Law

Finance Act 2006

United Kingdom · statute

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In force since 2026-04-01, 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: 203 provisions
  1. Title and introductory text
  2. 1 Rates of tobacco products duty
  3. 2 Tobacco products duty: evasion
  4. 3 Rate of duty on beer
  5. 4 Rates of duty on wine and made-wine
  6. 5 Repeal of provisions of ALDA 1979 of no practical utility etc
  7. 6 Rates until 1st September 2006
  8. 7 Rates from 1st September 2006
  9. 8 Road vehicles
  10. 9 General betting duty: gaming machines
  11. 10 Rates of gaming duty
  12. 11 Definition of “gaming machine”
  13. 12 Classes of machine and rates of duty
  14. 13 Rates
  15. 14 Reduced pollution certificates
  16. 15 Late renewal supplement
  17. 16 Gaming machines
  18. 17 Buildings and land
  19. 18 Value of imported works of art etc: auctioneer's commission
  20. 19 Missing trader intra-community fraud
  21. 20 Power to inspect goods
  22. 21 Directions to keep records where belief VAT might not be paid
  23. 22 Treatment of credit vouchers
  24. 23 Charge and rates for 2006-07
  25. 24 Charge and main rate for financial year 2007
  26. 25 Small companies' rate and fraction for financial year 2006
  27. 26 Abolition of corporation tax starting rate and non-corporate distribution rate
  28. 27 Group relief where surrendering company not resident in UK
  29. 28 Relief for research and development: subjects of clinical trials
  30. 29 Claims for relief for research and development
  31. 30 Temporary increase in amount of first-year allowances for small enterprises
  32. 31 Meaning of “film” and related expressions
  33. 32 Meaning of “film production company”
  34. 33 Meaning of “film-making activities” etc
  35. 34 Meaning of “production expenditure” and related expressions
  36. 35 Meaning of “UK expenditure”
  37. 36 Meaning of “qualifying co-production” and “co-producer”
  38. 37 Taxation of activities of film production company
  39. 38 Films qualifying for film tax relief
  40. 39 Conditions of relief: intended theatrical release
  41. 40 Conditions of relief: British film
  42. 41 Conditions of relief: UK expenditure
  43. 42 Film tax relief: further provisions
  44. 43 Films: restriction on use of losses while film in production
  45. 44 Films: use of losses in later periods
  46. 45 Films: terminal losses
  47. 46 Films: withdrawal of existing reliefs (corporation tax)
  48. 47 Films: withdrawal of existing reliefs (income tax)
  49. 48 Sound recordings: revenue nature of expenditure
  50. 49 Sound recordings: allocation of expenditure
  51. 50 Sound recordings: interpretation
  52. 51 Corporation tax: films and sound recordings as intangible fixed assets
  53. 52 Films: application of provisions to certain films already in production
  54. 53 Films and sound recordings: commencement and power to alter dates
  55. 54 Transactions with substantial donors
  56. 55 Non-charitable expenditure
  57. 56 Trade profits
  58. 57 Gift aid relief for companies wholly owned by one or more charities
  59. 58 Extension of restrictions on gift aid payments by close companies
  60. 59 Cars with a CO2 emissions figure
  61. 60 Mobile telephones
  62. 61 Computer equipment
  63. 62 Exemption for employees' eye tests and special glasses
  64. 63 Power to exempt use of vouchers or tokens to obtain exempt benefits
  65. 64 Payments to or in respect of victims of National-Socialist persecution
  66. 65 London Organising Committee
  67. 66 Section 65: supplementary
  68. 67 International Olympic Committee
  69. 68 Competitors and staff
  70. 69 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  71. 70 Restrictions on companies buying losses or gains
  72. 71 Other avoidance involving losses accruing to companies
  73. 72 Repeal of s.106 of TCGA 1992
  74. 73 Policies of insurance and non-deferred annuities
  75. 74 Exception to “bed and breakfasting” rules etc
  76. 75 Interest relief: film partnership
  77. 76 Avoidance involving financial arrangements
  78. 77 Treating assets as “existing assets” etc
  79. 78 Controlled foreign companies and treaty non-resident companies
  80. 79 Transfer of assets abroad
  81. 80 Restriction of exemption from charge to income tax
  82. 81 Leases of plant or machinery
  83. 82 Sale etc of lessor companies etc
  84. 83 Restrictions on use of losses etc: leasing partnerships
  85. 84 Disposal of plant or machinery subject to lease where income retained
  86. 85 Restrictions on effect of elections under section 266 of CAA 2001
  87. 86 Insurance companies
  88. 87 Qualifying policies: altering method for calculating benefits
  89. 88 Settlements, etc: chargeable gains
  90. 89 Settlements, etc: income
  91. 90 Special trusts tax rates not to apply to social landlords' service charge income
  92. 91 Venture capital schemes
