Law

Finance Act 2003

United Kingdom · statute

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In force since 2026-05-01, as the publisher states.

Copy read on 2026-11-08. The page it was read from

Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.

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Contents: 301 provisions

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301 provisions

120 Further provisions relating to leases

Schedule 17A contains further provisions relating to leases.

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121 Minor definitions

In this Part— . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . “employee” includes an office-holder and related expressions have a corresponding meaning; “HMRC” means Her Majesty’s Revenue and Customs; “jointly entitled” means— in England ... , beneficially entitled as joint tenants or tenants in common, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . in Northern Ireland, beneficially entitled as joint tenants, tenants in common or coparceners; “land” includes— buildings and structures, and land covered by water; . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . “statutory provision” means any provision made by or under an Act of Parliament, an Act of the Scottish Parliament or any Northern Ireland legislation; . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . “tax”, unless the context otherwise requires, means tax under this Part. “tribunal” means the First-tier Tribunal or, where determined by or under Tribunal Procedure Rules, the Upper Tribunal.

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122 Index of defined expressions

In this Part the expressions listed below are defined or otherwise explained by the provisions indicated— acquisition relief | Schedule 7, paragraph 8(1) . . . | . . . bare trust | Schedule 16, paragraph 1(2) the Board (in relation to the Inland Revenue) | section 42(3) chargeable consideration | section 50 and Schedule 4 chargeable interest | section 48(1) chargeable transaction | section 49 charities relief | Schedule 8, paragraph 1(1) closure notice | Schedule 10, paragraph 23(1) (in relation to a land transaction return); ... co-ownership scheme seeding relief | Schedule 7A, paragraph 10(1) co-ownership authorised contractual scheme | section 102A co-ownership contractual scheme | section 102A company | section 100 (except as otherwise expressly provided) . . . | . . . contingent (in relation to consideration) | section 51(3) delivery (in relation to a land transaction return) | Schedule 10, paragraph 2(2) discovery assessment | Schedule 10, paragraph 28(1) effective date (in relation to a land transaction) | section 119 employee | section 121 exempt interest | section 48(2) to (5) filing date (in relation to a land transaction return) | Schedule 10, paragraph 2(1) implementation date | Schedule 19, paragraph 2(2) the Inland Revenue | section 113 jointly entitled | section 121 land | section 121 land transaction | section 43(1) land transaction return | section 76(1) lease (and related expressions) | Schedule 17A linked transactions | section 108 main subject-matter (in relation to a land transaction) | section 43(6) major interest (in relation to land) | section 117 market value | section 118 non-resident transaction | Schedule 9A, paragraph 2 notice of enquiry | Schedule 10, paragraph 12(1) (in relation to a land transaction return); ... notifiable (in relation to a land transaction) | section 77 (see too sections 71A(7) and 72A(7)) and paragraph 30 of Schedule 15 operator (in relation to a co-ownership authorised contractual scheme) | section 102A PAIF seeding relief | Schedule 7A, paragraph 1(1) partnership (and related expressions) | Schedule 15, paragraphs 1 to 4 purchaser | section 43(4) . . . | . . . reconstruction relief | Schedule 7, paragraph 7(1) . . . | . . . Reserved Investor Fund (Contractual Scheme) | section 102A residential property | section 116 Revenue certificate | section 79(3)(a) Revenue determination | Schedule 10, paragraph 25(1) self-assessment | section 76(3)(a) . . . | . . . settlement | Schedule 16, paragraph 1(1) (except as otherwise expressly provided) . . . | . . . statutory provision | section 121 subject-matter (in relation to a land transaction) | section 43(6) substantial performance (in relation to a contract) | section 44(5) to (7) . . . | . . . tax | section 121 tribunal | section 121 uncertain (in relation to consideration) | section 51(3) unit holder | section 101(4) unit trust scheme | section 101(4) vendor | section 43(4) (see too section 45A(9) and paragraphs 8, 10 and 11 of Schedule 2A)

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123 Consequential amendments

(1) Schedule 18 contains certain amendments consequential on the provisions of this Part. (2) The Treasury may by regulations make such other amendments and repeals as appear to them appropriate in consequence of the provisions of this Part. (3) The regulations may, in particular, make such provision as the Treasury think fit for reproducing in relation to stamp duty land tax the effect of enactments providing for exemption from stamp duty.

