Law

Finance Act 2007

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: 142 provisions
  1. Title and introductory text
  2. 1 Charge and rates for 2007-08
  3. 2 Charge and main rates for financial year 2008
  4. 3 Small companies' rates and fractions for financial year 2007
  5. 4 Rates and rate bands for 2010-11
  6. 5 Rates of duty on alcoholic liquor
  7. 6 Rates of tobacco products duty
  8. 7 Rates of gaming duty
  9. 8 Remote gaming duty
  10. 9 Amusement machine licence duty
  11. 10 Fuel duty rates and rebates
  12. 11 Rates of vehicle excise duty
  13. 12 Rates of air passenger duty
  14. 13 Rates of climate change levy
  15. 14 Rate of aggregates levy
  16. 15 Rates of landfill tax
  17. 16 Emissions trading: charges for allocations
  18. 17 Corporation tax deduction for expenditure on energy-saving items
  19. 18 Extension of income tax deduction for expenditure on energy-saving items
  20. 19 SDLT relief for new zero-carbon homes
  21. 20 Income tax exemption for domestic microgeneration
  22. 21 Renewables obligation certificates for domestic microgeneration
  23. 22 Aggregates levy: exemption for aggregate removed from railways etc
  24. 23 Climate change levy: reduced-rate supplies etc
  25. 24 Landfill tax: bodies concerned with the environment
  26. 25 Managed service companies
  27. 26 Restrictions on trade loss relief for partners
  28. 27 Extension of restrictions on allowable capital losses
  29. 28 Restriction on expenses of management
  30. 29 Life policies etc: effect of rebated or reinvested commission
  31. 30 Avoidance involving financial arrangements
  32. 31 Companies carrying on business of leasing plant or machinery
  33. 32 Restrictions on companies buying losses or gains: tax avoidance schemes
  34. 33 Lloyd's corporate members: restriction of group relief
  35. 34 Employee benefit contributions
  36. 35 Schemes etc designed to increase double taxation relief
  37. 36 Industrial and agricultural buildings allowances
  38. 37 Temporary increase in first-year capital allowances for small enterprises
  39. 38 Insurance companies: gross roll-up business etc
  40. 39 Insurance companies: basis of taxation etc
  41. 40 Insurance companies: transfers etc
  42. 41 Insurance companies: miscellaneous
  43. 42 Technical provisions made by general insurers
  44. 43 Lloyd's: cessation of business by corporate members
  45. 44 Transfers of business by friendly societies to insurance companies etc
  46. 45 Tax exempt business of friendly societies
  47. 46 Purchased life annuities: self-assessment
  48. 47 Sale and repurchase of securities
  49. 48 Controlled foreign companies
  50. 49 Vaccine research relief: amount of deduction for SMEs
  51. 50 Research and development tax relief: definition of SME etc
  52. 51 Venture capital schemes etc
  53. 52 Real Estate Investment Trusts
  54. 53 Alternative finance investment bond
  55. 54 Profit share agency
  56. 55 Trust income
  57. 56 Trust gains on contracts for life insurance
  58. 57 Offshore funds
  59. 58 Election out of special film rules for film production companies
  60. 59 Securitisation companies
  61. 60 Gift aid: limits
  62. 61 Enterprise management incentives: excluded activities
  63. 62 Benefits code: whether employment is “lower-paid employment”
  64. 63 Armed forces redundancy schemes
  65. 64 Armed forces: the Operational Allowance
  66. 65 Service charge income
  67. 66 Charge on benefits received by former owner of property: late elections
  68. 67 Unpaid remuneration and employee benefit contributions
  69. 68 Abolition of contributions relief for life assurance premium contributions
