of replacing the integral feature at the time it is incurred, but (b) in the period of 12 months beginning with the initial expenditure being incurred the person incurs further expenditure on the integral feature. (4) If the aggregate of— (a) the amount of the initial expenditure, and (b) the amount (or the aggregate of the amounts) of the further expenditure, is more than 50% of the cost of replacing the integral feature at the time the initial expenditure was incurred, this section applies to the initial expenditure and the further expenditure. (5) Where section 33A applies because of subsection (4), all such assessments and adjustments of assessments are to be made as are necessary to give effect to that section.

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

(4) In Chapter 4 of Part 2 of ITTOIA 2005 (rules restricting deductions from trade profits), after section 55 insert—

(55A) Section 33A(3) of CAA 2001 provides that no deduction is allowed in respect of certain expenditure on an integral feature of a building or structure (within the meaning of that section).

(5) In the table in section 272(2) of ITTOIA 2005 (provisions of Part 2 applicable to profits of property business), after the entry relating to section 55 insert—

section 55A	expenditure on integral features

(6) The amendments made by this section have effect—

(a) for corporation tax purposes, in relation to expenditure incurred on or after 1 April 2008, and

(b) for income tax purposes, in relation to expenditure incurred on or after 6 April 2008.

Plant and machinery: annual investment allowance

Annual investment allowance

74

Schedule 24 contains provision about an annual investment allowance in respect of certain qualifying expenditure on plant or machinery.

Plant and machinery: first-year allowances

First-year allowance for small and medium-sized enterprises discontinued

75

(1) CAA 2001 is amended as follows.

(2) Omit section 44 (expenditure incurred by small or medium-sized enterprises).

(3) In consequence of the repeal made by subsection (2)—

(a) in the list in section 39 (provisions under which first-year allowances available), omit the entry relating to section 44,

(b) in the list in section 46(1) (provisions subject to general exclusions), omit the entry relating to section 44,

(d) in section 52(3) (first-year allowances) omit—

(i) in the table, the entry relating to expenditure qualifying under section 44, and

(ii) the words from “In the case” to the end.

(4) Omit the following provisions (which relate to provisions repealed by subsection (3))—

(a) section 142 of FA 2004 (increase in first-year allowance under section 44 for 2004),

(b) section 30 of FA 2006 (increase in first-year allowance under section 44 for 2006), and

(5) The repeals made by subsections (2) and (3) have effect in relation to expenditure incurred on or after the relevant date.

(6) But subsection (7) applies in relation to an additional VAT liability incurred on or after the relevant date which under section 235 of CAA 2001 is treated as qualifying expenditure.

(7) If the original expenditure (within the meaning of that section) was first-year qualifying expenditure by virtue of section 44 of CAA 2001, Chapter 18 of Part 2 of that Act (additional VAT liabilities and rebates) applies to the additional VAT liability as if the provisions repealed by this section were not so repealed.

(8) The relevant date is—

(a) for corporation tax purposes, 1 April 2008, and

(b) for income tax purposes, 6 April 2008.

Repeal of spent first-year allowances

76

(1) CAA 2001 is amended as follows.

(2) Omit sections 40 to 43 (first-year allowance for Northern Ireland expenditure incurred on or before 11 May 2002).

(3) Omit section 45 (first-year allowance for ICT expenditure incurred on or before 31 March 2004).

(4) In Schedule 3 (transitionals and savings), omit paragraphs 46 to 51 (first-year allowance for additional VAT liabilities).

(5) In consequence of the amendments made by subsections (2) to (4), omit the following provisions—

(a) in the list in section 39 (provisions under which first-year allowances available), the entries relating to section 40 and section 45,

(b) in section 46 (general exclusions)—

(i) in the list in subsection (1), the entries relating to section 40 and section 45, and

(ii) in the heading, from “applying” to “45”,

(d) in the table in section 52(3) (first-year allowances), the entries relating to expenditure qualifying under section 40 and expenditure qualifying under section 45,

(e) section 237(2) (exception to section 236 where section 43 applies), and

(f) in Schedule 3 (transitionals and savings), paragraph 14 (application of section 45).

(6) In consequence of the amendments made by this section, omit—

(a) in section 98 of TMA 1970, in the second column of the table, in the entry relating to requirements imposed by CAA 2001, “43(5) and (6),”,

(b) sections 165 and 166 of FA 2003, and

(7) Subsection (8) applies in relation to an additional VAT liability incurred on or after the day this section comes into force which under section 235 of CAA 2001 is treated as qualifying expenditure.

(8) If the original expenditure (within the meaning of that section) was first-year qualifying expenditure by virtue of a provision repealed by subsections (2) to (4), Chapter 18 of Part 2 of that Act (additional VAT liabilities and rebates) applies to the additional VAT liability as if that provision were not so repealed.