  93. 92 Avoidance using options etc
  94. 93 Corporation tax relief for shares acquired under EMI option
  95. 94 PAYE: retrospective notional payments
  96. 95 Profit share agency
  97. 96 Diminishing shared ownership
  98. 97 Beneficial loans to employees
  99. 98 Orders amending Chapter 5 of Part 2 of FA 2005
  100. 99 Amendment of section 29 of the Energy Act 2004
  101. 100 Amendment of section 30 of the Energy Act 2004
  102. 101 Securitisation companies
  103. 102 Accountancy change: spreading of adjustment
  104. 103 Real Estate Investment Trusts
  105. 104 Property rental business
  106. 105 Other key concepts
  107. 106 Conditions for company
  108. 107 Conditions for tax-exempt business
  109. 108 Conditions for balance of business
  110. 109 Notice
  111. 110 Duration
  112. 111 Effects of entry
  113. 112 Entry charge
  114. 113 Ring-fencing of tax-exempt business
  115. 114 Maximum shareholding
  116. 115 Profit: financing-cost ratio
  117. 116 Minor or inadvertent breach
  118. 117 Cancellation of tax advantage
  119. 118 Funds awaiting re-investment
  120. 119 Corporation tax
  121. 120 Calculation of profits
  122. 121 Distributions: liability to tax
  123. 122 Distributions: deduction of tax
  124. 123 Attribution of distributions
  125. 124 Corporation tax
  126. 125 Movement of assets out of ring-fence
  127. 126 Movement of assets into ring-fence
  128. 126A Demergers
  129. 127 Interpretation
  130. 128 Termination by notice: company
  131. 129 Termination by notice: Commissioners
  132. 130 Automatic termination for breach of requirement
  133. 131 Effects of cessation
  134. 132 Early exit by notice
  135. 133 Early exit
  136. 134 Group Real Estate Investment Trusts
  137. 135 Transfer within group
  138. 136 Availability of group reliefs
  139. 136A Connected persons
  140. 137 Insurance companies
  141. 138 Joint ventures
  142. 139 Manufactured dividends
  143. 140 Penalties for failure to give notice, etc
  144. 141 Effect of deemed disposal and re-acquisition
  145. 142 Interpretation
  146. 143 Housing investment trusts: repeal
  147. 144 Regulations
  148. 145 Commencement
  149. 146 New basis for determining the market value of oil
  150. 147 Section 146: commencement and transitional provisions
  151. 148 Crude oil: power to make regulations
  152. 149 Nomination scheme
  153. 150 Amendment of Schedule 10 to FA 1987
  154. 151 Nomination excesses and corporation tax
  155. 152 Increase in rate of supplementary charge
  156. 153 Election to defer capital allowances
  157. 154 Ring fence expenditure supplement
  158. 155 Rates and rate bands for 2008-09 and 2009-10
  159. 156 Rules for trusts etc
  160. 157 Purchase of interests in foreign trusts
  161. 158 Taxable property held by investment-regulated pension schemes
  162. 159 Recycling of lump sums
  163. 160 Inheritance tax
  164. 161 Miscellaneous
  165. 162 Raising of thresholds
  166. 163 Partnerships
  167. 164 Leases
  168. 165 Reallocation of trust property as between beneficiaries
  169. 166 Unit trust schemes
  170. 167 Demutualisation of insurance companies
  171. 168 Alternative finance
  172. 169 Reliefs for certain company acquisitions
  173. 170 Rate of landfill tax
  174. 171 Climate change levy: rates
  175. 172 Abolition of half-rate supplies etc
  176. 173 International tax enforcement arrangements
  177. 174 Arrangements under section 173: information powers
  178. 175 Arrangements under section 173: recovery of debts
  179. 176 Double taxation agreements: procedure
  180. 177 Disclosure of information
  181. 178 Repeals
  182. 179 Interpretation
  183. 180 Short title
  184. SCHEDULE 1 Group relief where surrendering company not resident in UK
  185. SCHEDULE 3 Claims for relief for research and development
  186. SCHEDULE 5 Film tax relief: further provisions
  187. SCHEDULE 6 Avoidance involving financial arrangements
  188. SCHEDULE 7 Transfer of assets abroad
  189. SCHEDULE 8 Long funding leases of plant or machinery
  190. SCHEDULE 9 Leases of plant or machinery: miscellaneous amendments
  191. SCHEDULE 10 Sale etc of lessor companies etc
  192. SCHEDULE 12 Settlements: amendment of TCGA 1992 etc
  193. SCHEDULE 13 Settlements: amendments to ICTA and ITTOIA 2005 etc
  194. SCHEDULE 14 Investment reliefs: venture capital schemes
  195. SCHEDULE 15 Accountancy change: spreading of adjustment
  196. SCHEDULE 18 Oil taxation: market value of oil
  197. SCHEDULE 20 Inheritance tax: rules for trusts etc
  198. SCHEDULE 21 Taxable property held by investment-regulated pension schemes
  199. SCHEDULE 22 Pension schemes: inheritance tax
  200. SCHEDULE 23 Pension schemes etc: miscellaneous
  201. SCHEDULE 24 Stamp duty land tax: amendments of Schedule 15 to FA 2003
  202. SCHEDULE 25 Stamp duty land tax: amendments of Schedule 17A to FA 2003
  203. SCHEDULE 26 Repeals

