Finance Act 2008

(1A) (1) The following steps are to be taken for the purpose of calculating the section 2(2) amounts for a settlement that are outstanding at the end of a tax year (“the relevant tax year”). Step 1 Find the section 2(2) amount for the settlement for the relevant tax year and earlier tax years, as reduced under section 87A as it applies for the relevant tax year and earlier tax years. Step 2 This Step applies if, by virtue of the matching of the section 2(2) amount for the settlement for a tax year (“the applicable year”) with a capital payment, chargeable gains are treated under section 87 or 89(2) as accruing in the relevant tax year to a beneficiary who is not chargeable to tax for that year. Increase the section 2(2) amount for the applicable year (found under Step 1) by the amount of the chargeable gains. (2) For the purposes of Step 1 of sub-paragraph (1) take into account the effect of section 90 in relation to any transfer of settled property from or to the trustees of the settlement made in or before the relevant tax year. (3) For the purposes of this Schedule a beneficiary is “chargeable to tax” for a tax year if the beneficiary is resident or ordinarily resident in the United Kingdom in that year.

134

In paragraph 4(2) (chargeable amount: non-resident settlement), at the end insert “ (and had made the disposals which Schedule 4B treats them as having made) ”.

135

In paragraph 5(2)(a) (chargeable amount: dual resident settlement), after “apply” insert “ (and the disposals which Schedule 4B treats them as having made were made) ”.

136

Omit paragraph 7A (and the heading before it).

137

For paragraph 7B substitute—

(7B) (1) This paragraph applies if the trustees of the transferor settlement make a further transfer of value to which Schedule 4B applies in a tax year (“the year of the transfer”) after the tax year mentioned in paragraph 1(3). (2) If the settlement has a Schedule 4C pool at the beginning of the year of the transfer— (a) the section 2(2) amounts in the Schedule 4C pool are increased by the section 2(2) amounts for the settlement that are outstanding at the end of the year of the transfer, and (b) the section 2(2) amount in the pool for the year of transfer is increased (or further increased) by the amount of Schedule 4B trust gains accruing by virtue of the further transfer. (3) If the settlement does not have a Schedule 4C pool at the beginning of the year of the transfer, this Schedule applies in relation to the further transfer as it applied in relation to the original transfer. (4) For the purposes of this paragraph a settlement has a Schedule 4C pool until the end of the tax year in which all section 2(2) amounts in the pool have been reduced to nil.

138

For paragraph 8 substitute—

(8) (1) Chargeable gains are treated as accruing in a tax year (“the relevant tax year”) to a beneficiary who has received a capital payment from the trustees of a relevant settlement in the relevant tax year or any earlier tax year if all or part of the capital payment is matched (under section 87A as it applies for the relevant tax year) with the section 2(2) amount in the Schedule 4C pool for the relevant tax year or any earlier tax year. (2) The amount of chargeable gains treated as accruing is equal to— (a) the amount of the capital payment, or (b) if only part of the capital payment is matched, the amount of that part. (3) Section 87A applies for a tax year for the purposes of matching capital payments received from the trustees of a relevant settlement with section 2(2) amounts in the Schedule 4C pool as if— (a) references to section 2(2) amounts were to section 2(2) amounts in the Schedule 4C pool, (b) references to a capital payment received from the trustees by a beneficiary were to a capital payment received from the trustees of a relevant settlement by a beneficiary who is chargeable to tax for that year, and (c) for section 87A(3)(b) there were substituted— (b) all section 2(2) amounts in the Schedule 4C pool have been reduced to nil. (4) Section 87A applies for a tax year by virtue of this paragraph before it applies for that year otherwise than by virtue of this paragraph; but this is subject to sub-paragraph (5). (5) If section 87A applies for a tax year by virtue of section 762(3) of the Taxes Act (offshore income gains), it applies for that year by virtue of that provision before it applies for that year by virtue of this paragraph.

139

After paragraph 8A insert—

(8AA) Section 87B (remittance basis) applies in relation to chargeable gains treated under paragraph 8 as accruing as it applies in relation to chargeable gains treated under section 87 as accruing.

140

Omit paragraphs 8B and 8C (including the heading before paragraph 8B).

141

For paragraph 9 (and the heading before it) substitute—

(9) (1) For the purposes of paragraph 8 (and section 87A as it applies for the purposes of that paragraph), no account is to be taken of a capital payment to which any of sub-paragraphs (2) to (4) applies (or a part of a capital payment to which sub-paragraph (4) applies). (2) This sub-paragraph applies to a capital payment received before the tax year preceding the tax year in which the original transfer is made. (3) This sub-paragraph applies to a capital payment that— (a) is received by a beneficiary of a settlement from the trustees in a tax year during the whole of which the trustees— (i) are resident and ordinarily resident in the United Kingdom, and (ii) are not Treaty non-resident, (b) was made before any transfer of value to which Schedule 4B applies was made, and (c) was not made in anticipation of the making of any such transfer of value or of chargeable gains accruing under that Schedule. (4) This sub-paragraph applies to a capital payment if (and to the extent that) it is received (or treated as received) in a tax year from the trustees by a company that— (a) is not resident in the United Kingdom in that year, and (b) would be a close company if it were resident in the United Kingdom, (and is not treated under any of subsections (3) to (5) of section 96 as received by another person).

142

In paragraph 10 (residence of trustees from whom capital payment received)—

• (a) in sub-paragraph (1), for “sub-paragraph (2) below” substitute “ paragraph 9(3) ”, and

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

143

• (1) Paragraph 12 (attribution of gains to settlor in section 10A cases) is amended as follows.

• (2) For sub-paragraphs (1) to (3) substitute—

(1) This paragraph applies if— (a) by virtue of section 10A, an amount of chargeable gains within section 86(1)(e) that accrued in an intervening year to the trustees of a settlement would be treated as accruing to a person (“the settlor”) in the year of return, and (b) after paragraph 8 has applied for the year of return, the section 2(2) amount for the intervening year that is in the Schedule 4C pool for the settlement is less than the amount mentioned in paragraph (a). (2) The amount of chargeable gains treated as mentioned in sub-paragraph (1)(a) as accruing to the settlor in the year of return is limited to the section 2(2) amount referred to in sub-paragraph (1)(b).

144

In paragraph 12A(3), for “87(4)” substitute “ 87(2) ”.

145

• (1) Paragraph 13 (increase in tax payable under this Schedule) is amended as follows.

