Legalize / United Kingdom / Public General Act

Finance Act 2012

Type Public General Act

Publication 2012-07-17

State In force

Department Statute Law Database

Source legislation.gov.uk

Reform history JSON API

PART 1 — Income tax, corporation tax and capital gains tax

CHAPTER 1 — Income tax and corporation tax charges and rate bands

Income tax

Charge for 2012-13 and rates for 2012-13 and subsequent tax years

1

(1) Income tax is charged for the tax year 2012-13, and for that tax year—

(a) the basic rate is 20%,

(b) the higher rate is 40%, and

(2) For the tax year 2013-14—

(a) the basic rate is 20%,

(b) the higher rate is 40%, and

(3) In Chapter 2 of Part 2 of ITA 2007 (rates at which income tax is charged)—

(a) in section 8(3) (dividend additional rate), for “42.5%” substitute “ 37.5% ”,

(b) in section 9(1) (trust rate), for “50%” substitute “ 45% ”, and

(4) In section 394 of ITEPA 2003 (charge on relevant benefits provided under employer-financed retirement benefits scheme), in subsection (4) for “50%” substitute “ 45% ”.

(5) In section 640 of ITTOIA 2005 (capital sums treated as income of the settlor: grossing-up of deemed income), in subsection (6)(b)—

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

(b) in sub-paragraph (iii) for “or any subsequent tax year.” substitute “ , 2011-12 or 2012-13, and ”, and

(iv) 45%, if the relevant year is the year 2013-14 or any subsequent tax year.

(6) The amendments made by subsections (3) to (5) have effect for the tax year 2013-14 and subsequent tax years.

Basic rate limit for 2012-13

2

(1) For the tax year 2012-13 the amount specified in section 10(5) of ITA 2007 (basic rate limit) is replaced with “ £34,370 ”.

(2) Accordingly section 21 of that Act (indexation of limits), so far as relating to the basic rate limit, does not apply for that tax year.

Group supplies using an overseas member

3

(1) For the tax year 2012-13 the amount specified in section 35(1) of ITA 2007 (personal allowance for those aged under 65) is replaced with “ £8,105 ”.

(2) Accordingly section 57 of that Act (indexation of allowances), so far as relating to the amount specified in section 35(1) of that Act, does not apply for that tax year.

Personal allowances from 2013

4

(1) Chapter 2 of Part 3 of ITA 2007 (personal allowance etc) is amended in accordance with subsections (2) to (6).

(2) In section 35 (personal allowance for those aged under 65)—

(a) in subsection (1), for paragraph (a) substitute—

(a) was born after 5 April 1948, and

, and

(b) in the heading for “aged under 65” substitute “ born after 5 April 1948 ”.

(3) In section 36 (personal allowance for those aged 65 to 74)—

(a) for subsection (1) substitute—

(1) An individual who makes a claim is entitled to a personal allowance of £10,500, or (if greater) the section 35 amount, for a tax year if the individual— (a) was born after 5 April 1938 but before 6 April 1948, and (b) meets the requirements of section 56 (residence etc).

(b) in subsection (2)—

(i) for “For” substitute “ If the allowance under subsection (1) is greater than the section 35 amount, for ”,

(ii) in paragraph (a), for “half the excess” substitute “ an amount equal to half of that excess income ”, and

(iii) in paragraph (b), for the words from “amount” to the end substitute “ section 35 amount. ”,

(2A) In this section “the section 35 amount” means the amount of any allowance to which the individual would be entitled under section 35 for the tax year if the individual had been born after 5 April 1948.

, and

(d) in the heading for “aged 65 to 74” substitute “ born after 5 April 1938 but before 6 April 1948 ”.

(4) In section 37 (personal allowance for those aged 75 and over)—

(a) for subsection (1) substitute—

(1) An individual who makes a claim is entitled to a personal allowance of £10,660, or (if greater) the section 35 amount, for a tax year if the individual— (a) was born before 6 April 1938, and (b) meets the requirements of section 56 (residence etc).

(b) in subsection (2)—

(i) for “For” substitute “ If the allowance under subsection (1) is greater than the section 35 amount, for ”,

(ii) in paragraph (a), for “half the excess” substitute “ an amount equal to half of that excess income ”, and

(iii) in paragraph (b), for the words from “amount” to the end substitute “ section 35 amount. ”,

(2A) In this section “the section 35 amount” means the amount of any allowance to which the individual would be entitled under section 35 for the tax year if the individual had been born after 5 April 1948.

, and

(d) in the heading for “aged 75 and over” substitute “ born before 6 April 1938 ”.

(5) In section 41 (allowances in year of death), omit subsections (2) and (3).