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124 Commencement and transitional provisions

Schedule 19 makes provision for and in connection with the coming into force of the provisions of this Part.

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125 Abolition of stamp duty except on instruments relating to stock or marketable securities

(1) Stamp duty is chargeable under Schedule 13 of the Finance Act 1999 (c. 16) only on instruments relating to stock or marketable securities. (2) Section 12 of the Finance Act 1895 (c. 16) (collection of stamp duty in cases of property vested by Act or purchased under statutory powers) does not apply to property other than stock or marketable securities. (3) This section shall be construed as one with the Stamp Act 1891 (c. 39). (4) Part 1 of Schedule 20 to this Act contains provisions supplementing this section and Part 2 of that Schedule provides for consequential amendments and repeals. (5) This section and that Schedule have effect— (a) in relation to an instrument effecting a land transaction (or any duplicate or counterpart of such an instrument), if the transaction— (i) is an SDLT transaction within the meaning of Schedule 19 to this Act (stamp duty land tax: commencement and transitional provisions), or (ii) would be such a transaction but for an exemption or relief from stamp duty land tax; (b) in relation to an instrument effecting a transaction other than a land transaction (or any duplicate or counterpart of such an instrument), if the instrument is executed on or after the implementation date for the purposes of stamp duty land tax (see paragraph 2(2) of that Schedule). For this purpose an instrument effecting both a land transaction and a transaction other than a land transaction (or any duplicate or counterpart of such an instrument) is treated as if it were two instruments to which paragraph (a) and paragraph (b) above respectively applied. (6) Where in the case of an instrument effecting both a land transaction and a transaction other than a land transaction the result of applying subsection (5) is that stamp duty is chargeable on either or both of the deemed instruments, the enactments relating to stamp duty have effect as if— (a) there were two instruments as mentioned in the closing words of that subsection, (b) the consideration had been apportioned between them in a just and reasonable manner, and (c) the amount found on that apportionment to be attributable to the chargeable instrument, or (as the case may be) to each of them, had been set forth distinctly in that instrument. (7) In subsections (5) and (6) “land transaction” has the same meaning as in Part 4 of this Act. (8) This section and Schedule 20 have effect subject to paragraph 31 of Schedule 15 to this Act (continued application of stamp duty in relation to certain partnership transactions).

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126 Circumstances in which group relief withdrawn