  70. 69 Alternatively secured pensions etc
  71. 70 Miscellaneous
  72. 71 Anti-avoidance
  73. 72 Partnerships
  74. 73 Exemptions: intermediaries, repurchases etc
  75. 74 Acquisition relief: disregard of company holding own shares
  76. 75 SDLT: alternative finance arrangements
  77. 76 SDLT: exchanges
  78. 77 SDLT: shared ownership trusts
  79. 78 SDLT: shared ownership lease
  80. 79 Certain transfers of school land
  81. 80 Payment of tax
  82. 81 Self-certificate declarations
  83. 82 Criminal investigations: powers of Revenue and Customs
  84. 83 Northern Ireland criminal investigations
  85. 84 Sections 82 and 83: supplementary
  86. 85 Criminal investigations: Scotland
  87. 86 Search warrants
  88. 87 Cross-border exercise of powers
  89. 88 Personal tax returns
  90. 89 Trustee's tax return
  91. 90 Partnership tax returns
  92. 91 Consequential amendments
  93. 92 Commencement
  94. 93 Mandatory electronic filing of returns
  95. 94 Mandatory electronic payment
  96. 95 Payment by cheque
  97. 96 Enquiry into returns
  98. 97 Penalties for errors
  99. 98 VAT: joint and several liability of traders in supply chain where tax unpaid
  100. 99 VAT: non-business use etc of business goods
  101. 100 VAT: transfers of going concerns
  102. 101 IPT: meaning of “premium”
  103. 102 Abolition of PRT for fields recommissioned after earlier decommissioning
  104. 103 Tax-exempt tariffing receipts
  105. 104 Allowance of unrelievable loss from abandoned field
  106. 105 Amendments connected with Gambling Act 2005
  107. 106 VED: exempt vehicles
  108. 107 Limitation period in old actions for mistake of law relating to direct tax
  109. 108 Disclosure of tax avoidance schemes
  110. 109 Meaning of “recognised stock exchange” etc
  111. 110 Mergers Directive: regulations
  112. 111 Excise duties: small consignment relief
  113. 112 Updating references to Standing Committees
  114. 113 Interpretation
  115. 114 Repeals
  116. 115 Short title
  117. SCHEDULE 1 Remote gaming duty
  118. SCHEDULE 2 Climate change levy: reduced-rate supplies etc
  119. SCHEDULE 3 Managed service companies
  120. SCHEDULE 4 Restrictions on trade loss relief for partners
  121. SCHEDULE 5 Avoidance involving financial arrangements
  122. SCHEDULE 6 Companies carrying on business of leasing plant or machinery
  123. SCHEDULE 7 Insurance business: gross roll-up business etc
  124. SCHEDULE 8 Insurance companies: basis of taxation etc
  125. SCHEDULE 9 Insurance companies: transfers etc
  126. SCHEDULE 10 Insurance companies: miscellaneous
  127. SCHEDULE 11 Technical provisions made by general insurers
  128. SCHEDULE 13 Sale and repurchase of securities
  129. SCHEDULE 14 Sale and repurchase of securities: minor and consequential amendments
  130. SCHEDULE 15 Controlled foreign companies
  131. SCHEDULE 16 Venture capital schemes etc
  132. SCHEDULE 17 Real Estate Investment Trusts
  133. SCHEDULE 18 Pensions schemes: abolition of relief for life assurance premium contributions etc
  134. SCHEDULE 19 Alternatively secured pensions and transfer lump sum death benefit etc
  135. SCHEDULE 20 Pension schemes etc: miscellaneous
  136. SCHEDULE 21 Exemptions from stamp duty and SDRT: intermediaries, repurchases etc
  137. SCHEDULE 22 Amendments and repeals consequential on extension of HMRC powers
  138. SCHEDULE 23 Extension of HMRC powers: Scotland
  139. SCHEDULE 24 Penalties for errors
  140. SCHEDULE 25 Amendments connected with Gambling Act 2005
  141. SCHEDULE 26 Meaning of "recognised stock exchange" etc
  142. SCHEDULE 27 Repeals