(6) In section 57 (indexation of allowances)—

(a) in subsection (1)—

(i) in paragraph (a) for “aged under 65” substitute “ born after 5 April 1948 ”, and

(ii) omit paragraphs (b) and (c), and

(b) in subsection (3)(a), for “, 36(1), 37(1),” substitute “ and ”.

(7) In section 508A of ICTA (contemplative religious communities: profits exempt from corporation tax), in subsections (5) and (9)(b) for “under 65” substitute “ born after 5 April 1948 ”.

(8) The amendments made by this section have effect for the tax year 2013-14 and subsequent tax years.

Corporation tax

Main rate of corporation tax for financial year 2012

5

(1) In section 5(2)(a) of FA 2011 (main corporation tax rate for financial year 2012 on profits other than ring fence profits), for “25%” substitute “ 24% ”.

(2) The amendment made by this section is treated as having come into force on 1 April 2012.

Charge and main rate for financial year 2013

6

(1) Corporation tax is charged for the financial year 2013.

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

(a) 23% 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 same meaning as in Part 8 of CTA 2010 (see section 276 of that Act).

Small profits rate and fractions for financial year 2012

7

(1) For the financial year 2012 the small profits rate is—

(a) 20% on profits of companies other than ring fence profits, and

(b) 19% on ring fence profits of companies.

(2) For the purposes of Part 3 of CTA 2010, for that year—

(a) the standard fraction is 1/100th, and

(b) the ring fence fraction is 11/400ths.

(3) In subsection (1) “ring fence profits” has the same meaning as in Part 8 of that Act (see section 276 of that Act).

CHAPTER 2 — Income tax: general

Child benefit

High income child benefit charge

8

Schedule 1 contains provision for and in connection with a high income child benefit charge.

Anti-avoidance

Post-cessation trade or property relief: tax-generated payments or events

9

(1) Part 4 of ITA 2007 (loss relief) is amended as follows.

(2) In section 96(7) (post-cessation trade relief), after paragraph (b) insert—

(ba) section 98A (denial of relief for tax-generated payments or events),

(3) After section 98 insert—

(98A) (1) Post-cessation trade relief is not available to a person in respect of a payment or an event which is made or occurs directly or indirectly in consequence of, or otherwise in connection with, relevant tax avoidance arrangements (and, accordingly, no section 261D claim may be made in respect of the payment or event). (2) For this purpose “relevant tax avoidance arrangements” means arrangements— (a) to which the person is a party, and (b) the main purpose, or one of the main purposes, of which is the obtaining of a reduction in tax liability as a result of the availability of post-cessation trade relief (whether by making a claim for that relief or a section 261D claim). (3) In this section— (a) “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable), and (b) “section 261D claim” means a claim under section 261D of TCGA 1992.

(4) In section 125(6) (post-cessation property relief), after paragraph (b) insert—

(ba) section 98A (denial of relief for tax-generated payments or events),

(5) The amendments made by subsections (2) and (3) have effect in relation to—

(a) payments which are made on or after 12 January 2012 except where they are made pursuant to an unconditional obligation in a contract made before that date, or

(b) events which occur on or after that date.

(6) The amendment made by subsection (4) has effect in relation to—

(a) payments which are made on or after 13 March 2012 except where they are made pursuant to an unconditional obligation in a contract made before that date, or

(b) events which occur on or after that date.

(7) In subsections (5)(a) and (6)(a) “an unconditional obligation” means an obligation which may not be varied or extinguished by the exercise of a right (whether under the contract or otherwise).

(8) For the purposes of subsections (5)(b) and (6)(b) section 98 of ITA 2007 applies for determining when an event occurs.

Property loss relief against general income: tax-generated agricultural expenses

10

(1) Chapter 4 of Part 4 of ITA 2007 (losses from property businesses) is amended as follows.

(2) In section 117(3) (overview of Chapter), for “section 127A” substitute “ sections 127A and 127B ”.

(3) In section 120(7) (deduction of property losses from general income), at the end insert “ and section 127B (no relief for tax-generated agricultural expenses) ”.

(4) After section 127A insert—

(127B) (1) This section applies if— (a) in a tax year a person makes a loss in a UK property business or overseas property business (whether carried on alone or in partnership), (b) the business has a relevant agricultural connection for the purposes of section 120 (see section 123(3) to (7)), and (c) any allowable agricultural expenses deducted in calculating the loss arise directly or indirectly in consequence of, or otherwise in connection with, relevant tax avoidance arrangements. (2) No property loss relief against general income may be given to the person for so much of the applicable amount of the loss as is attributable to expenses falling within subsection (1)(c). (3) For the purposes of subsection (2), the applicable amount of the loss is to be treated as attributable to expenses falling within subsection (1)(c) before anything else. (4) In subsection (1) “relevant tax avoidance arrangements” means arrangements— (a) to which the person is a party, and (b) the main purpose, or one of the main purposes, of which is the obtaining of a reduction in tax liability by means of property loss relief against general income. (5) In subsection (4) “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable). (6) In this section “the applicable amount of the loss” has the meaning given by section 122 and “allowable agricultural expenses” has the meaning given by section 123.

