Finance (No. 2) Act 2005
2005 c. 22
An Act to grant certain duties, to alter other duties, and to amend the law relating to the National Debt and the Public Revenue, and to make further provision in connection with finance.
[20th July 2005]
Most Gracious Sovereign
We, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom in Parliament assembled, towards raising the necessary supplies to defray Your Majesty's public expenses, and making an addition to the public revenue, have freely and voluntarily resolved to give and to grant unto Your Majesty the several duties hereinafter mentioned; and do therefore most humbly beseech Your Majesty that it may be enacted, and be it enacted by the Queen's most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—
1 Goods subject to warehousing regime: place of acquisition or supply
In section 18 of VATA 1994 (goods subject to warehousing regime: place and time of acquisition or supply), after subsection (1) insert—
(1A) The Commissioners may by regulations prescribe circumstances in which subsection (1) above shall not apply.
2 Cars: determination of consideration for fuel supplied for private use
(1) Section 57 of VATA 1994 (determination of consideration for fuel supplied for private use) is amended as follows.
(2) After subsection (4) (power of Treasury by order to substitute a different Table for Table A) insert—
(4A) The power conferred by subsection (4) above includes power to substitute for Table A a Table (whether or not of the same or a similar configuration) where any description of vehicle may be by reference to any one or more of the following—
(a) the CO2 emissions figure for the vehicle;
(b) the type or types of fuel or power by which the vehicle is, or is capable of being, propelled;
(c) the cylinder capacity of the engine in cubic centimetres.
(4B) The provision that may be included in any such Table includes provision for the purpose of enabling the consideration to be determined by reference to the Table—
(a) by applying a percentage specified in the Table to a monetary amount specified in the Table, or
(b) by any other method.
(4C) Table A, as from time to time substituted by virtue of subsection (4A) above, may be implemented or supplemented by either or both of the following—
(a) provision in Rules inserted before the Table, prescribing how the consideration is to be determined by reference to the Table;
(b) provision in Notes inserted after the Table in accordance with the following provisions of this section.
(4D) The provision that may be made in Notes includes provision—
(a) with respect to the interpretation or application of the Table or any Rules or Notes;
(b) with respect to the figure that is to be regarded as the CO2 emissions figure for any vehicle or any particular description of vehicle;
(c) for treating a vehicle as a vehicle with a particular CO2 emissions figure;
(d) for treating a vehicle with a CO2 emissions figure as a vehicle with a different CO2 emissions figure;
(e) for or in connection with determining the consideration appropriate to vehicles of any particular description (in particular, vehicles falling within any one or more of the descriptions in subsection (4E) below).
(4E) The descriptions are—
(a) vehicles capable of being propelled by any particular type or types of fuel or power;
(b) vehicles first registered before 1st January 1998;
(c) vehicles first registered on or after that date which satisfy the condition in subsection (4F) below (registration without a CO2 emissions figure).
(4F) The condition is that the vehicle is not one which, when it is first registered, is so registered on the basis of—
(a) an EC certificate of conformity that specifies a CO2 emissions figure, or
(b) a UK approval certificate that specifies such a figure.
(4G) Any Rules or Notes do not form part of the Table, but the Treasury, by order taking effect from the beginning of any prescribed accounting period beginning after the order is made, may—
(a) insert Rules or Notes,
(b) vary or remove Rules or Notes, or
(c) substitute any or all Rules or Notes.
.
(3) In subsection (5) (fuel supplied for 2 or more vehicles)—
(a) in paragraph (a), for “Table A above, that Table” substitute “ Table A above or any Notes, that Table and those Notes ”;
(b) in paragraph (b), after “that Table”, in both places, insert “ or those Notes ”.
(4) In subsection (7) (cubic capacity of internal combustion engine with reciprocating pistons) after “for the purposes of Table A above” insert “ and any Notes ”.
(5) In subsection (8) (cubic capacity in other cases) after “for the purposes of Table A above” insert “ and any Notes ”.
(6) After subsection (8) insert—
(9) In this section—
“CO2 emissions figure” means a CO2 emissions figure expressed in grams per kilometre driven;
“EC certificate of conformity” means a certificate of conformity issued by a manufacturer under any provision of the law of a Member State implementing Article 6 of Council Directive 70/156/EEC, as from time to time amended;
“Notes” means Notes inserted by virtue of subsection (4C)(b) above;
“Rules” means Rules inserted by virtue of subsection (4C)(a) above;
“UK approval certificate” means a certificate issued under—
section 58(1) or (4) of the Road Traffic Act 1988, or
Article 31A(4) or (5) of the Road Traffic (Northern Ireland) Order 1981.
(10) If the Treasury consider it necessary or expedient to do so in consequence of—
(a) the form or content of any Table substituted or to be substituted by virtue of subsection (4A) above, or
(b) any provision included or to be included in Rules or Notes,
they may by order amend, repeal or replace so much of this section as for the time being follows subsection (1) and precedes Table A and relates to the use of that Table.
.