(1) Section 111 of the Finance Act 2002 (c. 23) (stamp duty: withdrawal of group relief) is amended as follows. (2) In subsection (1)(b) (circumstances in which relief withdrawn: transferee company ceasing to be member of group within two years) for “two years” substitute “ three years ”. (3) In subsection (1)(c) (circumstances in which relief withdrawn: transferee company holding estate or interest when it ceases to be member of group)— (a) in the opening words— (i) for “it ceases” substitute “ the transferee company ceases ”, and (ii) for “it holds” substitute “ it or a relevant associated company holds ”; (b) in sub-paragraph (i) for “to it” substitute “ to the transferee company ”; and (c) for the closing words substitute “ and that has not subsequently been transferred at market value by a duly stamped instrument on which ad valorem duty was paid and in respect of which group relief was not claimed ”. (4) In subsection (3)— (a) after “transferred” insert “ to the transferee company ”, and (b) for “what the transferee company holds at the time it ceases to be a member” substitute “ what is held by that company or, as the case may be, that company and any relevant associated companies, at the time it or they cease to be members ”. (5) After subsection (4) insert— (4A) In this section “relevant associated company”, in relation to the transferee company, means a company that— (a) is a member of the same group as the transferee company immediately before that company ceases to be a member of the same group as the transferor company, and (b) ceases to be a member of the same group as the transferor company in consequence of the transferee company so ceasing. . (6) In paragraph 4(3) of Schedule 34 to the Finance Act 2002 (c. 23) (withdrawal of group relief: supplementary provisions), in paragraph (b)— (a) in the opening words— (i) for “it ceases” substitute “ the transferee company ceases ”, and (ii) for “it holds” substitute “ it or a relevant associated company (as defined in sub-paragraph (4) below) holds ”; (b) in sub-paragraph (i) for “to it” substitute “ to the transferee company ”; and (c) for the closing words substitute “ and that has not subsequently been transferred at market value by a duly stamped instrument on which ad valorem duty was paid and in respect of which group relief was not claimed ”. (7) In the closing words of that sub-paragraph, for the words from “as if” to the end substitute “ as if the transferee had then ceased to be a member of the same group as the transferor company and had then held the estate or interest referred to in paragraph (b). ”. (8) After that sub-paragraph insert— (4) In sub-paragraph (3)(b) “relevant associated company”, in relation to the transferee company, means a company that is in the same group as the transferee company immediately before the transferee company ceases to be a member of the new group and which ceases to be a member of the new group in consequence of the transferee company so ceasing. . (9) This section applies to instruments executed after 14th April 2003. (10) But this section does not apply to an instrument giving effect to a contract made on or before 9th April 2003, unless— (a) the instrument is made in consequence of the exercise after that date of any option, right of pre-emption or similar right, or (b) the instrument transfers the property in question to, or vests it in, a person other than the purchaser under the contract because of an assignment (or, in Scotland, assignation) or further contract made after that date. (11) This section shall be deemed to have come into force on 15th April 2003.

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127 Circumstances in which relief for company acquisitions withdrawn

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128 Exemption of certain leases granted by registered social landlords

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129 Relief for certain leases granted before section 128 has effect

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130 Registered social landlords: treatment of certain leases granted between 1st January 1990 and 27 March 2000

(1) This section applies to a lease in relation to which the following conditions are met— (a) it is a lease of a dwelling to one or more individuals; (b) it is for an indefinite term or is terminable by notice of a month or less; (c) it was executed on or after 1st January 1990 and before 28th March 2000; (d) at the time it was executed the rate or average rate of the rent (whether reserved as a yearly rent or not) was £5,000 a year or less; and (e) the landlord’s interest has at any time before 26th June 2003 been held by a registered social landlord. (2) A lease to which this section applies (whether or not presented for stamping) shall be treated— (a) for the purposes of section 14 of the Stamp Act 1891 (c. 39) (production of instrument in evidence) as it applies in relation to proceedings begun after the day on which this Act is passed, and (b) for the purposes of section 17 of that Act (enrolment etc of instrument) as it applies to any act done after that day, as if it had been duly stamped in accordance with the law in force at the time when it was executed. (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7) This section shall be construed as one with the Stamp Act 1891. (8) The reference in subsection (1) above to the landlord’s interest being held by a “registered social landlord” is to its being held by a body that— (a) is registered in a register maintained under— (i) Article 124 of the Housing (Northern Ireland) Order 1981 (S.I. 1981/156 (N.I. 3)), (ii) section 3(1) of the Housing Associations Act 1985 (c. 69), (iii) Article 14 of the Housing (Northern Ireland) Order 1992 (S.I. 1992/1725 (N.I. 15)), (iv) section 1(1) of the Housing Act 1996 (c. 52), or (v) section 57 of the Housing (Scotland) Act 2001 (asp 10), or (b) is a body corporate whose objects correspond to those of a housing association and which, pursuant to a contract with Scottish Homes, is registered in a register kept for the purposes by Scottish Homes. (9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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131 Charge and rates for 2003-04

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132 Indexed rate bands for 2003-04: PAYE deductions etc

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133 Charge and main rate for financial year 2004

Corporation tax shall be charged for the financial year 2004 at the rate of 30%.