Proposed changes to this act

No one has proposed a change to this act yet.

203 provisions

120 Calculation of profits

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121 Distributions: liability to tax

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122 Distributions: deduction of tax

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123 Attribution of distributions

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124 Corporation tax

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125 Movement of assets out of ring-fence

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126 Movement of assets into ring-fence

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126A Demergers

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127 Interpretation

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128 Termination by notice: company

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129 Termination by notice: Commissioners

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130 Automatic termination for breach of requirement

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131 Effects of cessation

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132 Early exit by notice

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133 Early exit

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134 Group Real Estate Investment Trusts

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135 Transfer within group

After section 171(2)(d) of TCGA 1992 (transfer within a group: exclusions) insert— ; or (da) a disposal by or to a company to which Part 4 of the Finance Act 2006 applies (Real Estate Investment Trusts); .

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136 Availability of group reliefs

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136A Connected persons

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137 Insurance companies

In section 212(1) of TCGA 1992 (annual deemed disposal of holdings of certain assets) after paragraph (b) insert— , or (c) shares in a company to which Part 4 of the Finance Act 2006 applies (Real Estate Investment Trusts), .

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138 Joint ventures

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139 Manufactured dividends

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140 Penalties for failure to give notice, etc

At the end of the second column of the Table in section 98(5) of TMA 1970 (penalties) add— Section 106 of FA 2006 as modified by Schedule 17 to that Act. Section 116 of FA 2006. Regulations under section 116 of FA 2006. Regulations under section 122 of FA 2006. Section 130 of FA 2006.

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141 Effect of deemed disposal and re-acquisition

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142 Interpretation

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143 Housing investment trusts: repeal

Section 160 of, and Schedule 30 to, FA 1996 (housing investment trusts) shall cease to have effect (and accordingly— (a) sections 508A and 508B of ICTA shall cease to have effect, (b) the amendments of section 842(1)(a) and (e) of ICTA effected by paragraph 2(2) of Schedule 30 shall cease to have effect, and (c) section 842(1AA) of ICTA shall cease to have effect).

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144 Regulations

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145 Commencement

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) Section 143 shall have effect in relation to accounting periods beginning on or after the day on which this Act is passed.

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146 New basis for determining the market value of oil