Proposed changes to this act

No one has proposed a change to this act yet.

142 provisions

40 Insurance companies: transfers etc

Schedule 9 contains provision about transfers by insurance companies and related matters.

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41 Insurance companies: miscellaneous

Schedule 10 contains miscellaneous provisions relating to insurance companies.

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42 Technical provisions made by general insurers

Schedule 11 contains provision in relation to technical provisions made by general insurers.

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43 Lloyd's: cessation of business by corporate members

(1) In FA 1994, after section 227A (inserted by section 33) insert— Transfer of underwriting business without change of ownership 227B (1) This section applies where, in accordance with the rules or practice of Lloyd's, a corporate member (“the successor”) has taken up the syndicate capacity of another corporate member (“the predecessor”). (2) Section 343 of the Taxes Act 1988 (company reconstructions without a change of ownership) applies as if— (a) the trade mentioned in that section were the underwriting business of the predecessor, (b) the predecessor ceases to carry it on, and the successor begins to carry it on, at the end of the first underwriting year in which profits or losses of the predecessor's last active underwriting year are declared, and (c) subsections (8) to (10) and (12) were omitted. (3) For the purposes of subsection (1) above the successor has taken up the predecessor's syndicate capacity if it has taken up the rights to participate in syndicates which were (or otherwise would be) offered to the predecessor. (4) In subsection (2)(b) above “last active underwriting year” has the same meaning as in section 227A above (see subsections (2) to (4) of that section). (2) The amendment made by subsection (1) has effect in any case where the first underwriting year in which profits or losses of the predecessor's final underwriting year are declared is 2007 or a later underwriting year.