(7) The amendments made by this section come into force on such day or days as the Treasury may appoint by order made by statutory instrument; and different days may be so appointed for different purposes.
3 Credit for, or repayment of, overstated or overpaid VAT
(1) Section 80 of VATA 1994 (recovery of overpaid VAT) is amended as follows.
(2) For subsection (1) (liability of Commissioners to repay overpaid VAT) substitute—
(1) Where a person—
(a) has accounted to the Commissioners for VAT for a prescribed accounting period (whenever ended), and
(b) in doing so, has brought into account as output tax an amount that was not output tax due,
the Commissioners shall be liable to credit the person with that amount.
(1A) Where the Commissioners—
(a) have assessed a person to VAT for a prescribed accounting period (whenever ended), and
(b) in doing so, have brought into account as output tax an amount that was not output tax due,
they shall be liable to credit the person with that amount.
(1B) Where a person has for a prescribed accounting period (whenever ended) paid to the Commissioners an amount by way of VAT that was not VAT due to them, otherwise than as a result of—
(a) an amount that was not output tax due being brought into account as output tax, or
(b) an amount of input tax allowable under section 26 not being brought into account,
the Commissioners shall be liable to repay to that person the amount so paid.
.
(3) In subsection (2) (Commissioners only liable to repay an amount on a claim) before “repay” insert “ credit or ”.
(4) After subsection (2) insert—
(2A) Where—
(a) as a result of a claim under this section by virtue of subsection (1) or (1A) above an amount falls to be credited to a person, and
(b) after setting any sums against it under or by virtue of this Act, some or all of that amount remains to his credit,
the Commissioners shall be liable to pay (or repay) to him so much of that amount as so remains.
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(5) In subsection (3) (defence of unjust enrichment) for “under this section, that repayment” substitute “ under this section by virtue of subsection (1) or (1A) above, that the crediting ”.
(6) For subsection (3A) (cost of payment borne for practical purposes by third party) substitute—
(3A) Subsection (3B) below applies for the purposes of subsection (3) above where—
(a) an amount would (apart from subsection (3) above) fall to be credited under subsection (1) or (1A) above to any person (“the taxpayer”), and
(b) the whole or a part of the amount brought into account as mentioned in paragraph (b) of that subsection has, for practical purposes, been borne by a person other than the taxpayer.
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(7) In subsection (3B) (loss or damage to be disregarded) in paragraph (a), for “repayment” substitute “ crediting ”.
(8) For subsection (4) (time limit on claims) substitute—
(4) The Commissioners shall not be liable on a claim under this section—
(a) to credit an amount to a person under subsection (1) or (1A) above, or
(b) to repay an amount to a person under subsection (1B) above,
if the claim is made more than 3 years after the relevant date.
(4ZA) The relevant date is—
(a) in the case of a claim by virtue of subsection (1) above, the end of the prescribed accounting period mentioned in that subsection, unless paragraph (b) below applies;
(b) in the case of a claim by virtue of subsection (1) above in respect of an erroneous voluntary disclosure, the end of the prescribed accounting period in which the disclosure was made;
(c) in the case of a claim by virtue of subsection (1A) above in respect of an assessment issued on the basis of an erroneous voluntary disclosure, the end of the prescribed accounting period in which the disclosure was made;
(d) in the case of a claim by virtue of subsection (1A) above in any other case, the end of the prescribed accounting period in which the assessment was made;
(e) in the case of a claim by virtue of subsection (1B) above, the date on which the payment was made.
In the case of a person who has ceased to be registered under this Act, any reference in paragraphs (b) to (d) above to a prescribed accounting period includes a reference to a period that would have been a prescribed accounting period had the person continued to be registered under this Act.
(4ZB) For the purposes of this section the cases where there is an erroneous voluntary disclosure are those cases where—
(a) a person discloses to the Commissioners that he has not brought into account for a prescribed accounting period (whenever ended) an amount of output tax due for the period;
(b) the disclosure is made in a later prescribed accounting period (whenever ended); and
(c) some or all of the amount is not output tax due.
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(9) For subsections (4A) and (4B) (recovery of excess repayments) substitute—
(4A) Where—
(a) an amount has been credited under subsection (1) or (1A) above to any person at any time on or after 26th May 2005, and
(b) the amount so credited exceeded the amount which the Commissioners were liable at that time to credit to that person,
the Commissioners may, to the best of their judgement, assess the excess credited to that person and notify it to him.
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(10) For subsection (7) (no other liability of Commissioners to repay VAT not due) substitute—
(7) Except as provided by this section, the Commissioners shall not be liable to credit or repay any amount accounted for or paid to them by way of VAT that was not VAT due to them.
.
(11) The side-note to the section accordingly becomes “ Credit for, or repayment of, overstated or overpaid VAT ”.
(12) Section 4 contains consequential and supplementary provision.
4 Section 3: consequential and supplementary provision
(1) In consequence of the amendments made by section 3, VATA 1994 is amended as follows.