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

(1) This paragraph applies if— (a) chargeable gains are treated under paragraph 8 as accruing to a beneficiary by virtue of the matching (under section 87A) of all or part of a capital payment with the section 2(2) amount for a tax year (“the relevant tax year”), and (b) the beneficiary is charged to tax by virtue of the matching. (1A) Where part of a capital payment is matched, references in sub-paragraphs (2) and (3) to the capital payment are to the part matched.

• (3) In sub-paragraph (5)(a), for the words from “year of assessment” to the end (excluding the “and”) substitute “ tax year immediately after the relevant tax year, ”.

146

Omit paragraph 3 and 6(2) and (3) of Schedule 29 to FA 2003.

Attribution of gains to beneficiaries in cases involving transfers of value: commencement etc

147

The amendments made by paragraphs 128 to 146 have effect in relation to transfers of value to which Schedule 4B to TCGA 1992 applies that are made on or after 6 April 2008.

148

For the purposes of paragraph 8 of Schedule 4C to TCGA 1992 (and section 87A of that Act as it applies for the purposes of that paragraph), no account is to be taken of any capital payment received before 21 March 2000.

149

A capital payment received before 6 April 2008 is not within paragraph 9(4) of Schedule 4C to TCGA 1992 (if it otherwise would be).

150

Paragraph 124 applies in relation to chargeable gains treated under paragraph 8 of Schedule 4C to TCGA 1992 as accruing as it applies in relation to chargeable gains treated under section 87 as accruing.

151

• (1) This paragraph applies for the tax year 2008-09 or any subsequent tax year (“the relevant tax year”) if—

• (a) an individual who was resident or ordinarily resident, but not domiciled, in the United Kingdom in the tax year 2007-08 received a capital payment from the trustees of a settlement on or after 12 March 2008 but before 6 April 2008, and

• (b) the individual is resident or ordinarily resident, but not domiciled, in the United Kingdom in the relevant tax year.

• (2) For the purposes of paragraph 8 of Schedule 4C to TCGA 1992 as it applies for the relevant tax year (and section 87A of that Act as it applies for those purposes), no account is to be taken of the capital payment.

Attribution of gains to beneficiaries: existing Schedule 4C pools

152

Schedule 4C to TCGA 1992 (as it has effect without the amendments made by paragraphs 128 to 146) applies for the tax year 2008-09 and subsequent tax years in relation to Schedule 4C pools created before 6 April 2008 (“existing Schedule 4C pools”) as if paragraphs 7B and 9(2) were omitted.

153

Any reduction in the amount of a capital payment has effect for the purposes of Schedule 4C to TCGA 1992 as it applies in relation to existing Schedule 4C pools (as well as for other purposes).

154

• (1) If all of a capital payment ceases (in the tax year 2008-09 or any subsequent tax year) to be available, the amount of the capital payment is reduced to nil.

• (2) If part of a capital payment ceases (in the tax year 2008-09 or any subsequent tax year) to be available, the amount of the capital payment is reduced by the amount of that part.

• (3) A capital payment “ceases to be available” in a tax year if and to the extent that, by reason of the capital payment, chargeable gains are treated under paragraph 8 of Schedule 4C to TCGA 1992 (as it has effect in relation to existing Schedule 4C pools) as accruing in that year to the recipient.

• (4) If—

• (a) chargeable gains are treated under paragraph 8 of Schedule 4C to TCGA 1992 (as it has effect in relation to existing Schedule 4C pools) as accruing in a tax year,

• (b) more than one capital payment that the beneficiary has received is taken into account for the purposes of determining the amount of chargeable gains treated as accruing to the beneficiary, and

• (c) the amount of the chargeable gains is less than the total amount of capital payments taken into account,

sub-paragraph (3) applies in relation to earlier capital payments before later ones.

155

In any tax year—

• (a) Schedule 4C to TCGA 1992 (as amended by paragraphs 128 to 146) applies in relation to a settlement before that Schedule (as it has effect without those amendments) applies in relation to the settlement, and

• (b) that Schedule (as it has effect without those amendments) applies in relation to the settlement before section 87 or 89(2) of that Act applies in relation to the settlement.

Transfers of securities: accrued income profits

156

In section 830(4) of ITTOIA 2005 (meaning of “relevant foreign income”)—

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

• (b) at the end of paragraph (g) insert—

(h) section 670A of ITA 2007 (accrued income profits),

.

157

In section 617 of ITA 2007 (accrued income profits: income charged), after subsection (6) insert—

(7) Subsection (1) is subject to section 832 of ITTOIA 2005 (relevant foreign income charged on remittance basis).

158

Omit section 644 of that Act (accrued income profits: individuals to whom remittance basis applies).

159

After section 670 of that Act insert—

(670A) (1) This section applies if— (a) accrued income profits are made by an individual as a result of a transfer of foreign securities, and (b) section 809B, 809D or 809E (remittance basis) applies to the individual for the tax year in which the profits are made. (2) Treat the accrued income profits as relevant foreign income of the individual. (3) For the purposes of Chapter A1 of Part 14 (remittance basis)— (a) if the individual is the transferor— (i) treat any consideration for the transfer as deriving from the accrued income profits, and (ii) if on the transfer the individual does not receive consideration of an amount equal to (or exceeding) the market value of the securities, treat the securities as deriving from the accrued income profits, and (b) if the individual is the transferee, treat the securities as deriving from the accrued income profits. (4) For the purposes of this section securities are “foreign” if income from them would be relevant foreign income.

160

The amendments made by paragraphs 156 to 159 have effect in relation to transfers of securities where the settlement day is on or after 6 April 2008.

Transfers of assets abroad

161

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

162

In section 830(4) of ITTOIA 2005 (meaning of “relevant foreign income”), after paragraph (h) insert

and (i) sections 726, 730 and 735 of that Act (transfer of assets abroad: foreign deemed income).

163

ITA 2007 is amended as follows.

164

In section 720(4) (transfer of assets abroad: charge where power to enjoy income), after “abroad)” insert “ and section 726 (non-UK domiciled individuals to whom remittance basis applies) ”.

165

For section 726 substitute—

(726) (1) This section applies in relation to income treated under section 721 as arising to an individual in a tax year (“the deemed income”) if— (a) section 809B, 809D or 809E (remittance basis) applies to the individual for the year, and (b) the individual is not domiciled in the United Kingdom in the year. (2) For the purposes of this section the deemed income is “foreign” if (and to the extent that) the income mentioned in section 721(2) would be relevant foreign income if it were the individual's. (3) Treat the foreign deemed income as relevant foreign income of the individual. (4) For the purposes of Chapter A1 of Part 14 (remittance basis) treat so much of the income within section 721(2) as would be relevant foreign income if it were the individual's as deriving from the foreign deemed income.