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44 Transfers of business by friendly societies to insurance companies etc

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45 Tax exempt business of friendly societies

(1) Section 462 of ICTA (conditions for tax exempt business) is amended as follows. (2) For subsection (1) substitute— (1) Subject to subsections (2) to (4) below, section 460 does not afford any exemption from corporation tax in relation to so much of the profits arising to a friendly society or insurance company from any business as is attributable to a policy which— (a) is not a qualifying policy (by virtue of sub-paragraph (2) of paragraph 6 of Schedule 15) and is not an excluded policy, and (b) would not be a qualifying policy (by virtue of that sub-paragraph) if all excluded policies were left out of account. (1A) For the purposes of subsection (1) above a policy is an excluded policy if— (a) it is a policy held otherwise than with the friendly society or insurance company, or (b) the person who has the contract effecting the policy acquired the rights under it on an assignment (or, in Scotland, assignation) otherwise than for money or money's worth. (3) In subsection (2), for “under section 460(1) for profits arising from any part of a life or endowment” substitute “ in relation to profits arising from any part of a ”. (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6) The amendments made by this section are deemed to have come into force on 1st January 2007.

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46 Purchased life annuities: self-assessment

(1) In section 437(1C) of ICTA (general annuity business), omit paragraphs (c)(i) and (d)(i). (2) In section 656 of that Act (purchased life annuities other than retirement annuities), omit subsections (5) and (6). (3) In section 658 of that Act (supplementary), omit subsections (1) and (4) to (6). (4) In section 828(4) of that Act (parliamentary procedure for orders and regulations), omit “658(3)”. (5) In section 717 of ITTOIA 2005 (exemption for part of purchased life annuity payment), omit subsection (3). (6) Omit section 723 of that Act (officer of Revenue and Customs to determine certain questions). (7) In section 724 of that Act (regulations)— (a) in subsection (1)(a), for “723” substitute “ 722 ”, and (b) omit subsection (2). (8) In section 873(3) of that Act (parliamentary procedure for orders and regulations), omit paragraph (b). (9) The amendments made by subsections (1) to (3) and (5) to (7) come into force on such day as the Treasury may by order appoint; and different days may be appointed for different purposes.

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47 Sale and repurchase of securities

(1) Schedule 13 contains provision for corporation tax purposes about the sale and repurchase of securities. (2) Schedule 14 contains minor and consequential amendments in relation to the sale and repurchase of securities. (3) The Treasury may by order make such other amendments (including repeals and revocations) of enactments or instruments as may appear appropriate in consequence of, or otherwise in connection with, those Schedules. (4) Schedule 13, and the amendments made by Schedule 14, have effect in accordance with provision made by the Treasury by order. (5) Any order under this section— (a) may make different provision for different purposes, and (b) may contain transitional provision and savings.

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48 Controlled foreign companies

Schedule 15 contains provision in relation to controlled foreign companies.

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49 Vaccine research relief: amount of deduction for SMEs

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50 Research and development tax relief: definition of SME etc

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51 Venture capital schemes etc

Schedule 16 contains provision about venture capital schemes (and provision consequential on such provision).

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52 Real Estate Investment Trusts

(1) Schedule 17 contains provisions about Real Estate Investment Trusts. (2) The amendments made by that Schedule have effect in respect of— (a) an accounting period, of a company to which Part 4 of FA 2006 (REITs) applies, which begins on or after 1st January 2007, (b) an accounting period, of the principal company of a group to which that Part applies, which begins on or after 1st January 2007, and (c) a distribution to which section 121 of FA 2006 applies and which is received on or after 1st January 2007.

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53 Alternative finance investment bond

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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54 Profit share agency

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Propose a change

55 Trust income

(1) In section 686A(2)(a) of ICTA (receipts to be treated as income subject to special rate of tax: payment by company), after “made” insert “ by way of qualifying distribution ”. (2) In Type 1(b) in section 482 of ITA 2007 (types of amount to be charged at special rates for trustees), after “made” insert “ by way of qualifying distribution ”. (3) The amendments made by this section have effect in respect of payments made to the trustees of a settlement on or after 6th April 2006.