(2) In section 78 (interest in certain cases of official error) in subsection (1)(a) (overstated output tax) for “and which they are in consequence liable to repay to him” substitute “ and, as a result, they are liable under section 80(2A) to pay (or repay) an amount to him, ”.
(3) In section 80A (arrangements for reimbursing customers)—
(a) in subsection (2)(a), for “repayment” substitute “ crediting ”;
(b) in subsection (2)(b), for “the cost of the original payment of that amount to the Commissioners” substitute “ the amount brought into account as mentioned in paragraph (b) of subsection (1) or (1A) of that section ”;
(c) in subsection (3)(a), for “repayment” substitute “ crediting of the amount ”;
(d) for subsection (3)(b) substitute—
(b) provision for cases where an amount is credited but an equal amount is not reimbursed in accordance with the arrangements;
;
(e) in subsection (3)(c), for “repaid” substitute “ paid (or repaid) ”;
(f) in subsection (4)(a), for “to make the repayments to the Commissioners that they are required to make” substitute “ to make the repayments, or give the notifications, to the Commissioners that they are required to make or give ”;
(g) in subsection (7)—
(i) for “repayment”, in the first place, substitute “ credit ”;
(ii) for “the making of any repayment” substitute “ the crediting of any amount ”.
(4) In section 80B (assessment of amounts due under section 80A arrangements) after subsection (1) (person liable to pay an amount) insert—
(1A) Where—
(a) an amount (“the gross credit”) has been credited to any person under subsection (1) or (1A) of section 80,
(b) any sums were set against that amount, in accordance with subsection (2A) of that section, and
(c) the amount reimbursed in accordance with the reimbursement arrangements was less than the gross credit,
subsection (1B) below applies.
(1B) In any such case—
(a) the person shall cease to be entitled to so much of the gross credit as exceeds the amount so reimbursed, and
(b) the Commissioners may, to the best of their judgement, assess the amount due from that person and notify it to him,
but an amount shall not be assessed under this subsection to the extent that the person is liable to pay it to the Commissioners as mentioned in subsection (1) above.
(1C) In determining the amount that a person is liable to pay as mentioned in subsection (1) above, any amount reimbursed in accordance with the reimbursement arrangements shall be regarded as first reducing so far as possible the amount that he would have been liable so to pay, but for the reimbursement of that amount.
(1D) For the purposes of this section, nil is an amount.
(1E) Any reference in any other provision of this Act to an assessment under subsection (1) above includes, if the context so admits, a reference to an assessment under subsection (1B) above.
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(5) In section 83 (appeals)—
(a) in paragraph (t) (repayment of amounts under section 80 etc) before “repayment” insert “ crediting or ”;
(b) in paragraph (ta) (assessments under section 80B(1) etc) after “80B(1)” insert “ or (1B) ”.
(6) The amendments made by section 3 and this section have effect in any case where a claim under section 80(2) of VATA 1994 is made on or after 26th May 2005, whenever the event occurred in respect of which the claim is made.
(1) In paragraph 8 of Schedule 6 to VATA 1994 (valuation in case of reverse charge)—
(a) after “8” insert “ , or any supply of goods is treated by virtue of section 9A, ”, and
(b) after “the services” insert “ or goods ”.
(2) This section has effect in relation to supplies made on or after 17th March 2005.
(1) Schedule 1 (which contains amendments of Schedule 11A to VATA 1994) has effect.
(2) Subsection (1) and Schedule 1 shall come into force on such day as the Treasury may by order made by statutory instrument appoint.
(3) An order under subsection (2) may—
(a) appoint different days for different purposes, and
(b) contain transitional provisions and savings.
(1) A charge to income tax arises where a person becomes entitled to a social security pension lump sum.
(2) For the purposes of the Tax Acts (including subsection (5)) a social security pension lump sum—
(a) is to be treated as income, but
(b) is not to be taken into account in determining the total income of any person.
(3) The person liable to a charge under this section is the person (“P”) entitled to the lump sum, whether or not P is resident ... ... in the United Kingdom.
(4) The charge is imposed on P for the applicable year of assessment (see subsection (6)).
(5) A charge under this section for a person who is neither a Scottish taxpayer nor a Welsh taxpayer in the applicable year of assessment is a charge in respect of the amount of the lump sum at the following rate—
(a) if P's Step 3 income for the applicable year of assessment is nil, 0%;
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c) if P's Step 3 income for that year of assessment is greater than nil but does not exceed the basic rate limit for that year, the basic rate ... for that year;
(d) if P's Step 3 income for that year of assessment exceeds the basic rate limit for that year but does not exceed the higher rate limit for that year, the higher rate ... for that year.
(e) if P's Step 3 income for that year of assessment exceeds the higher rate limit for that year, the additional rate ... for that year.
(5A) Where P is a Scottish taxpayer in the applicable year of assessment, a charge under this section is a charge in respect of the amount of the lump sum at the following rate—
(a) if P’s Step 3 income for the applicable year of assessment is nil, 0%;
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c) if P’s Step 3 income for that year of assessment is greater than nil, the highest Scottish rate for that tax year that would be applicable to an amount of income that is equal to P’s Step 3 income(2) for that year if such amount were wholly chargeable to income tax at Scottish rates.