166

In section 727 (transfer of assets abroad: charge where capital sums received), after subsection (3) insert—

(3A) But see section 730 (non-UK domiciled individuals to whom remittance basis applies).

167

For section 730 substitute—

(730) (1) This section applies in relation to income treated under section 728 as arising to an individual in a tax year (“the deemed income”) if— (a) section 809B, 809D or 809E (remittance basis) applies to the individual for the year, and (b) the individual is not domiciled in the United Kingdom in the year. (2) For the purposes of this section the deemed income is “foreign” if (and to the extent that) the income mentioned in section 728(1)(a) would be relevant foreign income if it were the individual's. (3) Treat the foreign deemed income as relevant foreign income of the individual. (4) For the purposes of Chapter A1 of Part 14 (remittance basis) treat so much of the income within section 728(1)(a) as would be relevant foreign income if it were the individual's as deriving from the foreign deemed income.

168

In section 731 (transfer of assets abroad: charge where benefit received), after subsection (2) insert—

(2A) But see section 735 (non-UK domiciled individuals to whom remittance basis applies).

169

For section 735 substitute—

(735) (1) This section applies if— (a) income is treated under section 732 as arising to an individual in a tax year (“the deemed income”), (b) section 809B, 809D or 809E (remittance basis) applies to the individual for the year, and (c) the individual is not domiciled in the United Kingdom in the year. (2) For the purposes of this section the deemed income is “foreign” if (and to the extent that) the relevant income to which it relates would be relevant foreign income if it were the individual's. (3) Treat the foreign deemed income as relevant foreign income of the individual. (4) For the purposes of Chapter A1 of Part 14 (remittance basis) treat relevant income, or a benefit, that relates to any part of the foreign deemed income as deriving from that part of the foreign deemed income. (735A) (1) For the purposes of section 735— (a) place the benefits mentioned in Step 1 in the order in which they were received by the individual (starting with the earliest benefit received), (b) deduct from those benefits so much of any benefit within section 734(1)(b) as gives rise as mentioned in section 734(1)(d) to chargeable gains or offshore income gains, (c) place the income mentioned in Step 3 for the tax years mentioned in Step 4 (“the relevant income”) in the order determined under subsection (3), (d) deduct from that income any income that may not be taken into account because of section 743(1) or (2) (no duplication of charges), (e) place the income treated under section 732(2) as arising to the individual in respect of the benefits in the order in which it is treated as arising (starting with the earliest income treated as having arisen), and (f) treat the income mentioned in paragraph (e) as related to— (i) the benefits, and (ii) the relevant income, by matching that income with the benefits and the relevant income (in the orders mentioned in paragraphs (a), (c) and (e)). (2) In subsection (1) references to a step are to a step in section 733(1). (3) The order referred to in subsection (1)(c) is arrived at by taking the following steps. Step 1 Find the relevant income for the earliest tax year (of the tax years referred to in subsection (1)(c)). Step 2 Place so much of that income as is not foreign in the order in which it arose (starting with the earliest income to arise). Step 3 After that, place so much of that income as is foreign in the order in which it arose (starting with the earliest income to arise). Step 4 Repeat Steps 1 to 3. For this purpose, read references to the relevant income for the earliest tax year as references to the relevant income for the first tax year after the last tax year in relation to which those Steps have been undertaken. (4) For the purposes of subsection (3) relevant income is “foreign” where it would be relevant foreign income if it were the individual's. (5) For those purposes treat income for a period as arising immediately before the end of the period. (6) Subsection (1)(d) does not apply if the income may not be taken into account because the individual has been charged to income tax under section 731 by reason of the income.

170

The amendments made by paragraphs 161 to 169 have effect for the tax year 2008-09 and subsequent tax years.

General

171

For the purposes of this Part of this Schedule, the market value of any asset is its market value for the purposes of TCGA 1992.

SCHEDULE 8

Rates of research and development relief: SMEs

1

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

Rates of research and development tax relief: large companies

2

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

Rates of vaccine research relief

3

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

SCHEDULE 9

Research and development relief

1

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

Vaccine research relief

2

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

Commencement

3

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

SCHEDULE 10

Part 1 — Calculation of total R&D aid

Calculation of total R&D aid

1

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

2

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

3

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

4

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

5

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

Interpretation

6

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

Transitional provision

7

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

Part 2 — Consequential amendments

8

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

9

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

10

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

SCHEDULE 11

Corporate Venturing Scheme

1

Part 3 of Schedule 15 to FA 2000 (CVS: the issuing company) is amended as follows.

2

In paragraph 26 (excluded activities)—

• (a) in sub-paragraph (1), after paragraph (h) insert—

(ha) shipbuilding; (hb) producing coal; (hc) producing steel;

, and

• (b) in sub-paragraph (2), after the entry relating to paragraph 30 insert—

paragraph 30A (shipbuilding); paragraph 30B (producing coal); paragraph 30C (producing steel);

.

3

After paragraph 30 insert—

(30A) In paragraph 26(1)(ha) “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. (30B) (1) This paragraph supplements paragraph 26(1)(hb). (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. (30C) In paragraph 26(1)(hc) “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.

Enterprise Investment Scheme

4

Chapter 4 of Part 5 of ITA 2007 (EIS: the issuing company) is amended as follows.

5

In section 192 (meaning of “excluded activities”)—

• (a) in subsection (1), after paragraph (i) insert—

(ia) shipbuilding, (ib) producing coal, (ic) producing steel,

, and

• (b) in subsection (2), after paragraph (d) insert—

(da) section 196A (shipbuilding), (db) section 196B (producing coal), (dc) section 196C (producing steel),

.

6

After section 196 insert—

(196A) In section 192(1)(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. (196B) (1) This section supplements section 192(1)(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. (196C) In section 192(1)(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.

Venture capital trusts

7

Chapter 4 of Part 6 of ITA 2007 (VCTs: qualifying holdings) is amended as follows.

8

In section 303 (meaning of “excluded activities”)—

• (a) in subsection (1), after paragraph (i) insert—

(ia) shipbuilding, (ib) producing coal, (ic) producing steel,

, and

• (b) in subsection (2), after paragraph (d) insert—

(da) section 307A (shipbuilding), (db) section 307B (producing coal), (dc) section 307C (producing steel),

.