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56 Trust gains on contracts for life insurance

(1) Section 498 of ITA 2007 (trustees' tax pool) is amended as follows. (2) In subsection (1)— (a) in Type 1, for “2 or 3” substitute “ 2, 3 or 3A ”, and (b) after Type 3 insert— Type 3A The amount of tax at the nominal rate on any amount in respect of which— (a) the trustees are liable to income tax under section 467 of ITTOIA 2005 (gains from contracts for life insurance etc), (b) the trustees are liable to income tax at the trust rate by virtue of section 482 above, and (c) tax at the savings rate is treated as having been paid by virtue of section 530 of ITTOIA 2005 (life insurance). (3) After subsection (2) insert— (2A) In relation to Type 3A, the reference to the nominal rate is a reference to a rate equal to the difference between the trust rate and the savings rate. (4) The amendments made by this section have effect in relation to gains arising to the trustees of a settlement on or after 6th April 2007.

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57 Offshore funds

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) In section 756A of ICTA (definition of “offshore fund”), for subsection (3) substitute— (3) In this section “collective investment scheme” means any arrangements which are a collective investment scheme for the purposes of Part 17 of the Financial Services and Markets Act 2000 (see section 235 of that Act and orders made under subsection (5) of that section) or would be if the words “, within a period appearing to him to be reasonable,” were omitted from section 236(3)(a) of that Act. (4) But the reference to offshore funds in section 760(3)(a) does not include any arrangements which are not a collective investment scheme for the purposes of that Part of that Act. (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) In Schedule 27 to ICTA (distributing funds), in sub-paragraph (1)(c) of paragraph 6 (investments of offshore fund in other offshore funds which could, apart from that paragraph, be certified as distributing funds not to count towards limit in section 760(3)(a)), omit “without regard to the provisions of this paragraph,”. (5) In section 152 of ITA 2007 (losses from miscellaneous transactions), in subsection (8), insert at the end “ except that income on which income tax is charged under section 761(1)(b)(i) of ICTA is not “section 1016 income” for the purposes of subsection (2)(a) ”. (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8) The amendment made by subsection (4) has effect in relation to account periods (within the meaning of Chapter 5 of Part 17 of ICTA) beginning on or after 1st January 2007. (9) The amendment made by subsection (5) has effect in relation to transactions on or after 6th April 2007.

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58 Election out of special film rules for film production companies

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) In paragraph 10 of Schedule 18 to FA 1998 (other claims and elections to be included in company tax return), insert at the end— (5) An election under section 32(7) of the Finance Act 2006 (election not to be a film production company) can only be made by being included in a company tax return (see section 32(8)(a) of that Act).

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59 Securitisation companies

(1) Section 83 of FA 2005 (continued application of old UK GAAP to securitisation companies during transitional period) is amended as follows. (2) In subsection (1)(b) (old UK GAAP to apply to periods of account ending before 1st January 2008), insert at the beginning “ (subject to subsection (7A)(a)) ”. (3) After subsection (7) insert— (7A) The Treasury may by regulations— (a) make provision for subsection (1) to apply in relation to periods of account ending on or after 1st January 2008 but before a date specified by the regulations, and (b) make provision modifying any provision of, or made under, the Corporation Tax Acts in relation to the first period of account of securitisation companies in the case of which subsection (1) does not apply (whether by virtue of that subsection itself or regulations under paragraph (a)). (7B) Regulations under subsection (7A)(a) may, in particular— (a) specify a date only in relation to specified descriptions of company, (b) specify different dates in relation to different descriptions of company, and (c) include provision for a company to elect that the regulations are to apply to it or provision for a company to elect that they are not to apply to it. (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Propose a change

60 Gift aid: limits

(1) In section 418 of ITA 2007 (donations to charity by individuals: limits)— (a) in subsection (2)(c), for “2.5%” substitute “ 5% ”, and (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) The amendment made by subsection (1) has effect in relation to gifts made on or after 6th April 2007. (4) The amendment made by subsection (2) has effect in relation to gifts made in an accounting period ending on or after 6th April 2007.