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134 Small companies' rate and fraction for financial year 2003

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135 Corporation tax starting rate and fraction for financial year 2003

For the financial year 2003— (a) the corporation tax starting rate shall be 0%, and (b) the fraction mentioned in section 13AA of the Taxes Act 1988 (marginal relief for small companies) shall be 19/400ths.

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136 Provision of services through intermediary

(1) Chapter 8 of Part 2 of the Income Tax (Earnings and Pensions) Act 2003 (c. 1) (provision of services through an intermediary) is amended as follows. (2) In section 49(1)(a) (services to which the Chapter applies), for “for the purposes of a business carried on by another person” substitute “ for another person ”. (3) In consequence of the above amendment— (a) omit section 49(2) of that Act, and (b) in section 56(7) of that Act— (i) at the end of paragraph (a) insert “ , and ”, and (ii) omit paragraph (c) and the word “and” preceding it. (4) This section applies in relation to services performed or due to be performed on or after 10th April 2003.

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137 Exemption where homeworker’s additional expenses met by employer

(1) In Part 4 of the Income Tax (Earnings and Pensions) Act 2003 (c. 1) (employment income: exemptions), after section 316 insert— Homeworker’s additional household expenses 316A (1) This section applies where an employer makes a payment to an employee in respect of reasonable additional household expenses which the employee incurs in carrying out duties of the employment at home under homeworking arrangements. (2) No liability to income tax arises in respect of the payment. (3) In this section, in relation to an employee— “homeworking arrangements” means arrangements between the employee and the employer under which the employee regularly performs some or all of the duties of the employment at home; and “household expenses” means expenses connected with the day to day running of the employee’s home. . (2) This section applies to payments which the employer makes on or after 6th April 2003 in respect of expenses which the employee incurs on or after that date.

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138 Taxable benefits: lower threshold for cars with a CO2 emissions figure

(1) In section 139 of the Income Tax (Earnings and Pensions) Act 2003 (cash equivalent of the benefit of a car: calculation of the appropriate percentage for a year for cars with a CO2 emissions figure) the table in subsection (4) (which specifies the lower threshold for each year for the purposes of that calculation) is amended as follows. (2) In the entry relating to 2004-05 and subsequent tax years omit “and subsequent tax years”. (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) In section 170(3) of that Act (power to provide by order for a lower threshold different from that specified in the table in section 139(4) to apply for tax years beginning on or after 6th April 2005) for “6th April 2005” substitute “ 6th April 2006 ”.

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139 Approved share plans and schemes

Schedule 21 to this Act (which contains amendments relating to share incentive plans, SAYE option schemes and CSOP schemes) has effect.

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140 Employee securities and options

Schedule 22 to this Act (which makes provision about securities, and options to acquire securities, acquired by reason of employment) has effect.

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141 Corporation tax relief for employee share acquisitions

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142 Ending of relief for contributions to QUESTS

(1) Section 67 of the Finance Act 1989 (c. 26) (tax relief for contributions to trustees of qualifying employee share ownership trust) does not apply in relation to sums expended by a company in an accounting period of the company beginning on or after 1st January 2003. (2) In section 69 of that Act (chargeable events)— (a) the definitions in subsections (3AC) and (3AD) (by virtue of which certain transfers of shares by trustees of an employee share ownership trust to a SIP trust are not chargeable events) have effect in relation to 26th November 2002 as they had effect in relation to 20th March 2000; (b) in relation to shares that are relevant shares by virtue of paragraph (a) above, subsection (3AB) (deemed order of disposal of shares) has effect as if the reference there to 21st March 2000 were to 27th November 2002; and (c) the other provisions of that section have effect accordingly. (3) In consequence of subsection (2), in paragraph 78(2)(b) of Schedule 2 to the Income Tax (Earnings and Pensions) Act 2003 (c. 1) (reference to section 69(3AA) of the Finance Act 1989) after “21st March 2000” insert “ or, by virtue of section 142(2) of the Finance Act 2003, 27th November 2002 ”.