(5B) Where P is a Welsh taxpayer in the applicable year of assessment, a charge under this section is a charge in respect of the amount of the lump sum at the following rate—
(a) if P’s step 3 income for the applicable year of assessment is nil, 0%;
(b) if P’s step 3 income for that year of assessment is greater than nil but does not exceed the basic rate limit for that year, the Welsh basic rate for that year;
(c) if P’s step 3 income for that year of assessment is greater than the basic rate limit but does not exceed the higher rate limit for that year, the Welsh higher rate for that year;
(d) if P’s step 3 income for that year of assessment is greater than the higher rate limit for that year, the Welsh additional rate for that year.
(6) Section 8 makes provision as to the meaning of “the applicable year of assessment” for the purposes of this section.
(7) Section 9 contains further definitions and makes provision as to commencement.
(8) Section 10 contains consequential amendments.
(9) For the purposes of this section P's “ Step 3 income ” means P's net income less allowances deducted at Step 3 of the calculation in section 23 of ITA 2007 (calculation of income tax liability).
8 Meaning of “applicable year of assessment” in section 7
(1) For the purposes of section 7 “the applicable year of assessment” has the meaning given by this section.
(2) Subject to subsections (5) to (7), the applicable year of assessment is—
(a) the year of assessment in which the first benefit payment day falls, or
(b) if P dies before the beginning of that year of assessment, the year of assessment in which P dies.
(3) For the purposes of subsection (2) “the first benefit payment day” is, subject to subsections (4) , (4A) and (4B) , the day as from which P's—
(a) Category A or Category B retirement pension,
(b) shared additional pension, or
(c) graduated retirement benefit,
becomes payable following the period of deferment by virtue of which P's entitlement to the lump sum arises.
(4) But where—
(a) the lump sum is a state pension lump sum to which P is entitled under paragraph 7A of Schedule 5 to SSCBA 1992 or paragraph 7A of Schedule 5 to SSCB(NI)A 1992 or a graduated retirement benefit lump sum to which P is entitled under a provision corresponding to either of those paragraphs, and
(b) at the time of S's death, P was entitled to a Category A or Category B retirement pension or (as the case may be) graduated retirement benefit,
the first benefit payment day is the day on which S died; and for this purpose “S” is the person by virtue of whose period of deferment P's entitlement to the lump sum arises.
(4A) In a case where the social security pension lump sum is a lump sum under section 8 of the Pensions Act 2014 or under any corresponding provision under the law of Northern Ireland, “the first benefit payment day” for the purposes of subsection (2) is the day as from which the lump sum becomes payable.
(4B) In a case where the social security pension lump sum is a lump sum under regulations under section 10 of the Pensions Act 2014 which make provision corresponding or similar to section 8 of that Act or under any corresponding provision under the law of Northern Ireland, “the first benefit payment day” for the purposes of subsection (2) is the day as from which the lump sum becomes payable.
(5) Subsections (6) and (7) apply where social security regulations make provision enabling the making of an election for a social security pension lump sum to be paid in the year of assessment (“the later year of assessment”) next following that given by subsection (2).
(6) If such an election is made by P and is not revoked, the applicable year of assessment is—
(a) the later year of assessment, or
(b) if P dies before the beginning of that year of assessment, the year of assessment in which P dies.
(7) If—
(a) P dies after the beginning of the later year of assessment,
(b) by the time of P's death, P has not notified the Secretary of State as to whether or not P wishes to make such an election,
(c) social security regulations make provision enabling the making of such an election in such a case by the personal representatives of P, and
(d) P's personal representatives make such an election in accordance with the regulations,
the applicable year of assessment is the later year of assessment.
(8) For the purposes of determining the applicable year of assessment, it does not matter when the lump sum is actually paid.
(9) In this section—
“Category A or Category B retirement pension” means Category A or Category B retirement pension under Part 2 of SSCBA 1992 or Part 2 of SSCB(NI)A 1992;
“graduated retirement benefit” means graduated retirement benefit under section 36 or 37 of NIA 1965 or section 35 or 36 of NIA(NI) 1966;
“shared additional pension” means shared additional pension under Part 2 of SSCBA 1992 or Part 2 of SSCB(NI)A 1992;
“social security regulations” means any regulations under—
the Social Security Administration Act 1992 (c. 5), or
the Social Security Administration (Northern Ireland) Act 1992 (c. 8).
(10) This section is to be construed as one with section 7.
(1) In sections 7 and 8 “social security pension lump sum” means—
(a) a state pension lump sum,
(b) a shared additional pension lump sum, or
(c) a graduated retirement benefit lump sum.