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61 Enterprise management incentives: excluded activities

(1) In Part 3 of Schedule 5 to ITEPA 2003 (enterprise management incentives: qualifying companies), in paragraph 19 (excluded activities: receipt of royalties or licence fees)— (a) in sub-paragraph (4), for paragraphs (a) and (b) substitute— (a) by the relevant company, or (b) by a company which was a qualifying subsidiary of the relevant company throughout a period during which it created the whole or greater part (in terms of value) of the intangible asset. , and (b) after sub-paragraph (7) insert— (8) If— (a) the relevant company acquired all the shares (“old shares”) in another company (“the old company”) at a time when the only shares issued in the relevant company were subscriber shares, and (b) the consideration for the old shares consisted wholly of the issue of shares in the relevant company, references in sub-paragraph (4) to the relevant company include the old company. (2) The amendments made by subsection (1) have effect in relation to options granted on or after 6th April 2007. (3) They also have effect in relation to a qualifying option within subsection (4), for the purpose of determining at any time on or after that date whether an activity is an excluded activity. (4) An option is within this subsection if it was granted before 6th April 2007 and, immediately before that date— (a) it had not been exercised, and (b) no disqualifying event had occurred in relation to it. (5) Subsection (6) applies in respect of an option within subsection (4) if— (a) immediately before 6th April 2007— (i) the right to exploit an intangible asset (“the asset”) was vested in the relevant company or a subsidiary of it (in either case, alone or jointly with others), and (ii) the asset was a relevant intangible asset, (b) at any time on or after that date, an activity carried on by the relevant company or a subsidiary of it would be an excluded activity by reason only of the receipt of royalties or licence fees attributable to the exploitation of the asset, and (c) the activity would not be an excluded activity if the amendments made by subsection (1) had not been made. (6) The activity is to be treated, in relation to the option, as not being an excluded activity at that time.

Propose a change

62 Benefits code: whether employment is “lower-paid employment”

(1) In section 219 of ITEPA 2003 (exclusion of lower-paid employments from parts of benefits code: extra amounts to be added in connection with a car), omit subsections (5) and (6). (2) The repeal made by subsection (1) has effect for the tax year 2007-08 and subsequent tax years.

Propose a change

63 Armed forces redundancy schemes

(1) In section 411 of ITEPA 2003 (exception for payments and benefits for forces), the existing provision becomes subsection (1) and after that subsection insert— (2) This Chapter does not apply to a payment or other benefit provided under a scheme established by an order under section 1(1) of the Armed Forces (Pensions and Compensation) Act 2004. (2) The amendments made by subsection (1) have effect for the tax year 2006-07 and subsequent tax years.

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64 Armed forces: the Operational Allowance

(1) In ITEPA 2003, after section 297 insert— Armed forces: the Operational Allowance 297A (1) No liability to income tax arises in respect of payments to members of the armed forces of the Crown of the Operational Allowance. (2) The Operational Allowance is an allowance designated as such by the Secretary of State. (2) The amendment made by subsection (1) has effect in relation to payments whenever made.

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65 Service charge income

(1) Section 480 of ITA 2007 (meaning of “accumulated or discretionary income”) is amended as follows. (2) In subsection (3)(c) (income from service charges held on trust by relevant housing body), for the words after “charges” substitute “ which are paid in respect of dwellings in the United Kingdom and are held on trust. ” (3) For subsections (5) and (6) substitute— (5) In subsection (3)(c) “service charges” has the meaning given by section 18 of the Landlord and Tenant Act 1985 (but as if that section also applied in relation to dwellings in Scotland and Northern Ireland). (4) The amendments made by this section have effect for the tax year 2007-08 and subsequent tax years.

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66 Charge on benefits received by former owner of property: late elections

(1) In paragraph 23 of Schedule 15 to FA 2004 (charge to income tax on benefits received by former owner of property), for sub-paragraphs (3) and (4) substitute— (3) The election must be made on or before— (a) the relevant filing date, or (b) such later date as an officer of Revenue and Customs may, in a particular case, allow. (2) The amendment made by subsection (1) is deemed to have come into force on 21st March 2007.

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67 Unpaid remuneration and employee benefit contributions

(1) Section 31 of ITTOIA 2005 (relationship between rules prohibiting and allowing deductions: trading income) is amended as follows. (2) In subsection (1) (priority of relevant permissive rules over relevant prohibitive rules), in paragraph (b) (sections to which that priority rule is subject), for “sections 48 (car or motor cycle hire) and” substitute “ section 36 (unpaid remuneration), section 38 (employee benefit contributions), section 48 (car or motor cycle hire) and section ”. (3) In subsection (3) (meaning of “relevant prohibitive rule”), after “sections” insert “ 36, 38, ”. (4) Section 274 of ITTOIA 2005 (provision corresponding to section 31 of that Act in case of property income) is amended as follows. (5) In subsection (1)(b), for “sections 48 (car or motor cycle hire) and” substitute “ section 36 (unpaid remuneration), section 38 (employee benefit contributions), section 48 (car or motor cycle hire) and section ”. (6) In subsection (3), after “sections” insert “ 36, 38, ”. (7) The amendments made by this section have effect for the tax year 2007-08 and subsequent tax years.