(1) In OTA 1975, in Schedule 3 (petroleum revenue tax: miscellaneous provisions) before paragraph 2 (definition of market value of oil) insert— Determination of market value: the notional delivery day for a quantity of oil 1A (1) This paragraph has effect for determining, for the purposes of this Schedule, the day which is the “notional delivery day” in the case of any particular quantity of oil of any particular kind whose market value falls to be determined in accordance with the provisions of this Schedule in the case of any chargeable period. (2) The notional delivery day need not be a day in the chargeable period. (3) In the case of a quantity of oil which, at the end of the chargeable period,— (a) has neither been disposed of nor relevantly appropriated in the period, or (b) has been disposed of but not delivered in the period, the notional delivery day is the last business day of the chargeable period. (4) In the case of— (a) a quantity of oil won and disposed of which is delivered on a day in the chargeable period, or (b) a quantity of oil— (i) relevantly appropriated on a day in the chargeable period, but (ii) not disposed of in the chargeable period, the notional delivery day is to be determined in accordance with sub-paragraphs (5) to (7) below. (5) If that oil is— (a) oil transported by ship from the place of extraction to a place in the United Kingdom or elsewhere, or (b) oil transported by pipeline to a place in the United Kingdom and loaded on to a ship there, and there is a loading slot for it (see sub-paragraph (8)), the notional delivery day is the middle day of the loading slot. (6) If sub-paragraph (5) above does not apply to that oil, then— (a) if it is oil delivered on a day in the chargeable period, the notional delivery day is the date of the delivery, or (b) if it is oil relevantly appropriated on a day in the chargeable period, the notional delivery day is the date of the appropriation. (7) The Treasury may by regulations make provision for or in connection with substituting as the notional delivery day in such circumstances as may be prescribed— (a) in the case of oil transported by ship from the place of extraction to a place in the United Kingdom or elsewhere, the date of completion of load, or (b) in the case of oil transported by pipeline to a place in the United Kingdom and loaded on to a ship there, the date of the bill of lading. (8) The “loading slot” for any oil is the period of three days within which the loading of the oil on to the ship is or was to take place— (a) as duly published by the operator of the facility at which that loading is or was to take place (unless paragraph (b) below applies), or (b) as subsequently finally duly varied to give effect to any modifications duly notified to that operator by the participator concerned. (9) In sub-paragraph (8) above, “duly” means in accordance with the arrangements for the time being governing the time and manner of— (a) publication, or variation, of the final loading schedule for the calendar month in which loading is or was to take place, or (b) notification of modifications to that schedule, and, in any case, before the end of the calendar month immediately preceding that in which loading is to take place. (10) If the Treasury consider that, for the purpose of defining “loading slot”, any period of days for the time being specified by or under this Act as the period of days within which loading of oil on to a ship is to take place is, or is to be, no longer appropriate, they may by regulations make provision for, or in connection with,— (a) varying the number of days in the period, (b) determining the day that is to be the notional delivery day if the number, as varied, is an even number. The power conferred by this sub-paragraph includes power to make amendments to, or modifications of, this Schedule. . (2) Paragraph 2 of that Schedule (definition of market value of oil) is amended as follows. (3) In sub-paragraph (1) (market value of oil in any calendar month to be determined in accordance with the paragraph) for “any oil in any calendar month” substitute “ any particular quantity of oil of any kind on any day ”. (4) After sub-paragraph (1) insert— (1A) This paragraph makes different provision according to whether the oil is— (a) Category 1 oil of any kind, or (b) Category 2 oil of any kind. (1B) For the purposes of this Act— (a) Category 1 oil is oil of any of one or more kinds specified as such in regulations made for the purpose by the Board; (b) Category 2 oil is oil of any other kind. (1C) The Board may specify oil of any particular kind as Category 1 oil only if they are satisfied that reports of prices for sales of oil of that kind are published and widely available (whether or not on payment of a fee). . (5) For sub-paragraph (2) substitute— (2) The market value of any particular quantity of Category 1 oil of any kind is the price for which that quantity of oil of that kind might reasonably have been expected to be sold under a contract of sale that meets the following conditions— (a) the contract is for the sale of the oil at arm's length to a willing buyer; (b) the contract is for delivery of a single standard cargo of the oil; (c) the contract specifies a period of three days within which loading of the oil is to take place and that period includes the notional delivery day for the actual oil; (d) the contract requires the oil to have been subjected to appropriate initial treatment before delivery; (e) the contract requires the oil to be delivered— (i) in the case of oil extracted in the United Kingdom, at the place of extraction; or (ii) in the case of oil extracted from strata in the sea bed and subsoil of the territorial sea of the United Kingdom or of a designated area, at the place in the United Kingdom or another country at which the seller could reasonably be expected to deliver it or, if there is more than one such place, the one nearest to the place of extraction. The terms as to payment which are to be implied in the contract are those which are customarily contained in contracts for the sale at arm's length of oil of the kind in question. (2AA) The market value of any particular quantity of Category 2 oil of any kind is the price for which that quantity of oil of that kind might reasonably have been expected to be sold under a contract of sale that meets the following conditions— (a) the contract is for the sale of the oil at arm's length to a willing buyer; (b) the contract provides for delivery of the oil on the notional delivery day for the actual oil or within such period that includes that day as is normal under a contract at arm's length for the sale of oil of that kind (or, if there is more than one such period, the shortest of them); (c) the contract is made on a date such that the period between that date and the notional delivery day for the actual oil is the normal period between contract and delivery in the case of a contract at arm's length for the sale of oil of that kind (or, if there is more than one such period, the shortest of them); (d) the contract requires the oil to have been subjected to appropriate initial treatment before delivery; (e) the contract requires the oil to be delivered— (i) in the case of oil extracted in the United Kingdom, at the place of extraction; or (ii) in the case of oil extracted from strata in the sea bed and subsoil of the territorial sea of the United Kingdom or of a designated area, at the place in the United Kingdom or another country at which the seller could reasonably be expected to deliver it or, if there is more than one such place, the one nearest to the place of extraction. The terms as to payment which are to be implied in the contract are those which are customarily contained in contracts for the sale at arm's length of oil of the kind in question. . (6) For sub-paragraphs (2A) to (2D) substitute— (2E) For the purposes of sub-paragraph (2) or (2AA) above, the price of any quantity of Category 1 or Category 2 oil of any kind shall be determined in such manner, on the basis of such information, and by reference to such factors, as may be prescribed for oil of that Category and kind in regulations made by the Board. (2F) The provision that may be made by regulations under subsection (2E) above includes provision for or in connection with any or all of the following— (a) determining the price by reference to prices, or an average of prices, for sales of oil (whether or not oil of the Category or kind in question, and whether the prices are prices under actual contracts, prices that are published and widely available (whether on payment of a fee or otherwise) or prices ascertained or determined in some other way); (b) the prices to be taken into account; (c) the descriptions of contracts to be taken into account; (d) the method to be used for determining an average of prices; (e) the day or days, or period or periods, by reference to which prices, or any average of prices, is to be determined; (f) the application of a prescribed price differential, in cases where the price of oil of one kind falls to be determined in whole or in part by reference to prices for oil of some other kind. (2G) Sub-paragraph (2I) below has effect if, or in so far as, the Board are satisfied that it is impracticable or inappropriate to determine for the purposes of sub-paragraph (2) or (2AA) above the price of any oil in accordance with the provisions of regulations for the time being in force under sub-paragraph (2E) above. (2H) For that purpose it is immaterial whether the impracticability or inappropriateness is by virtue of— (a) an insufficiency of contracts or published prices that satisfy the conditions, (b) an insufficiency of information relating to such contracts or published prices, or (c) the nature of the market for oil of the kind in question, or for any other reason. (2I) Where this sub-paragraph has effect, the price is to be determined— (a) so far as it is practicable and appropriate to do so by reference to other contracts or published prices (whether or not relating to oil of the same kind) and in accordance with the principles set out in the regulations for determining an average of prices; and (b) so far as it is not practicable or appropriate to determine it as mentioned in paragraph (a) above, in such other manner as appears to the Board to be appropriate in the circumstances. . (7) Omit sub-paragraph (3) (which relates to the market value of disposals in a calendar month). (8) In sub-paragraph (3A) (oil that has been subjected to initial treatment)— (a) for “sub-paragraphs (1) and (2) above” substitute “ sub-paragraph (1) and sub-paragraph (2) or (2AA) above ”, and (b) for “sub-paragraph (2)(a) above” substitute “ sub-paragraph (2)(d) or (2AA)(d) above ”. (9) In sub-paragraph (4) (application of sub-paragraphs (2) and (3) in relation to paragraph 2(2) of Schedule 2) for “sub-paragraphs (2) and (3)” substitute “ sub-paragraphs (2) and (2AA) ”. (10) After paragraph (4) insert— (5) In this paragraph “prescribed” means specified in, or determined in accordance with, regulations. . (11) Schedule 18 (which makes minor and consequential amendments) has effect.