Cars with low carbon dioxide emissions

77

(1) Section 45D of CAA 2001 (expenditure on cars with low carbon dioxide emissions) is amended as follows.

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

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

(4) In consequence of the amendment made by subsection (2)—

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

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) The amendment made by subsection (3) has effect in relation to expenditure incurred on or after 1 April 2008.

(6) But in relation to expenditure incurred on the hiring of a car—

(a) for a period of hire which begins on or before 31 March 2008, and

(b) under a contract entered into on or before 31 March 2008,

section 50 of ITTOIA 2005 applies on and after 1 April 2008 as if the amendment made by subsection (3) did not have effect.

Gas refuelling stations

78

(1) Section 45E of CAA 2001 (expenditure on plant or machinery for gas refuelling station) is amended as follows.

(2) In subsection (1)(a), for “2008” substitute “ 2013 ”.

(3) After “natural gas” (in each place) insert “ , biogas ”.

(4) In subsection (4), before the definition of “gas refuelling station” insert—

“biogas” means gas produced by the anaerobic conversion of organic matter and used for propelling vehicles;

(5) The amendments made by subsections (3) and (4) have effect in relation to expenditure incurred on or after 1 April 2008.

First-year tax credits

79

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

Plant and machinery: writing-down allowances and pools

Main rate of writing down allowance

80

(1) Section 56 of CAA 2001 (amount of allowances and charges) is amended as follows.

(2) In subsection (1), for “25%” substitute “ 20% ”.

(3) After that subsection insert—

(1A) But in relation to qualifying expenditure incurred wholly for the purposes of a ring fence trade in respect of which tax is chargeable under section 501A of ICTA (supplementary charge in respect of ring fence trades), the amount of the writing-down allowance to which a person is entitled for a chargeable period is 25% of the amount by which AQE exceeds TDR.

(4) In subsection (2), for “Subsection (1) is” substitute “ Subsections (1) and (1A) are ”.

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

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

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

(8) The amendments made by this section have effect in relation to chargeable periods—

(a) beginning on or after the relevant date, and

(b) beginning before, and ending on or after, the relevant date.

(9) But in respect of a chargeable period within subsection (8)(b), they apply as if in—

(a) section 56(1) of CAA 2001,

(b) the provisions listed in subsection (6), and

the references to 20% were to x%.

(10) For the purposes of subsection (9)—

$$x=(25×BRDCP)+(20×ARDCP)$Where x would be a figure with more than 2 decimal places, it is to be rounded up to the nearest second decimal place.$

(11) In subsection (10)—

BRD is the number of days in the chargeable period before the relevant date,

ARD is the number of days in the chargeable period on and after the relevant date, and

CP is the number of days in the chargeable period.

(12) The relevant date is—

(a) for corporation tax purposes, 1 April 2008, and

(b) for income tax purposes, 6 April 2008.

Small pools

81

(1) CAA 2001 is amended as follows.

(2) In section 56(2) (amount of allowances and charges), before paragraph (a) insert—

(za) section 56A (small main pools and special rate pools),

(3) After section 56 insert—

(56A) (1) This section applies in relation to the main pool and the special rate pool. (2) Where the amount by which AQE exceeds TDR is less than or equal to the small pool limit, the amount of the writing-down allowance to which a person is entitled for a chargeable period is the amount by which AQE exceeds TDR. (3) The small pool limit is £1,000, except that— (a) if the chargeable period is more or less than a year, it is proportionately increased or reduced, and (b) if the qualifying activity has been carried on for part only of the chargeable period, it is proportionately reduced. (4) A person claiming a writing-down allowance under this section may require the allowance to be reduced to a specified amount. (5) The Treasury may by order substitute for the amount for the time being specified in subsection (3) such other amount as it thinks fit. (6) An order under subsection (5) may make such incidental, supplemental, consequential and transitional provision as the Treasury thinks fit.

(4) In section 59(1) (definition of unrelieved qualifying expenditure)—

(a) after “that period” insert “ (a) ”, and

(b) after “TDR” insert

, and (b) where section 56A(2) applies, the person does not claim a writing-down allowance of the amount by which AQE exceeds TDR.

(5) The amendments made by this section have effect—

(a) for corporation tax purposes, in relation to chargeable periods beginning on or after 1 April 2008, and

(b) for income tax purposes, in relation to chargeable periods beginning on or after 6 April 2008.

Special rate expenditure and the special rate pool

82

Schedule 26 contains provision about special rate expenditure and the special rate pool.

Existing long-life asset expenditure treated as special rate expenditure

83

(1) This section applies in relation to long-life asset expenditure—

(a) incurred before the relevant date, and

(b) allocated to a pool in a chargeable period beginning before the relevant date.

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