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143 Restriction of deductions for employee benefit contributions

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144 PAYE on notional payments: reimbursement period

(1) In section 222(1)(c) of the Income Tax (Earnings and Pensions) Act 2003 (period within which employee must reimburse employer for amount to be accounted for to Inland Revenue in respect of income tax on notional payment), for “30 days” substitute “ 90 days ”. (2) This section has effect in relation to payments of income treated as made on or after 9th April 2003.

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145 PAYE: regulations and notional payments

(1) In the list in subsection (2) of section 684 of the Income Tax (Earnings and Pensions) Act 2003 (c. 1) (PAYE regulations)— (a) for item 2 substitute— 1A Provision— (a) for deductions to be made, if and to the extent that the payee does not object, with a view to securing that income tax payable in respect of any income of a payee for a tax year which is not PAYE income is deducted from PAYE income of the payee paid during that year; and (b) as to the circumstances and manner in which a payee may object to the making of deductions. 2 Provision— (a) for repayments or deductions to be made, if and to the extent that the payee does not object, in respect of any amounts overpaid or remaining unpaid (or treated as overpaid or remaining unpaid) on account of— (i) income tax in respect of income for a previous tax year, or (ii) capital gains tax in respect of chargeable gains for such a year; and (b) as to the circumstances in which repayments or deductions may be made, and the circumstances and manner in which a payee may object to the making of repayments or deductions. ; (b) after item 4 insert — 4A Provision authorising the recovery from the payee rather than the payer of any amount that the Inland Revenue considers should have been deducted by the payer. ; (c) for item 8 substitute as items 7A and 8— 7A Provision for excluding payments of such description as may be specified from the operation of the regulations in such circumstances as may be specified. 8 Provision for the making of decisions by the Board or the Inland Revenue as to any matter required to be decided for the purposes of the regulations and for appeals against such decisions. . (2) After subsection (7) of that section insert— (7A) Nothing in PAYE regulations may be read— (a) as preventing the making of arrangements for the collection of tax in such manner as may be agreed by, or on behalf of, the payer and the Inland Revenue, or (b) as requiring the payer to comply with the regulations in circumstances in which the Inland Revenue is satisfied that it is unnecessary or not appropriate for the payer to do so. (7B) References in this section and section 685 to income tax in respect of PAYE income are references to income tax in respect of that income if reasonable assumptions are (when necessary) made about other income. (7C) In this section and section 685— “payer” means any person paying PAYE income and “payee” means any person in receipt of such income; “specified” means specified in PAYE regulations. . (3) In subsection (2) of section 685 of that Act (tax tables), for paragraph (b) substitute— (b) subject to an adjustment in respect of amounts required to be deducted or repaid by PAYE regulations made under item 1A or 2 in the list in section 684(2). . (4) After subsection (3) of that section insert— (4) PAYE regulations may make provision, where it appears to the Inland Revenue that it is impracticable for a payer to deduct tax by reference to tax tables— (a) for deductions to be made by the payer in accordance with other arrangements agreed as mentioned in section 684(7A)(a), or (b) for the payee to be required to keep records and make payments and returns as if he were the payer. . (5) In section 707 of that Act (interpretation of Chapter 5 of Part 11), in the definition of “employment”, for “this section” substitute “ this Chapter ”. (6) In section 710 of that Act (notional payments: accounting for tax)— (a) in subsections (1) and (4), after “must” insert “ , subject to and in accordance with PAYE regulations, ”; (b) in subsection (5)(b) and (c), for “accounted for” substitute “ deducted or accounted for (or required to be deducted or accounted for) ”; and (c) in subsection (6), for “an amount which” substitute “ an amount of tax which ” and for “is paid by the employee” substitute “ is deducted ”. (7) Substitute “ PAYE regulations ” (a) for “the said section 203” in subsection (8) of section 59A of the Taxes Management Act 1970 (c. 9) (payments on account of income tax); and (b) for “that section” in subsection (10) of that section and subsections (2) and (8) of section 59B of that Act (payments of income tax and capital gains tax).