(5) The amendments made by this section have effect in relation to expenses arising directly or indirectly in consequence of, or otherwise in connection with—

(a) arrangements which are entered into on or after 13 March 2012, or

(b) any transaction forming part of arrangements which is entered into on or after that date.

(6) But those amendments do not have effect where the arrangements are, or any such transaction is, entered into pursuant to an unconditional obligation in a contract made before that date.

(7) “An unconditional obligation” means an obligation which may not be varied or extinguished by the exercise of a right (whether under the contract or otherwise).

Gains from contracts for life insurance etc

11

(1) In Chapter 9 of Part 4 of ITTOIA 2005 (gains from contracts for life insurance etc), after section 473 insert—

(473A) (1) Policies or contracts which are connected with each other are treated as a single policy or contract for the purposes of this Chapter. (2) A policy or contract is “connected” with another policy or contract if— (a) they meet the condition in subsection (3) in relation to each other, and (b) the terms on which either of them is issued are significantly more or less favourable than would reasonably be expected if the other were ignored or any policy or contract meeting the condition in that subsection in relation to either of them were ignored. (3) A policy or contract meets the condition in this subsection in relation to another policy or contract if— (a) they are at any time simultaneously in force, and (b) either of them is issued with reference to the other or with a view to enabling the other to be issued on particular terms or facilitating its being issued on those terms. (4) If— (a) there is a policy or contract (“A”) with which two or more other policies or contracts are connected as a result of subsection (2), but (b) the other policies or contracts are not connected with each other as a result of that subsection, A and the other policies or contracts are (as a result of this subsection) to be regarded as “connected” with each other.

(2) In section 491(2) of that Act (calculating gains from contracts for life insurance etc: general rules), in the definition of “PG”, at the end insert “ but only in so far as those gains have been, or fall to be, taken into account in calculating the total income of a person as a result of this Chapter or Chapter 2 of Part 13 of ITA 2007 ”.

(3) In section 552 of ICTA (information: duty of insurers), for subsection (13) substitute—

(13) For the purposes of this section— (a) section 491(2) of ITTOIA 2005 is taken to have effect as if, in the definition of “PG”, the words from “but” to the end were omitted, and (b) no account is to be taken of the effect of section 541A of that Act.

(4) The amendments made by this section have effect in relation to—

(a) any policy issued in respect of an insurance made on or after 21 March 2012, or

(b) any contract made on or after that date.

(5) The amendments made by this section also have effect in the case of any insurance or contract made before 21 March 2012 if on or after that date—

(a) the policy or contract is varied with the result that there is an increase in the benefits secured,

(b) there is an assignment of rights, or a share of the rights, conferred by the policy or contract (whether or not for money's worth), or

(6) For the purposes of subsection (5)(a)—

(a) an exercise of rights conferred by a policy or contract is to count as a variation of the policy or contract, and

(b) the reference to an increase in the benefits secured by a policy or contract includes an increase in the benefits secured by another policy or contract with which the policy or contract is connected (within the meaning given by section 473A of ITTOIA 2005, as inserted by subsection (1)).

Settlements: income originating from settlors other than individuals

12

(1) ITTOIA 2005 is amended as follows.

(2) In section 627 (income where settlor retains an interest: exceptions), at the end insert—

(4) The rule in section 624(1) does not apply in relation to income which— (a) arises under a settlement, and (b) originates from any settlor who was not an individual.

(3) In section 645 (property or income originating from settlor), in subsection (2), for “section 644” substitute “ sections 627 and 644 ”.

(4) The amendments made by this section have effect in relation to income arising on or after 21 March 2012.

Reliefs

Champions League final 2013

13

(1) No liability to income tax arises in respect of any income from the 2013 Champions League final that arises to a person who is—

(a) an employee or contractor of an overseas team that competes in the final, and

(b) non-UK resident at the time of the final.

(2) The reference in subsection (1) to income from the 2013 Champions League final is to income related to duties or services performed by the person in the United Kingdom in connection with the final.

(3) The exemption under subsection (1) does not apply to—

(a) income that arises as a result of a contract entered into after the final, or of any amendment, after the final, of a contract entered into before the end of the final, or

(b) income that is the subject of tax avoidance arrangements.

(4) Income is the subject of tax avoidance arrangements if—

(a) arrangements have been made which, but for subsection (3)(b), would result in a person obtaining an exemption under subsection (1) for the income, and

(b) those arrangements, or other arrangements of which they form part, have as their main purpose, or one of their main purposes, the obtaining of that exemption.

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