(2) In section 8 and this section—
“graduated retirement benefit lump sum” means a lump sum payable under—
section 36 or 37 of NIA 1965, or
section 35 or 36 of NIA(NI) 1966;
“shared additional pension lump sum” means a lump sum payable under—
section 55C of, and Schedule 5A to, SSCBA 1992, or
section 55C of, and Schedule 5A to, SSCB(NI)A 1992;
“state pension lump sum” means a lump sum payable under—
section 8 of the Pensions Act 2014 or under any corresponding provision under the law of Northern Ireland,
regulations under section 10 of the Pensions Act 2014 which make provision corresponding or similar to section 8 of that Act or under any corresponding provision under the law of Northern Ireland, 1992, or
section 55 of, and Schedule 5 to, SSCBA 1992, or
section 55 of, and Schedule 5 to, SSCB(NI)A 1992.
(3) In section 8 and this section—
“NIA 1965” means the National Insurance Act 1965 (c. 51);
“NIA(NI) 1966” means the National Insurance Act (Northern Ireland) 1966 (c. 6 (N.I.));
“SSCBA 1992” means the Social Security Contributions and Benefits Act 1992 (c. 4);
“SSCB(NI)A 1992” means the Social Security Contributions and Benefits (Northern Ireland) Act 1992 (c. 7).
(4) Sections 7 and 8 and this section have effect in relation to the year 2006-07 and subsequent years of assessment.
(1) ITEPA 2003 is amended as follows.
(2) In section 577 (UK social security pensions) after subsection (1) insert—
(1A) But this section does not apply to any social security pension lump sum (within the meaning of section 7 of F(No.2)A 2005).
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(3) In section 683 (PAYE income) in subsection (3) (meaning, subject to subsection (4), of “PAYE pension income”) in the opening words, for “subsection (4)” substitute “ subsections (3A) and (4) ”.
(4) In that section, after subsection (3) insert—
(3A) “PAYE pension income” for a tax year also includes any social security pension lump sum (within the meaning of section 7 of F(No.2)A 2005) in respect of which a charge to income tax arises under that section for that tax year.
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(5) In section 686 (meaning of “payment”) in subsection (1) (rules as to when payment of, or on account of, PAYE income is to be treated as made for the purposes of PAYE regulations) at the end of the subsection insert— “ But this is subject to subsection (5) (PAYE pension income: social security pension lump sums). ”.
(6) In that section, after subsection (4) insert—
(5) For the purposes of PAYE regulations, a payment of, or on account of, an amount which is PAYE pension income of a person by virtue of section 683(3A) (social security pension lump sums) is to be treated as made at the time when the payment is made.
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(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14 Income tax deduction for payments to organisations
(1) Section 88 of ITTOIA 2005 (income tax deduction for payments to research associations etc.) is amended as follows.
(2) In subsection (1) (conditions for deduction), for the words from the beginning of paragraph (a) to “research” in paragraph (b) substitute—
(a) pays any sum to an Association in the case of which exemption may be claimed under section 508 of ICTA and which has as its object the undertaking of research and development which may lead to or facilitate an extension of the class of trade to which the trade carried on by the person belongs, or
(b) pays any sum to be used for scientific research related to that class of trade
.
(3) In subsection (4), omit paragraph (a) (meaning of “approved” in relation to scientific research association).
(4) In subsection (5) (references to scientific research related to a class of trade), for “references in this section” substitute “ reference in subsection (1)(b) ”.
(5) This section has effect in relation to sums paid to an Association during any accounting period of the Association beginning on or after the day appointed under section 13(6).
15 Corporation tax deduction for payments to organisations
(1) Section 82B of ICTA (corporation tax deduction for payments to research associations etc.) is amended as follows.
(2) In subsection (1) (conditions for deduction), for the words from the beginning of paragraph (a) to “above” in paragraph (b) substitute—
(a) pays any sum to an Association in the case of which exemption may be claimed under section 508 and which has as its object the undertaking of research and development which may lead to or facilitate an extension of the class of trade to which the trade carried on by the company belongs, or
(b) pays any sum to be used for scientific research related to that class of trade
.
(3) In subsection (3) (reference to scientific research related to a class of trade), for “this section” substitute “ subsection (1)(b) above ”.
(4) This section has effect in relation to sums paid to an Association during any accounting period of the Association beginning on or after the day appointed under section 13(6).
17 Authorised unit trusts and open-ended investment companies
(1) The following provisions shall cease to have effect—
(a) sections 468H to 468Q of ICTA (authorised unit trusts),
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(d) section 373(4) and (6) of ITTOIA 2005 (open-ended investment company: interest distributions), and
(e) section 376(4) and (6) of ITTOIA 2005 (authorised unit trust: interest distributions).
(2) In this Chapter “authorised investment funds” means—
(a) authorised unit trust schemes, and
(b) open-ended investment companies.
(3) The Treasury may, by regulations—
(a) make provision about the treatment of authorised investment funds for the purposes of an enactment relating to taxation;
(b) provide for the modification of an enactment relating to taxation in its application in relation to—
(i) authorised investment funds,
(ii) shareholders or unit holders in authorised investment funds, or
(iii) transactions involving authorised investment funds;
(c) impose requirements on persons responsible for the management of an authorised investment fund in relation to the provision of information, the form of accounts, the keeping of records or other administrative matters.