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146 Payroll giving: extension of 10% supplement to 5th April 2004

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147 Sub-contractor deductions etc: interest on late payment or repayment

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) In the Social Security Contributions and Benefits Act 1992 (c. 4) and the Social Security Contributions and Benefits (Northern Ireland) Act 1992 (c. 7), in paragraph 6 of Schedule 1 (power to combine collection of national insurance contributions with tax) after sub-paragraph (4A) insert— (4B) Interest required to be paid, by virtue of sub-paragraph (2)(a) or (b) above, by regulations under sub-paragraph (1) above shall be paid without any deduction of income tax and shall not be taken into account in computing any income, profits or losses for any tax purposes. . (3) In section 22 of the Teaching and Higher Education Act 1998 (c. 30) (student loans), after subsection (9) insert— (10) Interest required to be paid, by virtue of subsection (5)(d), by regulations under this section shall be paid without any deduction of income tax and shall not be taken into account in computing any income, profits or losses for any tax purposes. . (4) In Article 3 of the Education (Student Support) (Northern Ireland) Order 1998 (S.I. 1998/1760 (N.I. 14)) (student loans), after paragraph (9) insert— (10) Interest required to be paid, by virtue of paragraph (5)(d), by regulations under this Article shall be paid without any deduction of income tax and shall not be taken into account in computing any income, profits or losses for any tax purposes. . (5) In its application to the computation of income, profits or losses for an accounting period (in the case of a company) or a year of assessment (in the case of a person who is not a company), this section has effect in relation to— (a) accounting periods ending on or after 9th April 2003, or (b) 2003-04 and subsequent years of assessment.

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148 Meaning of “permanent establishment”

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149 Non-resident companies: basis of charge to corporation tax

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) After section 10A of the Taxation of Chargeable Gains Act 1992 (c. 12) insert— Non-resident company with United Kingdom permanent establishment 10B (1) Subject to any exceptions provided by this Act, the chargeable profits for the purposes of corporation tax of a company not resident in the United Kingdom but carrying on a trade in the United Kingdom through a permanent establishment there include chargeable gains accruing to the company on the disposal of— (a) assets situated in the United Kingdom and used in or for the purposes of the trade at or before the time the gain accrued, or (b) assets situated in the United Kingdom and used or held for the purposes of the permanent establishment at or before the time the gain accrued or acquired for use by or for the purposes of the permanent establishment. (2) Subsection (1) does not apply unless the disposal is made at a time when the company is carrying on a trade in the United Kingdom through a permanent establishment there. (3) This section does not apply to a company that, by virtue of Part 18 of the Taxes Act (double taxation relief arrangements), is exempt from corporation tax for the chargeable period in respect of the profits of the permanent establishment. (4) In this section “trade” has the meaning given by section 6(4)(b) of the Taxes Act. . (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6) This section has effect in relation to accounting periods (of the non-resident company) beginning on or after 1st January 2003, and regulations under section 11AA(5) of the Taxes Act 1988 (inserted by subsection (2) above) may be made so as to have effect from that date.

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150 Non-resident companies: assessment, collection and recovery of corporation tax

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151 Non-resident companies: extent of charge to income tax

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152 Non-resident companies: transactions carried out through broker, investment manager or Lloyd’s agent

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153 General replacement of references to branch or agency of company