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68 Abolition of contributions relief for life assurance premium contributions

Schedule 18 contains provisions denying relief for contributions made by or on behalf of members in respect of life assurance premiums.

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69 Alternatively secured pensions etc

Schedule 19 contains provisions about alternatively secured pensions and transfer lump sum death benefit etc.

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70 Miscellaneous

Schedule 20 contains miscellaneous provisions about registered pension schemes and employer-financed retirement benefits schemes.

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71 Anti-avoidance

(1) In FA 2003, after section 75 insert (in place of the section inserted by the Stamp Duty Land Tax (Variation of the Finance Act 2003) Regulations 2006 (S.I. 2006/ 3237))— Anti-avoidance 75A (1) This section applies where— (a) one person (V) disposes of a chargeable interest and another person (P) acquires either it or a chargeable interest deriving from it, (b) a number of transactions (including the disposal and acquisition) are involved in connection with the disposal and acquisition (“the scheme transactions”), and (c) the sum of the amounts of stamp duty land tax payable in respect of the scheme transactions is less than the amount that would be payable on a notional land transaction effecting the acquisition of V's chargeable interest by P on its disposal by V. (2) In subsection (1) “transaction” includes, in particular— (a) a non-land transaction, (b) an agreement, offer or undertaking not to take specified action, (c) any kind of arrangement whether or not it could otherwise be described as a transaction, and (d) a transaction which takes place after the acquisition by P of the chargeable interest. (3) The scheme transactions may include, for example— (a) the acquisition by P of a lease deriving from a freehold owned or formerly owned by V; (b) a sub-sale to a third person; (c) the grant of a lease to a third person subject to a right to terminate; (d) the exercise of a right to terminate a lease or to take some other action; (e) an agreement not to exercise a right to terminate a lease or to take some other action; (f) the variation of a right to terminate a lease or to take some other action. (4) Where this section applies— (a) any of the scheme transactions which is a land transaction shall be disregarded for the purposes of this Part, but (b) there shall be a notional land transaction for the purposes of this Part effecting the acquisition of V's chargeable interest by P on its disposal by V. (5) The chargeable consideration on the notional transaction mentioned in subsections (1)(c) and (4)(b) is the largest amount (or aggregate amount)— (a) given by or on behalf of any one person by way of consideration for the scheme transactions, or (b) received by or on behalf of V (or a person connected with V within the meaning of section 839 of the Taxes Act 1988) by way of consideration for the scheme transactions. (6) The effective date of the notional transaction is— (a) the last date of completion for the scheme transactions, or (b) if earlier, the last date on which a contract in respect of the scheme transactions is substantially performed. (7) This section does not apply where subsection (1)(c) is satisfied only by reason of— (a) sections 71A to 73, or (b) a provision of Schedule 9. Anti-avoidance: incidental transactions 75B (1) In calculating the chargeable consideration on the notional transaction for the purposes of section 75A(5), consideration for a transaction shall be ignored if or in so far as the transaction is merely incidental to the transfer of the chargeable interest from V to P. (2) A transaction is not incidental to the transfer of the chargeable interest from V to P— (a) if or in so far as it forms part of a process, or series of transactions, by which the transfer is effected, (b) if the transfer of the chargeable interest is conditional on the completion of the transaction, or (c) if it is of a kind specified in section 75A(3). (3) A transaction may, in particular, be incidental if or in so far as it is undertaken only for a purpose relating to— (a) the construction of a building on property to which the chargeable interest relates, (b) the sale or supply of anything other than land, or (c) a loan to P secured by a mortgage, or any other provision of finance to enable P, or another person, to pay for part of a process, or series of transactions, by which the chargeable interest transfers from V to P. (4) In subsection (3)— (a) paragraph (a) is subject to subsection (2)(a) to (c), (b) paragraph (b) is subject to subsection (2)(a) and (c), and (c) paragraph (c) is subject to subsection (2)(a) to (c). (5) The exclusion required by subsection (1) shall be effected by way of just and reasonable apportionment if necessary. (6) In this section a reference to the transfer of a chargeable interest from V to P includes a reference to a disposal by V of an interest acquired by P. Anti-avoidance: supplemental 75C (1) A transfer of shares or securities shall be ignored for the purposes of section 75A if but for this subsection it would be the first of a series of scheme transactions. (2) The notional transaction under section 75A attracts any relief under this Part which it would attract if it were an actual transaction (subject to the terms and restrictions of the relief). (3) The notional transaction under section 75A is a land transaction entered into for the purposes of or in connection with the transfer of an undertaking or part for the purposes of paragraphs 7 and 8 of Schedule 7, if any of the scheme transactions is entered into for the purposes of or in connection with the transfer of the undertaking or part. (4) In the application of section 75A(5) no account shall be taken of any amount paid by way of consideration in respect of a transaction to which any of sections 60, 61, 63, 64, 65, 66, 67, 69, 71, 74 and 75, or a provision of Schedule 6A or 8, applies. (5) In the application of section 75A(5) an amount given or received partly in respect of the chargeable interest acquired by P and partly in respect of another chargeable interest shall be subjected to just and reasonable apportionment. (6) Section 53 applies to the notional transaction under section 75A. (7) Paragraph 5 of Schedule 4 applies to the notional transaction under section 75A. (8) For the purposes of section 75A— (a) an interest in a property-investment partnership (within the meaning of paragraph 14 of Schedule 15) is a chargeable interest in so far as it concerns land owned by the partnership, and (b) where V or P is a partnership, Part 3 of Schedule 15 applies to the notional transaction as to the transfer of a chargeable interest from or to a partnership. (9) For the purposes of section 75A a reference to an amount of consideration includes a reference to the value of consideration given as money's worth. (10) Stamp duty land tax paid in respect of a land transaction which is to be disregarded by virtue of section 75A(4)(a) is taken to have been paid in respect of the notional transaction by virtue of section 75A(4)(b). (11) The Treasury may by order provide for section 75A not to apply in specified circumstances. (12) An order under subsection (11) may include incidental, consequential or transitional provision and may make provision with retrospective effect. (2) The amendment made by subsection (1) has effect in respect of disposals and acquisitions if the disposal mentioned in new section 75A(1)(a) (inserted by that subsection) takes place on or after 6th December 2006. (3) But— (a) the transitional provisions of sub-paragraphs (2) to (5) of paragraph 1 of the Schedule to the Stamp Duty Land Tax (Variation of the Finance Act 2003) Regulations 2006 (S.I. 2006/3237) continue to have effect in relation to this section as in relation to that paragraph, and (b) a provision of new section 75C (inserted by subsection (1) above) shall not have effect where the disposal mentioned in new section 75A(1)(a) took place before the day on which this Act is passed, if or in so far as the provision would make a person liable for a higher amount of tax than would have been charged in accordance with those regulations.