9

After section 307 insert—

(307A) In section 303(1)(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. (307B) (1) This section supplements section 303(1)(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. (307C) In section 303(1)(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.

Commencement

10

The amendments made by this Schedule are treated as having come into force on 6 April 2008.

11

But the amendments made by paragraphs 2, 3, 5 and 6 do not have effect in relation to shares issued before that date.

12

And the amendments made by paragraphs 8 and 9 do not have effect in relation to—

• (a) a relevant holding issued before that date, or

• (b) a relevant holding acquired by a company (“the investing company”) before 6 April 2018 by means of the investment of protected money.

13

For the purposes of paragraph 12(b) “protected money” is—

• (a) money raised by the issue before that date of shares in or securities of the investing company, or

• (b) money derived from the investment of such money.

SCHEDULE 12

Part 1 — The tax credit

1

Chapter 3 of Part 4 of ITTOIA 2005 (dividends etc from UK resident companies etc) is amended as follows.

2

In the heading of the Chapter, for “etc.”, in the second place, substitute “ and tax credits etc. in respect of certain distributions ”.

3

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

4

After section 397 insert—

(397A) (1) This section applies where a UK resident or eligible non-UK resident receives a relevant distribution made by a non-UK resident company, provided that— (a) the company is not an offshore fund (within the meaning of section 756A of ICTA), and (b) the person is a minority shareholder in the company at the time the distribution is received. (2) The person is entitled to a tax credit equal to one-ninth of the amount or value of the grossed up distribution (but see subsections (3) and (6)). (3) Subsection (2) only applies so far as the distribution is brought into charge to tax, and accordingly if the person's total income is reduced by any deductions which fall to be made from the distribution, the tax credit for the distribution is reduced in the same proportion as the distribution. (4) The person may claim to deduct the tax credit from the income tax charged on the person's total income for the tax year in which the distribution (or the part of the distribution to which the tax credit relates) is brought into charge to tax. (5) If a distribution is, or is treated under any provision of the Tax Acts as, the income of a person (“P”) other than the recipient (“R”), P (not R) is treated as receiving it for the purposes of this section (and so P (not R) is entitled to a tax credit if P falls within subsection (1)). (6) This section is subject to the following provisions— - section 171(2B) of FA 1993 (no tax credit for distributions in respect of assets in Lloyd's member's premium trust fund), - section 504(4) of ITA 2007 (disapplication of certain provisions for income of unauthorised unit trusts), - section 592 of ITA 2007 (no tax credits for borrower under stock lending arrangement), - section 593 of ITA 2007 (no tax credits for interim holder under repo), and - section 594 of ITA 2007 (no tax credits for original owner under repo). (7) In this section— - “eligible non-UK resident”, in relation to a distribution, means an individual who, at any time in the tax year in which the distribution (or the part of the distribution to which the tax credit relates) is brought into charge to tax, is a non-UK resident who meets the condition in section 56(3) of ITA 2007 (residence etc of claimants), - “grossed up distribution” means the distribution increased by the amount of any tax chargeable in respect of the distribution directly or by deduction under the laws of the territory in which the company is resident, including special withholding tax, - “minority shareholder”, in relation to a company, has the meaning given in section 397C, - “relevant distribution”, in relation to a person, means— 1. a qualifying distribution arising in a relevant tax year, 2. a cash dividend paid over to the person under paragraph 68(4) of Schedule 2 of ITEPA 2003 (cash dividend paid over if not reinvested etc) in a relevant tax year, and 3. a dividend treated under section 407 as paid to the person in a relevant tax year, - “relevant tax year” means the tax year 2008-09 or a subsequent tax year, and - “special withholding tax” has the meaning given in section 107(3) of FA 2004. (8) Section 397B makes provision about the application of this section in the case of overseas dividends arising from manufactured overseas dividends (within the meaning of Chapter 2 of Part 11 of ITA 2007). (397B) (1) This section applies where, under section 581 of ITA 2007, a person is treated as receiving an overseas dividend by virtue of having received a manufactured overseas dividend which is representative of an overseas dividend. (2) For the purposes of section 397A, the person is treated as receiving a relevant distribution made by a non-UK resident company that is not an offshore fund if, and only if, the manufactured overseas dividend is representative of such a distribution. (3) References in section 397A to the grossed up distribution have effect as if they were references to the gross amount of the overseas dividend of which the manufactured overseas dividend is representative, disregarding the amount of any overseas tax credit. (4) In this section— - “gross amount”, in relation to a manufactured overseas dividend, has the same meaning as in Chapter 2 of Part 11 of ITA 2007 (manufactured payments) (see section 589 of that Act), - “manufactured overseas dividend” and “overseas tax credit” have the same meaning as in Chapter 2 of that Part (see sections 581 and 591 of that Act), and - “overseas dividend” has the same meaning as in that Part (see section 567 of that Act). (397C) (1) In section 397A “minority shareholder”, in relation to a non-UK resident company, means a person whose shareholding in the company is less than 10% of the company's issued share capital. (2) Subsections (3) to (6) make provision about the circumstances in which shares form part of a person's shareholding in a company for the purposes of this section. (3) Shares form part of a person's shareholding in a company to the extent that the person is beneficially entitled to the shares or to a distribution arising in respect of the shares (or both). (4) Shares form part of a person's shareholding in the company where— (a) a person is a settlor in relation to a settlement, and (b) income arising from shares comprised in the settlement is treated for income tax purposes as the income of that person and of that person alone. (5) Shares form part of the shareholding in a company of a person (“P”) if— (a) they form part of the shareholding in the company of a person connected with P, (b) P transferred the shares to the connected person or arranged for the connected person to acquire the shares, and (c) the purpose of the transfer or arrangement was wholly or mainly to enable P to avoid tax. (6) Shares form part of a person's shareholding in a company if that person has transferred the shares to another person under a repo or stock lending arrangement. (7) In this section— - “repo” has the same meaning as in Part 11 of ITA 2007 (see section 569 of that Act), - “settlement” and “settlor” have the same meaning as in Chapter 5 of Part 5 of this Act, and - “stock lending arrangement” has the same meaning as in Part 11 of ITA 2007 (see section 568 of that Act).

5

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

6

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

Part 2 — Consequential provision

TMA 1970

7

TMA 1970 is amended as follows.

8

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

9

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

10

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

11

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

12

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

13

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

14

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

ICTA

15

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

FA 1993

16

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

ITTOIA 2005

17

ITTOIA 2005 is amended as follows.