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147 Section 146: commencement and transitional provisions

(1) The amendments made by section 146 and Schedule 18 have effect in relation to oil delivered or appropriated on or after 1st July 2006 (disregarding section 12A of that Act). (2) Those amendments also have effect for the purpose of determining for any chargeable period ending on or after 31st December 2006— (a) the value to be brought into account under section 2(4)(b) of OTA 1975 by reference to a previous chargeable period ending on or after 30th June 2006, and (b) the value to be brought into account under section 2(5)(d) of that Act. (3) Subsections (1) and (2) are subject to any express provision in Schedule 18 as to the commencement or application of any provision of that Schedule. (4) In the following provisions of this section— (a) “the last old period” means the chargeable period that ends on 30th June 2006, and (b) “the first new period” means the chargeable period that ends on 31st December 2006. (5) Subsection (6) applies in relation to oil which was won from an oil field before 1st July 2006 and which— (a) was loaded on to a ship before 1st July 2006 and transported from the place of extraction to a place in the United Kingdom or elsewhere, or (b) was transported by pipeline from the place of extraction to a place in the United Kingdom and there loaded on to a ship before that date. (6) If the oil is or was disposed of crude by a participator in sales otherwise than at arm's length, but the market value of the oil— (a) does not fall to be brought into account for the purposes of section 2(5)(b) of OTA 1975 for the last old period by reason only that the oil was not delivered in that period, and (b) would not (apart from this subsection) fall to be brought into account for the purposes of that provision in the first new period by reason only that the date on which the oil is to be regarded by virtue of section 12A of that Act as delivered falls in the last old period, the date on which the oil is to be taken for the purposes of section 2(5)(b) of that Act to have been delivered is instead to be the first business day of the first new period. (7) Any power to make regulations that is conferred under or by virtue of any of the amendments made by section 146 or Schedule 18 includes power to make regulations having effect for, or in relation to,— (a) the first new period, or (b) for the purpose mentioned in subsection (2), the last old period, notwithstanding that the period in question has begun or ended before the making of the regulations. (8) Any regulations made by virtue of subsection (7) must be made before 31st December 2006.

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148 Crude oil: power to make regulations

(1) In section 2(5) of OTA 1975 (profits from oil field) for “subsection (5A)” substitute “ subsections (5A) and (5B) ”. (2) After section 2(5A) of that Act insert— (5B) The Board may by regulations make provision for the purposes of subsection (5)(a) to (c) for determining to which fields and in what proportions blended oil to which subsection (5C) applies is attributable. (5C) This subsection applies to blended oil within the meaning of section 63(1A) of the Finance Act 1987 (other than light gases) which— (a) is not gaseous at a temperature of 15 degrees Centigrade and a pressure of one atmosphere, and (b) is not normally disposed of crude by deliveries in quantities of 25,000 metric tonnes or less. (5D) Regulations under subsection (5B)— (a) may apply generally or only to specified cases or circumstances, (b) may make different provision for different cases or circumstances, (c) may make incidental, consequential, or transitional provision, (d) shall be made by statutory instrument, and (e) may not be made unless a draft has been laid before and approved by resolution of the House of Commons. (3) Regulations under section 2(5B) of OTA 1975 (inserted by subsection (2) above) may have effect for the purpose of calculating profits in relation to a chargeable period ending at any time on or after 1st July 2006.

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149 Nomination scheme

(1) Section 61 of FA 1987 (oil taxation: nominations) shall be amended as follows. (2) In subsection (1) omit “, supplies and appropriations”. (3) For subsections (3) and (4) substitute— (3) If the market value of a relevant delivery ascertained in accordance with Schedule 3 to the principal Act exceeds a participator's delivery proceeds of a relevant delivery (within the meaning given by Schedule 10), the excess shall be brought into account by him in accordance with section 2(5)(e) of the principal Act. (4) If a relevant delivery is a delivery of blended oil within the meaning of section 63, regulations under section 2(5B) of the principal Act shall apply for the purposes of determining the proportion of the excess attributable to a field. (4A) For each month in which a participator makes a relevant delivery, his monthly excess is the sum of his excesses (if any) calculated in accordance with subsection (3). (4B) For each chargeable period of an oil field “the excess of nominated proceeds for the period” means, in relation to a participator in the oil field, that proportion of the sum of his monthly excesses for the chargeable period (if any) which is attributable to the field. (4) Subsections (6) and (7) shall cease to have effect. (5) In subsection (8) for “9th February 1987” substitute “ 1st July 2006 ”. (6) In subsection (9)— (a) omit “subsection (7) or”, and (b) after “shall” insert “ (unless otherwise expressly provided) ”. (7) This section shall have effect in relation to chargeable periods ending on or after 1st July 2006.

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150 Amendment of Schedule 10 to FA 1987