(1) In the following provisions (which relate only to companies) for “branch or agency” or “branches or agencies”, wherever occurring, substitute “ permanent establishment ” or “ permanent establishments ”. The provisions are— (a) in the Taxes Act 1988, sections ..., ... ... 442(1), ... ..., 748A(1)(c) and (2), ...; in Schedule 15, paragraphs 17(3)(c) and 25(2)(c); ... in Schedule 24, paragraphs 1 and 8; and in Schedule 25, paragraphs 6(2A) and (2C), 8 and 11(3); (b) in the Taxation of Chargeable Gains Act 1992 (c. 12), sections 140(1), 140C(1)(a), 173(3)(b), 175(1A)(b), 185(4) and 213(5A); (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (d) in the Capital Allowances Act 2001 (c. 2), sections 560(2) and 561(1)(c); (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) In the following provisions (which relate to companies and other persons), any reference to a branch or agency shall be read, in relation to a company, as a reference to a permanent establishment. The provisions are— (a) in the Taxes Act 1988, sections ... ... 806K(1)... ......; (b) in the Taxation of Chargeable Gains Act 1992, sections 25(2), (3) and (5), 80(4)(a) and (b) and (7)(b), 199(2) and (4) and 276(7); (c) in the Finance Act 1999 (c. 16), section 85(2)(a); (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) Any reference to a branch or agency— (a) in subordinate legislation made under an enactment contained in the Tax Acts or relating to chargeable gains, or (b) that is to be construed as having the same meaning as in any such enactment, shall be read, in relation to a company, as a reference to a permanent establishment. “Subordinate legislation” here has the same meaning as in the Interpretation Act 1978 (c. 30). (4) This section has effect in relation to accounting periods beginning on or after 1st January 2003.

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154 Double taxation relief: profits attributable to overseas permanent establishment

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155 Consequential amendments

(1) Schedule 27 to this Act provides for amendments consequential on the provisions of sections 148 to 153. (2) The amendments made by that Schedule have effect in relation to accounting periods beginning on or after 1st January 2003.

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156 Overseas life insurance companies

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157 Life insurance policies and deferred annuity contracts

(1) For section 210 of the Taxation of Chargeable Gains Act 1992 (c. 12) substitute— Life insurance and deferred annuities 210 (1) This section has effect in relation to any policy of insurance or contract for a deferred annuity on the life of any person. (2) A gain accruing on a disposal of, or of an interest in, the rights conferred by the policy of insurance or contract for a deferred annuity is not a chargeable gain unless subsection (3) below applies. (3) This subsection applies if— (a) (in the case of a disposal of the rights) the rights or any interest in the rights, or (b) (in the case of a disposal of an interest in the rights) the rights, the interest or any interest from which the interest directly or indirectly derives (in whole or in part), have or has at any time been acquired by any person for actual consideration (as opposed to consideration deemed to be given by any enactment relating to the taxation of chargeable gains). (4) For the purposes of subsection (3) above — (a) (in the case of a policy of insurance) amounts paid under the policy by way of premiums, and (b) (in the case of a contract for a deferred annuity) amounts paid under the contract, whether by way of premiums or as lump sum consideration, do not constitute actual consideration. (5) And for those purposes actual consideration for— (a) a disposal which is made by one spouse to the other or is an approved post-marriage disposal, or (b) a disposal to which section 171(1) applies, is to be treated as not constituting actual consideration. (6) For the purposes of subsection (5)(a) above a disposal is an approved post-marriage disposal if— (a) it is made in consequence of the dissolution or annulment of a marriage by one person who was a party to the marriage to the other, (b) it is made with the approval, agreement or authority of a court (or other person or body) having jurisdiction under the law of any country or territory or pursuant to an order of such a court (or other person or body), and (c) the rights disposed of were, or the interest disposed of was, held by the person by whom the disposal is made immediately before the marriage was dissolved or annulled. (7) Subsection (8) below applies for the purposes of tax on chargeable gains where— (a) (if that subsection did not apply) a loss would accrue on a disposal of, or of an interest in, the rights conferred by the policy of insurance or contract for a deferred annuity, but (b) if sections 37 and 39 were disregarded, there would accrue on the disposal a loss of a smaller amount, a gain or neither a loss nor a gain. (8) If (disregarding those sections) a loss of a smaller amount would accrue, that smaller amount is to be taken to be the amount of the loss accruing on the disposal; and in any other case, neither a loss nor a gain is to be taken to accrue on the disposal. (9) But subsection (8) above does not affect the treatment for the purposes of tax on chargeable gains of the person who acquired rights, or an interest in rights, on the disposal. (10) The occasion of— (a) the receipt of the sum or sums assured by the policy of insurance, (b) the transfer of investments or other assets to the owner of the policy of insurance in accordance with the policy, or (c) the surrender of the policy of insurance, is for the purposes of tax on chargeable gains an occasion of a disposal of the rights (or of all of the interests in the rights) conferred by the policy of insurance. (11) The occasion of— (a) the receipt of the first instalment of the annuity under the contract for a deferred annuity, or (b) the surrender of the rights conferred by the contract for a deferred annuity, is for the purposes of tax on chargeable gains an occasion of a disposal of the rights (or of all of the interests in the rights) conferred by the contract for a deferred annuity. (12) Where there is a disposal on the occasion of the receipt of the first instalment of the annuity under the contract for a deferred annuity— (a) in the case of a disposal of the rights conferred by the contract, the consideration for the disposal is the aggregate of the amount or value of the first instalment and the market value at the time of the disposal of the right to receive the further instalments of the annuity, and (b) in the case of a disposal of an interest in the rights, the consideration for the disposal is such proportion of that aggregate as is just and reasonable; and no gain accruing on any subsequent disposal of, or of any interest in, the rights is a chargeable gain (even if subsection (3) above applies). (13) In this section “interest”, in relation to rights conferred by a policy of insurance or contract for a deferred annuity, means an interest as a co-owner of the rights (whether the rights are owned jointly or in common and whether or not the interests of the co-owners are equal). . (2) This section has effect in relation to disposals on or after 9th April 2003.