18

In section 403(1) (dividends from non-UK resident companies: income charged), omit “full”.

19

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

20

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

21

In section 408 (reduction in tax due in cases within section 407), after subsection (2) insert—

(2A) In subsection (2) “the tax due” means the amount of tax due as a result of section 407 after deduction of the tax credit determined in accordance with section 407(4A).

22

In section 688(1) (income not otherwise charged), omit “full”.

ITA 2007

23

ITA 2007 is amended as follows.

24

In section 425(5) (gift aid: deductions when calculating total amount of income tax to which individual charged for a tax year)—

• (a) in paragraph (a), omit “and” at the end of sub-paragraph (v), and

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

25

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

26

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

27

• (1) Section 592 (no tax credits for borrower under stock lending arrangement) is amended as follows.

• (2) In subsection (1)—

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

• (b) in paragraph (c), omit “UK”, and

• (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

28

• (1) Section 593 (no tax credits for interim holder under repo) is amended as follows.

• (2) In subsection (1)—

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

• (b) in paragraphs (b) and (d), omit “UK”, and

• (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

29

• (1) Section 594 (no tax credits for original owner under repo) is amended as follows.

• (2) In subsection (1)—

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

• (b) in paragraph (b), omit “UK”,

• (c) in paragraph (d)—

• (i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (ii) omit “UK”, and

• (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

30

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

31

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

SCHEDULE 13

Definitions

1

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

Contract to be loan relationship

2

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

Increased non-trading credits

3

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

4

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

Commencement

5

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

6

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

7

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

8

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

SCHEDULE 14

ICTA

1

ICTA is amended as follows.

2

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

3

Omit sections 539 to 551A (corporation tax in respect of gains arising in connection with life policies etc).

4

• (1) Section 552 (information: duty of insurers) is amended as follows.

• (2) In subsection (3), omit—

• (a) the words from “(or” to “year)”, and

• (b) “, and the corresponding financial year,”.

• (3) In subsection (5)—

• (a) in paragraph (b)—

• (i) omit “section 546C(7)(a) of this Act and”, and

• (ii) for “the year and the insurance year end” substitute “ the insurance year ends ”, and

• (b) in paragraph (c), omit—

• (i) “this Chapter and”,

• (ii) in sub-paragraph (i), “the amount or value of any relevant capital payments and”,

• (iii) in sub-paragraph (iii), the words from the beginning to “656 and”, and

• (iv) in sub-paragraph (v), the words from the beginning to “year and”.

• (4) In subsection (6)—

• (a) in paragraph (b)—

• (i) omit “section 546C(7)(a) of this Act (and”,

• (ii) omit the closing bracket after “2005”, and

• (iii) for “the year (and the insurance year)” substitute “ the insurance year ”, and

• (b) in paragraph (c), omit “section 546C(7)(a) of this Act (and” and the closing bracket after “2005”.

• (5) In subsection (7)—

• (a) in paragraph (a), omit “, or, where the policy holder is a company, the financial year,”, and

• (b) in paragraph (b), for the words from “section 546C(7)(a)” to “insurance year)” substitute “ section 514(1) of ITTOIA 2005, the period of three months following the end of the insurance year ”.

• (6) In subsection (8)(c), omit the words from “or” to “financial year”.

• (7) In subsection (9)—

• (a) in the words before paragraph (a), omit “or financial year”,

• (b) in paragraph (a), for the words from “section 546C(7)(b)” to the end substitute “ subsection (1) of section 514 of ITTOIA 2005, the year of assessment which includes the end of the insurance year mentioned in subsection (3) and (4) of that section; ”, and

• (c) in paragraph (b) omit “or financial year”.

• (8) In subsection (10)—

• (a) in the definition of “amount”, omit “section 553(3) of this Act and”,

• (b) in the definition of “chargeable event”, omit “this Chapter and”,

• (c) omit the definition of “financial year”,

• (d) after that definition insert—

• “insurance year” has the same meaning as in Chapter 9 of Part 4 of ITTOIA 2005 (see section 499 of that Act);

,

• (e) in the definition of “the relevant year of assessment”, omit paragraph (b) and the “or” before it, and

• (f) omit the definitions of “section 546 excess” and “year”.

• (9) Omit subsection (11).

• (10) In subsection (13), omit “section 548A above or”.

5

In section 552ZA(3) (information: supplementary provisions), omit “section 546C(7)(a) of this Act and”.

6

In section 552A(12) (tax representatives)—

• (a) omit “this Chapter and” in each place, and

• (b) for “have” substitute “ has ” in each place.

7

Omit sections 553 to 553C (further provisions about corporation tax in respect of gains arising in connection with life policies etc).

8

Omit sections 656 to 658 (purchased life annuities).

9

In paragraph 20 of Schedule 15 (qualifying policies)—

• (a) in sub-paragraph (1)(a), omit “and 540 and 541”, and

• (b) in sub-paragraph (3)—

• (i) in paragraph (a), omit “and 540 and 541”, and

• (ii) omit paragraph (b) and the “and” before it.

ITTOIA 2005

10

ITTOIA 2005 is amended as follows.

11

In section 467(5) (persons liable: UK resident trustees), for paragraph (c) substitute—

(c) neither section 465 nor section 466 applies.

12

In section 469(2) (two or more persons interested in policy or contract), omit “above and section 547(1) of ICTA (persons liable for tax etc.)”.

13

Omit section 486 (exclusion of maturity of capital redemption policies in certain circumstances).

14

In section 501 (part surrenders: loans)—

• (a) in subsection (1), insert “ or ” at the end of paragraph (a) and omit paragraph (c) and the “or” before it”, and

• (b) omit subsection (4).

15

In section 541B(7) (section 541A: further definitions), omit paragraph (b) and the “or” before it.

16

In Schedule 1 (consequential amendments), omit paragraphs 210 to 221 and 226 to 228.