(4) For the purposes of this Chapter—
(a) “unit trust scheme” has the meaning given by section 237 of the Financial Services and Markets Act 2000 (c. 8),
(b) a unit trust scheme is authorised in relation to an accounting period if an order under section 243 of the Financial Services and Markets Act 2000 is in force in relation to that scheme during the whole or part of that accounting period,
(c) “unit holder” means a person entitled to a share of the investments subject to the trusts of a unit trust scheme,
(d) a reference to a shareholder or unit holder includes a person beneficially entitled to shares or units (and a reference to owning units or shares shall be construed accordingly),
(e) “open-ended investment company” means a company incorporated in the United Kingdom to which section 236 of the Financial Services and Markets Act 2000 applies,
(f) “associate” has the meaning given by section 417 of ICTA,
(g) “net asset value” means the value of the assets of the authorised investment fund, after the deduction of specified liabilities,
(h) a reference to a distribution includes investing an amount on behalf of a unit holder or shareholder in respect of his accumulation units or accumulation shares,
(i) “distribution accounts” means accounts showing—
(i) the total amount available for distribution to unit holders or shareholders, and
(ii) how that amount is computed,
(j) the “distribution date” for a distribution period in relation to an authorised investment fund means—
(i) the date specified by or in accordance with the terms of the trust or the instrument of incorporation of the company for any distribution for that distribution period, or
(ii) if no date is specified, the last day of that distribution period,
(k) “distribution period” in relation to an authorised investment fund means a period by reference to which the total amount available for distribution to unit holders or shareholders is ascertained,
(l) “umbrella company” has the meaning given by section 615 of the Corporation Tax Act 2010,
(m) “umbrella scheme” has the meaning given by section 619 of the Corporation Tax Act 2010, and
(n) section 1122 of the Corporation Tax Act 2010 (connected persons) applies.
(1) Regulations under section 17(3)(a) or (b) may make provision about distributions which may, in particular—
(a) require an authorised investment fund to comply with prescribed rules for determining (whether by reference to a formula or otherwise) what proportion of an amount shown in distribution accounts as available for distribution is to be distributed by way of dividends and what proportion is to be distributed by way of yearly interest;
(b) permit persons responsible for the management of an authorised investment fund to elect to distribute entirely by way of dividends;
(c) require distribution accounts to show the amount available for distribution—
(i) by way of dividends;
(ii) by way of yearly interest;
(d) allow a distribution of yearly interest for a distribution period to be deducted, in the prescribed manner, in computing the profits of the authorised investment fund for the accounting period in which the last day of that distribution period falls;
(e) make provision for determining the distribution date in relation to a distribution period of an authorised investment fund;
(f) permit distributions to be made, in prescribed circumstances, to or for the benefit of a person not ... resident in the United Kingdom without deducting tax;
(g) permit distributions to be made without deducting tax, in prescribed circumstances, to a person ... resident in the United Kingdom who is unlikely to be liable to pay an amount by way of income tax for the year of assessment in which the distribution is made;
(h) include provision, in respect of a unit holder or shareholder who is within the charge to corporation tax, about—
(i) the liability to corporation tax resulting from receipt of a distribution, and
(ii) the method of computing that liability.
(2) Regulations under section 17(3)(a) or (b) may, in particular—
(a) make special provision for loan relationships held by an authorised investment fund;
(b) make special provision for derivative contracts held by an authorised investment fund;
(c) modify the meaning of “ relevant holding ” for the purposes of—
(i) sections 490 and 492 of the Corporation Tax Act 2009 (loan relationships), and
(ii) section 587 of that Act (derivative contracts).
(d) make special provision in relation to the treatment of umbrella companies and umbrella schemes (or shareholders or unit holders in umbrella companies or umbrella schemes);
(e) prohibit action which favours a class of unit holders or shareholders.
(3) Regulations under section 17(3)(a) or (b) may, in particular—
(a) make special provision in relation to a person who, alone or together with associates or connected persons, owns (otherwise than as a nominee) units or shares, in a fund designated by the Financial Conduct Authority as a Qualified Investor Scheme, which represent 10% or more (or such other percentage as the regulations may specify) of the net asset value of the fund;
(b) include exceptions from provision made by virtue of paragraph (a) above including, in particular, an exception relating to units or shares held—
(i) by a charity ...,
(ii) by a registered pension scheme (within the meaning of section 150 of FA 2004),
(iii) by an insurance company (within the meaning of section 65 of FA 2012) as assets for the purposes of its long-term business (within the meaning of section 63 of that Act),or
(iv) by such other persons, in such circumstances, as the regulations may specify.
(4) Regulations under section 17(3)(c) may, in particular, require persons responsible for the management of an authorised investment fund to supply information to, and make available books, documents and other records for inspection by, the Commissioners for Her Majesty's Revenue and Customs.
(5) Regulations under section 17(3) may, in particular—
(a) amend a reference in an enactment to a provision repealed by section 17(1);
(b) make different provision for different circumstances;
(c) make incidental, consequential, supplemental or transitional provision.