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158 Application of market value rule in case of exercise of option

(1) In Chapter 3 of Part 4 of the Taxation of Chargeable Gains Act 1992 (c. 12) (miscellaneous provisions relating to options and other matters), after section 144 insert— Application of market value rule in case of exercise of option 144ZA (1) This section applies where— (a) an option is exercised, so that by virtue of section 144(2) or (3) the grant or acquisition of the option and the transaction resulting from its exercise are treated as a single transaction, and (b) section 17(1) (“the market value rule”) applies, or would apply but for this section, in relation to— (i) the grant of the option, (ii) the acquisition of the option (whether directly from the grantor or not) by the person exercising it, or (iii) the transaction resulting from its exercise. (2) If the option binds the grantor to sell— (a) the market value rule does not apply for determining the consideration for the sale, except, where the rule applies for determining the consideration for the option, to that extent (in accordance with section 144(2)(a)); (b) the market value rule does not apply for determining the cost to the person exercising the option of acquiring what is sold, except, where the rule applies for determining the cost of acquiring the option, to that extent (in accordance with section 144(3)(a)). (3) If the option binds the grantor to buy— (a) the market value rule does not apply for determining the cost of acquisition incurred by the grantor, but without prejudice to its application (in accordance with section 144(2)(b)) where the rule applies for determining the consideration for the option; (b) the market value rule does not apply for determining the consideration for the disposal of what is bought, but without prejudice to its application (in accordance with section 144(3)(b)) where the rule applies for determining the cost of the option. (4) To the extent that, by virtue of this section, the market value rule does not apply for determining an amount or value, the amount or value to be taken into account is (subject to section 120) the actual amount or value. (5) In this section “option” has the same meaning as in section 144. . (2) This section applies in relation to the exercise of an option on or after 10th April 2003.

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159 Reporting limits and annual exempt amount

(1) The Taxation of Chargeable Gains Act 1992 (c. 12) is amended in accordance with Schedule 28 to this Act. (2) In that Schedule— Part 1 makes provision as to the cases in which a return of information about chargeable gains is required, Part 2 contains minor and consequential amendments of the provisions relating to the annual exempt amount, and Part 3 provides for commencement.

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