Other repeals

17

Omit—

• (a) in FA 1989, section 90 and Schedule 9,

• (b) in FA 1991, section 76(1),

• (c) in F(No.2)A 1992, paragraph 15 of Schedule 9,

• (d) in FA 1995, section 55(8),

• (e) in FA 1996, section 168(4) to (6) and paragraph 1A of Schedule 9,

• (f) in FA 1997, section 79,

• (g) in FA 1998, sections 88 and 89 and paragraphs 1 to 4 of Schedule 14,

• (h) in FA 1999, section 80 and paragraphs 16 and 18(3) of Schedule 4,

• (i) in FA 2000, in section 46(2A), “547(1)(b)”,

• (j) in FA 2001, section 83(2) and Part 1 of Schedule 28,

• (k) in FA 2002, section 87 and paragraph 21 of Schedule 25,

• (l) in FA 2003, section 171 and Schedule 34,

• (m) in FA 2004, paragraphs 25 and 27 of Schedule 35,

• (n) in ITTOIA 2005, paragraph (b) of section 473(2) and the “or” before it, paragraphs 268(1) and (2), 269 and 493 of Schedule 1 and paragraph 86(3) of Schedule 2,

• (o) in ITA 2007, paragraphs 111 and 141 of Schedule 1, and

• (p) in FA 2007, section 29(1), paragraphs 45 and 46 of Schedule 7 and paragraph 6(3) of Schedule 10.

Commencement

18

• (1) The amendments made by this Schedule—

• (a) so far as relating to corporation tax, have effect for accounting periods beginning on or after 1 April 2008, and

• (b) so far as relating to income tax, have effect for the tax year 2008-09 and subsequent tax years.

• (2) The amendments made by paragraphs 4 to 6 also have effect in relation to deemed surrenders under paragraph 6(1) of Schedule 13.

SCHEDULE 15

Part 1 — Income tax

1

ITTOIA 2005 is amended as follows.

2

After section 172 insert—

(172A) (1) In this Chapter “trading stock”, in relation to a trade, means anything (whether land or other property)— (a) which is sold in the ordinary course of trade, or (b) which would be so sold if it were mature or its manufacture, preparation or construction were complete. (2) It does not include— (a) materials used in the manufacture, preparation or construction of any such thing, (b) any services performed in the ordinary course of the trade, or (c) any article produced, or any material used, in the performance of any such services. (172B) (1) This section applies if trading stock of a person's trade is appropriated by the person for any other purpose. (2) In calculating the profits of the trade— (a) the amount which the stock appropriated would have realised if sold in the open market at the time of the appropriation is brought into account as a receipt, and (b) the value of anything in fact received for it is left out of account. (3) The receipt is treated as arising on the date of the appropriation. (172C) (1) This section applies if something that— (a) belongs to a person carrying on a trade, but (b) is not trading stock of the trade, becomes trading stock of the trade. (2) In calculating the profits of the trade— (a) the cost of the stock is taken to be the amount which it would have realised if sold in the open market at the time it became trading stock of the trade, and (b) the value of anything in fact given for it is left out of account. (3) The cost is treated as being incurred on the date it became trading stock of the trade. (172D) (1) This section applies if— (a) trading stock of a trade is disposed of otherwise than in the course of a trade, and (b) section 172B does not apply. (2) In calculating the profits of the trade— (a) the amount which the stock disposed of would have realised if sold in the open market at the time of the disposal is brought into account as the receipt, and (b) any consideration obtained for it is left out of account. (3) The receipt is treated as arising on the date of the disposal. (4) This section is subject to section 172F. (172E) (1) This section applies if— (a) trading stock of a trade has been acquired otherwise than in the course of trade, and (b) section 172C does not apply. (2) In calculating the profits of the trade— (a) the cost of the stock is taken to be the amount which it would have realised if sold in the open market at the time of the acquisition, and (b) the value of anything in fact given for it is left out of account. (3) The cost is treated as being incurred on the date of the acquisition. (4) This section is subject to section 172F. (172F) (1) Section 172D or 172E does not apply if the relevant consideration— (a) falls to be adjusted for tax purposes under Schedule 28AA to ICTA, or (b) falls within that Schedule without falling to be so adjusted. (2) For the purposes of subsection (1)(b), the relevant consideration falls within Schedule 28AA to ICTA without falling to be adjusted under that Schedule if— (a) the conditions in paragraph 1(1) of that Schedule are met, but (b) either— (i) the actual provision does not differ from the arm's length provision, or (ii) the exception in paragraph 8, 10 or 13 of that Schedule applies. (3) In this section “relevant consideration” means— (a) in relation to section 172D, the consideration for the disposal of the stock, and (b) in relation to section 172E, the consideration for the acquisition of the trading stock.

3

In the heading of Chapter 12 of Part 2, insert at the end insert “ on cessation of trade ”.

4

In Schedule 4, in the table in Part 2, after the entry relating to “trade” insert—

trading stock (in relation to a trade) (in Chapter 11A of Part 2)	section 172A

.

Part 2 — Corporation tax

Introduction

5

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

Transfers of trading stock between trade and trader

6

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

7

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

Other disposals not made in the course of trade

8

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

9

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

Relationship with transfer pricing rules

10

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

SCHEDULE 16

Part 1 — Eligibility to be UK representative

1

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

2

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

Part 2 — Eligibility to be agent of independent status

FA 2003

3

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

ITA 2007

4

ITA 2007 is amended as follows.

5

• (1) Section 827 (meaning of “investment transaction”) is amended as follows.

• (2) For subsections (2) and (3) substitute—

(2) In this section “investment transaction” means any transaction of a description specified for the purposes of this section in regulations made by the Commissioners for Her Majesty's Revenue and Customs. (3) Provision made in regulations under subsection (2) may, in particular, have effect in relation to the tax year current on the day on which the regulations are made.

6

• (1) Section 1014(2) (orders and regulations under the Income Tax Acts: excluded powers) is amended as follows.

• (2) In paragraph (g)(iia), omit “and”.

• (3) After paragraph (g)(iia) insert—

(iib) section 827(2) (meaning of “investment transaction”), and

.

Part 3 — Non-residents liable to tax: disregarded investment income or profits

FA 2003

7

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

8

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

9

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

ITA 2007

10

• (1) Section 818 of ITA 2007 (the independent investment manager conditions) is amended as follows.

• (2) In subsection (1), for the words from “if” to the end substitute “ if conditions A to E are met. ”

• (3) Omit subsections (7) and (8).

Part 4 — Commencement

11

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

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

• (3) The amendments made by paragraph 10 have effect for the tax year 2008-09 and subsequent tax years.

• (4) Subject to sub-paragraphs (1) to (3), the amendments made by this Schedule come into force on the day on which this Act is passed.

• (5) But, despite the coming into force of paragraph 2, 3 or 5—

• (a) the superseded provision, and

• (b) any regulations made under the superseded provision,

continue to have effect until such time as the first regulations under the new regulation-making power come into force.