(1) Schedule 10 to FA 1987 (oil taxation: nominations) shall be amended as follows. (2) In paragraph 1— (a) in sub-paragraph (1)— (i) omit “, “proposed supply” and “proposed appropriation””, (ii) for “paragraph 3 below” substitute “ paragraph 12A below ”, and (iii) for “paragraphs (a) to (c)” substitute “ paragraph (a) ”, and (b) omit sub-paragraph (2). (3) In paragraph 2 omit— (a) sub-paragraph (1)(b), (c) and (d), and (b) the words following sub-paragraph (1)(d). (4) Omit paragraph 3. (5) In paragraph 4— (a) for sub-paragraph (1) substitute— (1) If a nomination is made during business hours it shall be effective only if— (a) it is made within the period of two hours beginning with the transaction base time, and (b) it satisfies the requirements of paragraph 5. (1A) If a nomination is made outside business hours it shall be effective only if— (a) it is made within the period of two hours beginning with the transaction base time, and (b) it satisfies the requirements of paragraph 5 or 5A. (1B) For the purposes of this paragraph— (a) the transaction base time of a proposed transaction is such time on such date as the Board shall prescribe by regulations, and (b) “business hours” means the period beginning with 09.00 and ending with 17.00 (UK time) on a business day (within the meaning of the Bills of Exchange Act 1882 (c. 61)). , (b) omit sub-paragraphs (2) and (2A), (c) in sub-paragraph (3)— (i) for “transaction base date” substitute “ transaction base time ”, and (ii) for “date” in each place substitute “ time ”, and (d) omit sub-paragraph (4). (6) In paragraph 5— (a) in sub-paragraph (1) for “A nomination of a proposed transaction shall not be effective unless it specifies, in respect to that transaction” substitute “ The requirements of this paragraph for a nomination in respect of a proposed transaction are ”, (b) in sub-paragraph (1)(b) omit “in the case of a proposed sale”, (c) in sub-paragraph (1)(c) and (d) omit “or relevantly appropriated”, (d) in sub-paragraph (1)(d) for “supplied” substitute “ delivered ”, (e) for sub-paragraph (1)(g) substitute— (g) the transaction base time; and , (f) in sub-paragraph (2) after “A nomination” insert “ made under this paragraph ”, and (g) in sub-paragraph (3) after “a nomination” insert “ made under this paragraph ”. (7) After paragraph 5 insert— 5A (1) The requirements of this paragraph for a nomination in respect of a proposed transaction are— (a) the name of the participator or of the group of which the participator is a member; (b) the name of the person to whom the oil is to be sold, or the name of the group of which that person is a member; (c) the blend or grade of oil to be delivered; (d) the nominated price of the oil to be delivered; (e) the nominal volume of the oil; (f) the proposed delivery month; (g) the transaction base time; and (h) such other information as may be prescribed by the Board. (2) In sub-paragraph (1) “group” has the meaning given by section 53 of the Companies Act 1989. 5B (1) A nomination of a transaction shall not be effective unless oil is delivered pursuant to a contract at arm's length the terms of which incorporate the information specified in the nomination in accordance with paragraph 5(1) or 5A(1). (2) But— (a) a contract need not refer to the transaction base time, and (b) the nomination shall be effective whether or not delivery takes place in the proposed delivery month specified in the nomination and the contract. (8) In paragraph 6— (a) in sub-paragraph (1) omit “Subject to sub-paragraph (3) below,”, and (b) omit sub-paragraphs (2) and (3). (9) Omit paragraph 7(2) and (5). (10) After paragraph 7(5) insert— (6) The Board may by regulations prescribe that in specified circumstances the nominal volume in relation to a delivery shall be treated as greater or less than the nominal volume ascertained in accordance with the preceding provisions of this paragraph. (7) Regulations under sub-paragraph (6)— (a) shall be made by statutory instrument, and (b) may not be made unless a draft has been laid before and approved by resolution of the House of Commons. (11) Omit paragraphs 8 to 11. (12) In paragraph 12(1) omit “, supply or appropriation”. (13) After paragraph 12 insert— Interpretation 12A For the purposes of section 61 and this Schedule— (a) a reference to the proposed delivery month in relation to a proposed transaction is a reference to the month in which delivery is to take place, (b) “relevant delivery” means a delivery of oil under a contract made at arm's length in respect of which there has been no effective nomination, and (c) “delivery proceeds” means the price received for a relevant delivery. (14) This section shall have effect in relation to a transaction whenever proposed, but shall not have effect in relation to a proposed transaction with a transaction base date (within the meaning given by regulations under paragraph 4 of Schedule 10 to FA 1987) on or before 30th June 2006. (15) Regulations under paragraph 4(1B) of Schedule 10 to FA 1987 (inserted by subsection (5) above) may have retrospective effect.

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151 Nomination excesses and corporation tax

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152 Increase in rate of supplementary charge

(1) In section 501A of ICTA (supplementary charge in respect of ring fence trades), in subsection (1) (charge of 10 per cent on adjusted ring fence profits), for “10 per cent” substitute “ 20 per cent ”. (2) The amendment made by subsection (1) has effect in relation to any accounting period beginning on or after 1st January 2006 (but see also subsection (3)). (3) For the purpose of calculating the amount of the supplementary charge on a company for an accounting period (a “straddling period”) beginning before 1st January 2006 and ending on or after that date— (a) so much of the straddling period as falls before 1st January 2006, and so much of the straddling period as falls on or after that date, are treated as separate accounting periods, and (b) the company's adjusted ring fence profits for the straddling period are apportioned to the two separate accounting periods in proportion to the number of days in those periods. (4) The amount of the supplementary charge on the company for the straddling period is the sum of the amounts of supplementary charge that would, in accordance with subsection (3), be chargeable on the company for those separate accounting periods. (5) In the case of a company's straddling period— (a) the Instalment Payments Regulations apply as if the amendment made by subsection (1) had not been made, but (b) those Regulations also apply separately, in accordance with the following subsection, in relation to the increase in the amount of any supplementary charge on the company for that period that arises as a result of that amendment. (6) In that separate application of those Regulations as mentioned in subsection (5)(b), those Regulations have effect as if, for the purposes of those Regulations,— (a) the straddling period were an accounting period beginning on 1st January 2006, (b) supplementary charge were chargeable on the company for that period, and (c) the amount of that charge were equal to the increase in the amount of the supplementary charge for the straddling period that arises as a result of the amendment made by subsection (1). (7) Any reference in the Instalment Payments Regulations to the total liability of a company is, accordingly, to be read— (a) in their application as a result of subsection (5)(a), as a reference to the amount that would be the company's total liability for the straddling period if the amendment made by subsection (1) had not been made, and (b) in their application as a result of subsection (5)(b), as a reference to the amount of the supplementary charge on the company for the deemed accounting period under subsection (6)(a). (8) For the purposes of the Instalment Payments Regulations— (a) a company is to be regarded as a large company as respects the deemed accounting period under subsection (6)(a) if (and only if) it is a large company for those purposes as respects the straddling period, and (b) any question whether a company is a large company as respects the straddling period is to be determined as it would have been determined if the amendment made by subsection (1) had not been made. (9) If the Instalment Payments Regulations— (a) apply in relation to a company's liability to supplementary charge for the deemed accounting period under subsection (6)(a), and (b) would (but for this subsection) treat any instalment payment in respect of that liability as being due and payable on a date falling on or before 22nd March 2006, those Regulations have effect as if the payment were due and payable instead at the end of the period of 14 days beginning with that date. (10) In this section— “adjusted ring fence profits” has the meaning given by section 501A of ICTA, “the Instalment Payments Regulations” means the Corporation Tax (Instalment Payments) Regulations 1998 (S.I. 1998/ 3175), “supplementary charge” means any sum chargeable under section 501A(1) of ICTA as if it were an amount of corporation tax.