(1) Section 17(1) shall come into force on such day as the Treasury may appoint by order.
(2) An order under subsection (1) may—
(a) commence only a specified repeal;
(b) commence different repeals at different times;
(c) commence a repeal at different times for different purposes;
(d) include savings.
(3) Regulations under section 17(3) shall be subject to annulment by a resolution of the House of Commons.
(4) But the first set of regulations under section 17(3) may not be made unless a draft has been laid before and approved by resolution of the House of Commons.
(1) Section 100 of TCGA 1992 (exemption for authorised unit trusts, etc) shall be amended as follows.
(2) After subsection (2) insert—
(2A) In determining whether subsection (2) applies no account shall be taken of units in a scheme which—
(a) have been disposed of by a unit holder, and
(b) are held by the managers of the scheme (in that capacity) pending disposal.
(2B) In determining whether subsection (2) applies no account shall be taken of the possibility of a charge to corporation tax on income in respect of a gain accruing on a disposal by—
(a) an insurance company (within the meaning given by section 431 of the Taxes Act), or
(b) a friendly society (being an incorporated friendly society or registered friendly society within the meaning given by section 466(2) of the Taxes Act).
(3) This section shall have effect for the year 2005-06 and subsequent years of assessment.
(1) In Chapter 3 of Part 3 of TCGA 1992 (collective investment schemes, etc) after section 99A insert—
Calculation of the disposal cost of accumulation units
99B (1) For the purposes of computing the gain accruing on a disposal by a unit holder of units in a unit trust scheme and for the purposes of all other provisions of this Act, an amount shall be treated as expenditure falling within section 38(1)(b) if—
(a) it represents income from the investments subject to the unit trust scheme,
(b) it has been reinvested in respect of the units on behalf of the unit holder (without an issue of new units), and
(c) it is either—
(i) charged to income tax as income of the unit holder (or would be charged to income tax as his income but for a relief which has effect in respect of it) for the purposes of the Income Tax Acts, or
(ii) taken into account as a receipt in calculating profits, gains or losses of the unit holder for the purposes of the Income Tax Acts.
(2) Where an amount is treated as expenditure by virtue of subsection (1), the expenditure shall be treated for the purposes of this Act as having been incurred—
(a) in relation to an authorised unit trust, on the distribution date for the distribution period in respect of which the amount is reinvested, and
(b) in relation to any other unit trust scheme, on the date on which the amount is reinvested.
(3) In subsection (2)(a) “distribution date” and “distribution period” shall have the meaning given by section 468H of the Taxes Act.
(2) This section shall have effect in relation to a disposal of units on or after 16th March 2005.
22 Section 349B ICTA: exemption for distributions to PEP/ISA managers
(1) Section 349B(4) of ICTA (requirement for individual to be entitled to income tax exemption) shall be amended as follows.
(2) In paragraph (a) after “of a plan” insert “ of a kind to which regulations under Chapter 3 of Part 6 of ITTOIA 2005 (income from individual investment plans) apply ”.
(3) Paragraph (b) shall cease to have effect.
(4) This section shall have effect in relation to payments made on or after 6th April 2005.
(1) Section 10A of TCGA 1992 is amended as follows.
(2) In subsection (3) (certain gains or losses to be excluded from being treated by virtue of subsection (2) as accruing to the taxpayer in year of return)—
(a) in paragraph (a), for “he was neither resident nor ordinarily resident in the United Kingdom” substitute—
(i) he was neither resident nor ordinarily resident in the United Kingdom, or
(ii) he was resident or ordinarily resident in the United Kingdom but was Treaty non-resident;
;
(b) in paragraph (d), after “152(1)(b)” insert “ , 153(1)(b) ”.
(3) In subsection (8) (definitions) in the definition of “relevant disposal”, after “United Kingdom” insert “ and was not Treaty non-resident ”.
(4) For subsection (9) substitute—
(9) For the purposes of this section an individual satisfies the residence requirements for a year of assessment—
(a) if, during any part of that year of assessment, he is resident in the United Kingdom and not Treaty non-resident, or
(b) if he is ordinarily resident in the United Kingdom during that year of assessment, unless he is Treaty non-resident during that year of assessment.
(9A) For the purposes of this section an individual is Treaty non-resident at any time if, at that time, he falls to be regarded as resident in a territory outside the United Kingdom for the purposes of double taxation relief arrangements having effect at that time.
(9B) Where this section applies in the case of any individual in circumstances in which one or more intervening years would, but for his being Treaty non-resident during some or all of that year or those years, not be an intervening year, this section shall have effect in the taxpayer's case—
(a) as if subsection (2)(a) above did not apply in the case of any amount treated by virtue of section 87 or 89(2) as an amount of chargeable gains accruing to the taxpayer in any such intervening year, and
(b) as if any such intervening year were not an intervening year for the purposes of subsections (2)(b) and (c) and (6) above.
.