• (6) In sub-paragraph (5)—

• “new regulation-making power” means the regulation-making power substituted by paragraph 2, 3 or 5, and

• “superseded provision” means—in relation to paragraph 2, the existing section 127(12) and (13) of FA 1995,in relation to paragraph 3, the existing paragraph 3(3) and (4) of Schedule 26 to FA 2003, orin relation to paragraph 5, the existing section 827(2) and (3) of ITA 2007.

SCHEDULE 17

Financing-arrangement-funded transfers

1

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

2

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

3

In consequence of paragraphs 1 and 2, omit—

• (a) paragraph 2(2A) of Schedule 11 to FA 1996,

• (b) paragraph 3 of Schedule 33 to FA 2003,

• (c) paragraph 8 of Schedule 11 to FA 2006, and

• (d) paragraph 1 of Schedule 10 to FA 2007.

4

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

Expenses: fronting reinsurance commissions etc

5

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

6

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

Structural assets

7

In section 83XA of FA 1989 (structural assets), omit—

• (a) subsections (10) and (11), and

• (b) in subsection (15), “or (10)”.

8

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

Deposit back arrangements

9

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

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

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

Foreign business assets

10

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

Foreign currency assets

11

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

Derivative contracts

12

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

Apportionments

13

In section 210A of TCGA 1992 (ring fencing of losses), after subsection (10) insert—

(10A) But where the BLAGAB profits for an accounting period are nil, the policy holders' share of the chargeable gains or allowable losses accruing in the accounting period— (a) if there are Case I profits of the accounting period in respect of its life assurance business, is nil, and (b) otherwise, is such proportion of the chargeable gains or allowable losses as is just and reasonable; and for this purpose there are Case I profits if there are profits computed in accordance with the provisions applicable to Case I of Schedule D after making adjustments in respect of losses in accordance with section 85A(4) of the Finance Act 1989.

14

In section 755A of ICTA (treatment of chargeable profits and creditable tax apportioned to life assurance company), after subsection (11B) insert—

(11BA) But where the BLAGAB profits for the relevant accounting period are nil, the relevant fraction— (a) if there are Case I profits of the accounting period in respect of its life assurance business, is nil, and (b) otherwise, is such fraction as is just and reasonable; and for this purpose there are Case I profits if there are profits computed in accordance with the provisions applicable to Case I of Schedule D after making adjustments in respect of losses in accordance with section 85A(4) of the Finance Act 1989.

15

The amendments made by paragraphs 13 and 14 have effect in relation to accounting periods beginning on or after 1 January 2008 and ending on or after 12 March 2008.

UK distributions received by insurance companies

16

• (1) In ICTA, after section 95 insert—

(95ZA) (1) If the total amount of relevant distributions received by a company in an accounting period exceeds £50,000, those distributions are to be taken into account in calculating for corporation tax purposes the profits of the company in that period (and accordingly section 208 does not apply in relation to those distributions). (2) A company (“company A”) receives a “relevant distribution” if— (a) it receives a distribution made by a company resident in the United Kingdom (“company B”), (b) the value of the shares or stock in respect of which the distribution is made (“the holding”) is materially reduced by reason of the distribution, (c) a profit on the sale of the holding (to anyone other than company B) would be taken into account in calculating company A's profits in respect of relevant insurance business, and (d) either— (i) the holding amounts to, or is an ingredient in a holding amounting to, 10% of all holdings of the same class in company B, or (ii) the period between the acquisition by company A of the holding and that company first taking steps to dispose of the holding does not exceed 30 days. (3) In this section “relevant insurance business” means any kind of insurance business other than life assurance business. (4) Section 177(7) of TCGA 1992 (provision supplementing provision corresponding to subsection (2)(d)(i) above) applies for the purposes of subsection (2)(d)(i). (5) Section 731(4) below (interpretation of “taking steps to dispose of securities”) applies for the purposes of subsection (2)(d)(ii) as if the reference to the securities were to the holding.

• (2) The amendment made by sub-paragraph (1) has effect in relation to distributions made on or after 1 April 2008.

Clarification of scope of ICTA s.432A

17

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

“BLAGAB profits” etc

18

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

Abolition of “inherited estates” apportionment rules

19

• (1) Chapter 1 of Part 12 of ICTA (insurance companies) is amended as follows.

• (2) In section 431(2ZB) and (2ZC) (interpretative provisions), insert “or” at the end of paragraph (b) and omit paragraph (d) and the “or” before it.

• (3) In section 432A (apportionment of income and gains), omit—

• (a) in subsection (6), paragraph (b) of the definition of A (but not the “and” following it),

• (b) in subsection (8), paragraph (b) and the “and” before it, and

• (c) subsections (8A) and (8B).

• (4) In section 432B (apportionment of receipts brought into account), omit subsections (4) to (12).

• (5) The amendments made by this paragraph have effect in relation to periods of account beginning on or after 1 January 2007.

Insurance special purpose vehicles

20

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

Group relief: gross profits to exclude relevant profits

21

Charges on income

22

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

Remediation of contaminated land

23

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

Repeal of ICTA s.56(4)

24

• (1) In section 56 of ICTA (transactions in deposits and debts), omit subsection (4) (which relates to section 76(2) computations and is spent).

• (2) In consequence of sub-paragraph (1), in section 164 of FA 1996, omit subsection (4) (which amends section 56(4) of ICTA).

Partnership returns

25

In section 12AE(2) of TMA 1970 (partnership returns: alternative methods for bringing amounts into charge to tax), for “84(2) or (3)” substitute “ 84(1) ”.

Overseas life assurance business

26

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

27

• (1) In section 476(3) of ITTOIA 2005 (foreign policies), omit—

• (a) “as a result of section 431D(1)(a) of ICTA (business with a non-UK resident policy holder)”, and

• (b) “as a result of section 431D(1) of ICTA”.

• (2) In consequence of sub-paragraph (1), omit paragraph 78 of Schedule 7 to FA 2007.

• (3) The amendments made by this paragraph have effect as if they were made by Schedule 7 to FA 2007 (see section 38(2) of that Act).

Trades in I minus E

28

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

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

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

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

Controlled foreign companies

29

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

Offshore income gains

30

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

Transfers of business

31

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

32

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

33

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

Periodical return

34

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

Repeal of section 737D of ICTA

35

• (1) In ICTA, omit section 737D (power to provide that manufactured payments are to be treated as income eligible for relief under section 438).