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153 Election to defer capital allowances

(1) This section applies if— (a) a company carries on a ring fence trade in an accounting period beginning on or after 1st January 2006, (b) relevant expenditure is incurred for the purposes of or in relation to the ring fence trade (see subsections (4) to (7)), and (c) the relevant expenditure would (but for this section) be treated as incurred for the purposes of CAA 2001 in the period of 12 months ending with 31st December 2005. (2) The company may elect for the relevant expenditure to be treated instead as if it were incurred on the first day of the company's first accounting period beginning on or after 1st January 2006. (3) The election— (a) has effect for the purposes of CAA 2001 other than those of section 45G (expenditure not first-year qualifying expenditure under section 45F if plant or machinery used for less than 5 years in a ring fence trade), and (b) must be made by notice given to an officer of Revenue and Customs on or before 31st December 2007. (4) Expenditure is relevant expenditure if it falls within any of Cases A to C. (5) Expenditure falls within Case A if— (a) it is first-year qualifying expenditure on the provision of plant or machinery under section 45F of CAA 2001 (expenditure on plant and machinery for use wholly in a ring fence trade), and (b) no disposal event (see subsection (8)) in relation to the plant or machinery occurs in the relevant period. (6) Expenditure falls within Case B— (a) if it is first-year qualifying expenditure under section 416B of CAA 2001 (mineral extraction allowances: expenditure incurred by a company for purposes of a ring fence trade), (b) if no disposal event in relation to any asset representing the expenditure occurs in the relevant period, (c) if (or so far as) it is expenditure to which no part of any capital sum received by the company in the relevant period is reasonably attributable under section 425(2) of CAA 2001, and (d) if no entitlement to a balancing allowance for a chargeable period in respect of the expenditure arises under any of sections 426 to 431 of CAA 2001 as a result of an event that occurs in the relevant period (as well as in that chargeable period). The reference in paragraph (b) to any asset representing the expenditure is to be read in accordance with section 416B(4) of CAA 2001. (7) Expenditure falls within Case C if— (a) it is qualifying expenditure on research and development under Part 6 of CAA 2001 where the ring fence trade is the trade by reference to which the expenditure is qualifying expenditure, and (b) no disposal event in relation to any asset representing the expenditure occurs in the relevant period. (8) In this section— “disposal event”— in relation to first-year qualifying expenditure under section 45F of CAA 2001, means an event of a kind that requires a disposal value to be brought into account under Part 2 of that Act (whether under section 61(1) or otherwise), in relation to first-year qualifying expenditure under section 416B of CAA 2001, means an event of a kind that requires a disposal value to be brought into account under section 421 or 422 of that Act, in relation to qualifying expenditure on research and development under Part 6 of CAA 2001, means an event of a kind that requires a disposal value to be brought into account under section 443(1) of that Act, “the relevant period”, in relation to any expenditure for the purposes of or in relation to a company's ring fence trade, means the period— beginning with the day on which the expenditure would (but for this section) be treated as incurred for the purposes of CAA 2001, and ending with the first day of the company's first accounting period beginning on or after 1st January 2006, “ring fence trade” means a ring fence trade in respect of which tax is chargeable under section 501A of ICTA (supplementary charge in respect of ring fence trades).

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154 Ring fence expenditure supplement