(5) After subsection (9B) (as inserted by subsection (4) above) insert—
(9C) Nothing in any double taxation relief arrangements shall be read as preventing the taxpayer from being chargeable to capital gains tax in respect of any of the chargeable gains treated by virtue of subsection (2)(a) above as accruing to the taxpayer in the year of return (or as preventing a charge to that tax from arising as a result).
.
(6) Omit subsection (10) (section to be without prejudice to right to claim relief under double taxation relief arrangements).
(7) The amendments in subsections (2)(a), (4), (5) and (6) have effect—
(a) in any case in which the year of departure is, or (on the assumption that the amendment in subsection (4) had always had effect) would be, the year 2005-06 or a subsequent year of assessment; and
(b) in any case in which—
(i) the year of departure is, or (on that assumption) would be, the year 2004-05, and
(ii) at a time in that year on or after 16th March 2005, the taxpayer was resident or ordinarily resident in the United Kingdom and was not Treaty non-resident (within the meaning given by section 10A(9A) of TCGA 1992, as inserted by subsection (4)).
(8) The amendment in subsection (2)(b) has effect in relation to relevant disposals made on or after 16th March 2005.
(9) The amendment in subsection (3) has effect for determining whether a disposal of an asset is a relevant disposal for the purposes of section 10A of TCGA 1992 in any case in which the person making the disposal acquired the asset on or after 16th March 2005.
33 Trustees both resident and non-resident in a year of assessment
(1) After section 83 of TCGA 1992 insert—
Trustees both resident and non-resident in a year of assessment
83A (1) This section applies if a chargeable gain accrues to the trustees of a settlement on the disposal by them of an asset in a year of assessment and the trustees—
(a) are within the charge to capital gains tax in that year of assessment, but
(b) are non-UK resident at the time of the disposal.
(2) Where this section applies, nothing in any double taxation relief arrangements shall be read as preventing the trustees from being chargeable to capital gains tax (or as preventing a charge to tax arising, whether or not on the trustees) by virtue of the accrual of that gain.
(3) For the purposes of this section the trustees of a settlement are within the charge to capital gains tax in a year of assessment—
(a) if, during any part of that year of assessment, they are resident in the United Kingdom and not Treaty non-resident, or
(b) if they are ordinarily resident in the United Kingdom during that year of assessment, unless they are Treaty non-resident during that year of assessment.
(4) For the purposes of this section the trustees of a settlement are non-UK resident at a particular time if, at that time,—
(a) they are neither resident nor ordinarily resident in the United Kingdom, or
(b) they are resident or ordinarily resident in the United Kingdom but are Treaty non-resident.
(5) For the purposes of this section the trustees of a settlement are Treaty non-resident at any time if, at that time, they fall to be regarded as resident in a territory outside the United Kingdom for the purposes of double taxation relief arrangements having effect at that time.
.
(2) The amendment made by this section has effect in relation to disposals made on or after 16th March 2005.
Schedule 4 (which makes provision in relation to the situation of assets for the purposes of TCGA 1992 and which makes minor amendments in that Act in relation to non-resident companies with United Kingdom permanent establishments) has effect.
38 Charges on income for the purposes of corporation tax
(1) Section 338A of ICTA (meaning of “charges on income” for the purposes of corporation tax) is amended as follows.
(2) In subsection (2) (what are charges on income) paragraph (a) (annuities or other annual payments that meet the conditions in section 338B) shall cease to have effect.
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) In section 434A(2)(a) of ICTA (loss resulting to insurance company from computation in accordance with Case I of Schedule D: reduction by specified amounts) omit sub-paragraph (i) (which relates to charges on income).
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6) The amendment made by subsection (4) has effect for accounting periods beginning on or after 1st April 2004.
(7) The other amendments made by this section have effect in relation to payments made on or after the commencement date in respect of annuities or other annual payments.
(8) Where—
(a) an accounting period of a company begins before, and ends on or after, the commencement date,
(b) a payment in respect of an annuity or other annual payment is made by the company in that period but before the commencement date, and
(c) the payment is deductible as a charge on income for the purposes of corporation tax,
subsection (9) applies.
(9) In any such case, so much of any amount as represents that payment—
(a) is not deductible under section 75 of ICTA (expenses of management), and
(b) is not to be brought into account under section 76 of that Act (expenses of insurance companies) as expenses payable,
for that or any subsequent accounting period.
(10) Subsection (12) applies in any case where—
(a) a payment in respect of an annuity or other annual payment is made by a company on or after the commencement date, and
(b) the condition in subsection (11) is satisfied.
(11) The condition is that the payment represents an amount which (apart from subsection (12))—
(a) would not be deductible under section 75 of ICTA, or
(b) would not fall to be brought into account under section 76 of that Act,
by reason only of section 337A(1)(b) of that Act (company's income from any source to be computed without any deduction in respect of charges on income) as it applies by virtue of section 338A(2)(a) of that Act.
(12) In any such case, the amount represented by the payment—
(a) is deductible under section 75 of ICTA, or
(b) falls to be brought into account under section 76 of that Act as expenses payable,
for the accounting period in which the payment is made.
(13) In this section “the commencement date” means 16th March 2005.