• (2) In consequence of sub-paragraph (1), omit—

• (a) section 83(1) of FA 1995,

• (b) section 139(6) of FA 2006, and

• (c) paragraph 175 of Schedule 1 to ITA 2007.

R&D relief

36

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

Section 89(7) of FA 1989

37

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

Commencement of Schedule 9 to FA 2007

38

• (1) Paragraph 17 of Schedule 9 to FA 2007 (transfers: commencement) is amended as follows.

• (2) In sub-paragraph (2), for “9, 10(3) to (5),” substitute “ 10(5), ”.

• (3) In sub-paragraph (3)—

• (a) after “effect” insert “ (a) ”, and

• (b) insert at the end

and (b) in relation to periods of account ending after 30 June 2008 where the transfer of business or demutualisation concerned took place on or after 21 March 2007 and before 1 July 2008.

• (4) After sub-paragraph (4) insert—

(4A) The amendment made by paragraph 9 has effect in relation to contracts entered into in a period of account beginning on or after 1 January 2008.

• (5) Insert at the end—

(6) The amendments made by paragraph 10(3) and (4) have effect in relation to assets transferred on or after 1 January 2008.

Commencement of Business Transfer Schemes Order

39

• (1) In article 1(5) of the Insurance Business Transfer Schemes (Amendment of the Corporation Tax Acts) Order 2008 (S.I. 2008/381), for “other” substitute “ earlier ”.

• (2) In article 29(2), for “ “assuming the transferor had continued to carry on the business transferred after the transfer”” substitute “assuming that the transferor had continued to carry on the business transferred” .

• (3) The amendments made by this paragraph are to be treated as always having had effect.

Gross roll-up business

40

• (1) In section 436A(6) of ICTA (gross roll-up business: separate charge on profits), omit “under subsection (4) above”.

• (2) The amendment made by sub-paragraph (1) has effect in relation to periods of account beginning on or after 1 January 2008 and ending on or after 12 March 2008.

Repeal of spent provision

41

In section 88(5) of FA 1989 (policy holders' share of profits), omit the words after “January 1990”.

SCHEDULE 18

Introduction

1

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

PHI business

2

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

Transfers of exempt “other” business

3

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

Extension of section 463

4

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

Repeal of obsolete provisions

5

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

SCHEDULE 19

Payment of gift aid supplement

1

• (1) A charity is entitled to be paid an amount by the Commissioners (referred to in this Schedule as a payment of “gift aid supplement”) if the following conditions are met.

• (2) Condition A is that a gift aid donation is made to the charity in a transitional tax year.

• (3) Condition B is that the charity makes a claim for the donation to be exempt from tax by virtue of—

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

• (b) section 521(4) of ITA 2007 (charitable trusts), ...

• (ba) section 472 of CTA 2010 (charitable companies),

• (bb) section 475 of CTA 2010 (eligible bodies), or

• (c) section 664(1) of CTA 2010 (community amateur sports clubs).

• (4) Condition C is that the claim is made within the period of two years beginning immediately after the end of—

• (a) the accounting period to which the claim relates (in a case falling within sub-paragraph (3)(ba), (bb) or (c)), or

• (b) the tax year to which the claim relates (in a case falling within sub-paragraph (3)(b)).

• (5) Condition D is that the claim is allowed.

Amount of gift aid supplement

2

• (1) The amount of gift aid supplement that a charity is entitled to be paid in respect of a gift aid donation is—

$$DGN-DGA$where—DGN is the amount of the gift aid donation grossed up by reference to the notional basic rate for the transitional tax year, andDGA the amount of the gift aid donation grossed up by reference to the actual basic rate of income tax for the transitional tax year.$

• (2) A charity is not entitled to be paid gift aid supplement in respect of a gift aid donation if the amount determined in accordance with sub-paragraph (1) is a negative amount.

The “notional basic rate”

3

• (1) The “notional basic rate” for a transitional tax year is calculated by adding together—

• (a) the actual basic rate of income tax for that year, and

• (b) the transitional supplement for that year.

• (2) But if the rate calculated for a transitional tax year by adding those two things together is more than 22%, the notional basic rate for that year is 22%.

• (3) The “transitional supplement” for each transitional tax year is 2%.

• (4) Section 998 of ITA 2007 applies to the grossing up of an amount by reference to a notional basic rate as if the notional basic rate were an actual rate of tax.

Errors in connection with payment of gift aid supplement

4

• (1) This paragraph applies if an officer of Revenue and Customs discovers that payment or set-off of an amount of gift aid supplement—

• (a) ought not to have been made, or

• (b) is or has become excessive.

• (2) The relevant amount of gift aid supplement may be recovered as if it were an amount of income tax wrongly repaid to the charity (and, in particular, section 30 of TMA 1970 and paragraph 52 of Schedule 18 to FA 1998 apply accordingly).

• (3) An amount to be recovered in accordance with sub-paragraph (2) is liable to interest as if it were an amount of income tax wrongly repaid to the charity.

• (4) In this paragraph “relevant amount of gift aid supplement” means the payment or set-off of the amount of gift aid supplement, to the extent that it—

• (a) ought not to have been made, or

• (b) is or has become excessive.

• (5) For the purposes of this paragraph income tax is “wrongly repaid” to a charity if it is an amount repaid to the charity which ought not to have been repaid.

• (6) For the purposes of this paragraph it does not matter if a charity is within the charge to income tax or the charge to corporation tax.

General

5

Gift aid supplement is not—

• (a) income for the purposes of income tax, or

• (b) profits for the purposes of corporation tax.

6

Any expenditure incurred by the Commissioners under this Schedule is to be paid out of money provided by Parliament.

7

In this Schedule—

• “charity” has the same meaning as in Chapter 2 of Part 8 of ITA 2007 (gift aid);

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

• “gift aid donation” means a gift which is a qualifying donation for the purposes of Chapter 2 of Part 8 of ITA 2007;

• “gift aid supplement” has the meaning given in paragraph 1(1);

• “transitional tax year” means each of the tax years 2008-09, 2009-10 and 2010-11.

Amendments

8

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

9

In section 521 of ITA 2007 (gifts entitling donor to gift aid relief: income tax liability and exemption of charity), after subsection (6) insert—

(7) Schedule 19 to FA 2008 contains provision for transitional payments to charitable trusts in respect of gifts made in the tax years 2008-09 to 2010-11.

SCHEDULE 20

Capital received in respect of lease to be treated as income

1

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

2

• (1) In ITA 2007, after section 809 insert—