(1) Chapter 5 of Part 12 of ICTA (petroleum extraction activities) is amended as follows. (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) Schedule 19B (petroleum extraction activities: exploration expenditure supplement) is amended as follows. (4) In paragraph 1 (about the Schedule)— (a) in sub-paragraph (1) (entitlement of company to supplement), in the opening words, after “2004” insert “ but before 1st January 2006 ”, (b) in sub-paragraph (2) (condition that expenditure incurred on or after 1st January 2004), after “2004” insert “ but before 1st January 2006 ”. (5) In paragraph 3 (accounting periods)— (a) in sub-paragraph (1), in the definition of “post-commencement period”, after “2004” insert “ but before 1st January 2006 ”, (b) in sub-paragraph (1), in the definition of “pre-commencement period”, after “2004” insert “ but before 1st January 2006 ”, (c) at the end insert— (3) In the case of an accounting period (a “straddling period”) of any qualifying company beginning before 1st January 2006 and ending on or after that date— (a) so much of the straddling period as falls before 1st January 2006, and (b) so much of the straddling period as falls on or after that date, are treated as separate accounting periods for the purposes of this Schedule. (4) Special provision is made elsewhere in this Schedule in relation to straddling periods (see paragraphs 16, 18A and 22). . (6) In paragraph 6 (qualifying E&A expenditure), in sub-paragraph (2) (condition that expenditure incurred on or after 1st January 2004), after “2004” insert “ but before 1st January 2006 ”. (7) In paragraph 15 (supplement in respect of a post-commencement period), in sub-paragraph (2) (supplement to be treated as a loss for the purposes of Corporation Tax Acts), for “this Schedule)” substitute “ this Schedule or Part 4 of Schedule 19C) ”. (8) In paragraph 16 (amount of post-commencement supplement for a post-commencement period), after sub-paragraph (2) (proportionate reduction of supplement if post-commencement period less than 12 months) insert— (2A) But, if the post-commencement period is the deemed accounting period under paragraph 3(3) ending before 1st January 2006, sub-paragraph (2) has no effect in relation to the amount of the supplement for that period. . (9) After paragraph 18 (ring fence losses and non-qualifying losses) insert— Special rule for straddling periods 18A (1) This paragraph applies in any case where the period of the loss in which a ring fence loss is incurred is the deemed accounting period under paragraph 3(3) ending before 1st January 2006. (2) The following assumption shall be made for the purpose of calculating the amount of the qualifying E&A loss and the amount of the non-qualifying loss. (3) The assumption is that the loss made in the trade is taken to be the loss incurred in the accounting period beginning before 1st January 2006 and ending on or after that date (disregarding paragraph 3(3)). (4) The amount of the non-qualifying loss (found in accordance with that assumption) is then reduced (but not below nil) by the following amount. (5) The amount is the amount of the ring fence loss in the deemed accounting period beginning on 1st January 2006 determined under paragraph 18 of Schedule 19C for the purposes of Part 4 of that Schedule. . (10) In paragraph 22 (reductions in respect of utilised ring fence profits), at the end insert— (4) If the post-commencement period is the deemed accounting period under paragraph 3(3) ending before 1st January 2006 (“the deemed accounting period”), the amount of the profits of the deemed accounting period is determined as follows. (5) The amount of the profits of the straddling period is apportioned to the deemed accounting period in proportion to the number of days in the deemed accounting period that fall in the straddling period. (6) The apportioned amount is taken for the purposes of this paragraph to be the amount of the profits of the deemed accounting period. (7) In this paragraph “the straddling period”, in relation to a qualifying company, means an accounting period of the company beginning before 1st January 2006 and ending on or after that date (disregarding paragraph 3(3)). . (11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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155 Rates and rate bands for 2008-09 and 2009-10

(1) For the Table in Schedule 1 to IHTA 1984 (rates and rate bands), as it has effect in relation to chargeable transfers made on or after 6th April 2008, there shall be successively substituted— (a) the 2008-09 Table, which shall apply to any chargeable transfer made on or after 6th April 2008 (but before 6th April 2009), and (b) the 2009-10 Table, which shall apply to any chargeable transfer made on or after 6th April 2009. (2) Subsection (1)(b) is without prejudice to the application of section 8 of IHTA 1984 (indexation) by virtue of the difference between the retail prices index for the month of September in 2008 or any later year and that for the month of September in the following year. (3) The 2008-09 Table is— Table of Rates of Tax Portion of value | Rate of tax Lower limit (£) | Upper limit (£) | Per cent. 0 | 312,000 | Nil 312,000 | 40 (4) The 2009-10 Table is— Table of Rates of Tax Portion of value | Rate of tax Lower limit (£) | Upper limit (£) | Per cent. 0 | 325,000 | Nil 325,000 | 40 (5) Section 8(1) of IHTA 1984 (indexation of rate bands) shall not have effect as respects any difference between the retail prices index— (a) for the month of September 2006 and that for the month of September 2007, or (b) for the month of September 2007 and that for the month of September 2008.

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156 Rules for trusts etc

(1) Schedule 20 contains— (a) amendments of provisions of IHTA 1984 relating to settled property, (b) amendments of provisions relating to property that, for purposes of that Act, is property subject to a reservation, and (c) related amendments of provisions relating to chargeable gains. (2) Those amendments have effect as mentioned in that Schedule.

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157 Purchase of interests in foreign trusts

(1) Section 48 of IHTA 1984 (settled property: excluded property) is amended as follows. (2) In subsection (3) (circumstances in which settled property situated outside the United Kingdom is excluded property), after paragraph (b) insert— “ ; but this subsection is subject to subsection (3B) below. ”. (3) In subsection (3A) (circumstances in which a holding in an authorised unit trust or a share in an open-ended investment company comprised in settled property is excluded property), after paragraph (b) insert— “ ; but this subsection is subject to subsection (3B) below. ”. (4) After subsection (3A) insert— (3B) Property is not excluded property by virtue of subsection (3) or (3A) above if— (a) a person is, or has been, beneficially entitled to an interest in possession in the property at any time, (b) the person is, or was, at that time an individual domiciled in the United Kingdom, and (c) the entitlement arose directly or indirectly as a result of a disposition made on or after 5th December 2005 for a consideration in money or money's worth. (3C) For the purposes of subsection (3B) above— (a) it is immaterial whether the consideration was given by the person or by anyone else, and (b) the cases in which an entitlement arose indirectly as a result of a disposition include any case where the entitlement arose under a will or the law relating to intestacy. . (5) If, in consequence of the amendments made by this section, an amount of inheritance tax would (but for this subsection) fall due before the day on which this Act is passed, that amount is to be treated instead as falling due at the end of the period of 14 days beginning with that day. (6) This section is deemed to have come into force on 5th December 2005.

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