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72 Partnerships

(1) Schedule 15 to FA 2003 (stamp duty land tax: partnerships) is amended as follows. (2) A reference in this section to a provision of that Schedule is to the provision as it had effect before variation by the Stamp Duty Land Tax (Variation of the Finance Act 2003) Regulations 2006. (3) In Step Two of paragraph 12(1) (transfer to partnership: how to calculate the “sum of the lower proportions”)— (a) in paragraph (b), for “or is connected with the relevant owner” substitute “ or is an individual connected with the relevant owner ”, and (b) insert at the end— “ (If there is no relevant owner with a corresponding partner, the sum of the lower proportions is nil.) ” (4) In paragraph 12, after sub-paragraph (2) insert— (3) For the purpose of paragraph (b) of Step 2 a company is to be treated as an individual connected with the relevant owner in so far as it— (a) holds property as trustee, and (b) is connected with the relevant owner only because of section 839(3) of the Taxes Act 1988. (5) Omit paragraph 13 (transfer to partnership where all partners are companies). (6) In paragraph 14 (transfer of interest in property-investment partnership)— (a) omit sub-paragraphs (1)(b) and (4), and (b) insert at the end— (9) An interest in respect of the transfer of which this paragraph applies shall be treated as a chargeable interest for the purposes of paragraph 3(1) of Schedule 7 to the extent that the relevant partnership property consists of a chargeable interest. , and in the italic cross-heading before it, omit “for consideration”. (7) In Step Two of paragraph 20(1) (transfer from partnership: how to calculate the “sum of the lower proportions”)— (a) in paragraph (b), for “or was connected with the relevant owner” substitute “ or was an individual connected with the relevant owner ”, and (b) insert at the end— “ (If there is no relevant owner with a corresponding partner, the sum of the lower proportions is nil.) ” (8) In paragraph 20, after sub-paragraph (2) insert— (3) For the purpose of paragraph (b) of Step 2 a company is to be treated as an individual connected with the relevant owner in so far as it— (a) holds property as trustee, and (b) is connected with the relevant owner only because of section 839(3) of the Taxes Act 1988. (9) After paragraph 27 insert— 27A (1) This paragraph applies where in calculating the sum of the lower proportions in relation to a transaction (in accordance with paragraph 12)— (a) a company (“the connected company”) would have been a corresponding partner of a relevant owner (“the original owner”) but for the fact that paragraph (b) of Step Two includes connected persons only if they are individuals, and (b) the connected company and the original owner are members of the same group. (2) The charge in respect of the transaction shall be reduced to the amount that would have been payable had the connected company been a corresponding partner of the original owner for the purposes of calculating the sum of the lower proportions. (3) The provisions of Part 1 of Schedule 7 apply to group relief under sub-paragraph (2) above as to group relief under paragraph 1(1) of Schedule 7, but— (a) with the omission of paragraph 2(2)(a), (b) with the substitution for “the purchaser” in paragraph 3(1)(a) of “a partner who was, at the effective date of the transaction, a partner and a member of the same group as the transferor (“the relevant partner”)”, and (c) with the other modifications specified in paragraph 27(3) to (6) above. (10) For paragraph 36 substitute— 36 For the purposes of this Part of this Schedule, where a person acquires or increases a partnership share there is a transfer of an interest in the partnership (to that partner and from the other partners). (11) In paragraph 39 (“connected persons”), insert at the end— (3) As applied by sub-paragraph (1) for the purposes of paragraph 12 or 20, that section has effect with the omission of subsection (3)(c) (trustee connected with settlement). (12) In Schedule 16 to FA 2003 (trusts and powers)— (a) in paragraph 3(1) (bare trust), after “a chargeable interest” insert “ or an interest in a partnership ”, and (b) in paragraph 4 (trustees of settlement), after “a chargeable interest” insert “ or an interest in a partnership ”. (13) The amendments made by subsections (1) to (11) have effect in respect of transfers occurring on or after the day on which this Act is passed. (14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15) The amendment made by subsection (12) has effect in respect of acquisitions occurring on or after the day on which this Act is passed. (16) An amendment made by this section replaces, to the extent provided for by subsections (13) to (15), any variation made by the Stamp Duty Land Tax (Variation of the Finance Act 2003) Regulations 2006 (S.I. 2006/3237). (17) Despite subsections (13) to (16), the transitional provisions of sub-paragraphs (8) to (10) of paragraph 2 of the Schedule to the Stamp Duty Land Tax (Variation of the Finance Act 2003) Regulations 2006 (S.I. 2006/3237) continue to have effect in relation to the amendments made by this section as in relation to that paragraph.

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73 Exemptions: intermediaries, repurchases etc

Schedule 21 contains provision in relation to exemptions from stamp duty and stamp duty reserve tax in cases involving intermediaries, repurchases, stock lending or recognised investment exchanges.

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74 Acquisition relief: disregard of company holding own shares

(1) In section 75 of FA 1986 (relief on acquisition of undertaking of company in pursuance of scheme for reconstruction of that company), after subsection (5) insert— (5A) If immediately before the acquisition the target company or the acquiring company holds any of its own shares, the shares are to be treated for the purposes of subsections (4) and (5) as having been cancelled before the acquisition (and, accordingly, the company is to be treated as if it were not a shareholder of itself). (2) In section 77 of that Act (relief on acquisition of target company's share capital), after subsection (3) insert— (3A) If immediately before the acquisition the target company or the acquiring company holds any of its own shares, the shares are to be treated for the purposes of subsection (3) as having been cancelled before the acquisition (and, accordingly, the company is to be treated as if it were not a shareholder of itself). (3) In Part 2 of Schedule 7 to FA 2003 (SDLT: reconstruction and acquisition reliefs), in paragraph 7 (reconstruction relief) after sub-paragraph (5) insert— (5A) If immediately before the acquisition the target company or the acquiring company holds any of its own shares, the shares are to be treated for the purposes of sub-paragraphs (2) and (4) as having been cancelled before the acquisition (and, accordingly, the company is to be treated as if it were not a shareholder of itself). (4) The amendments made by subsections (1) and (2) have effect in relation to any instrument executed on or after the day on which this Act is passed. (5) The amendment made by subsection (3) has effect in relation to any land transaction of which the effective date is on or after that day.

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75 SDLT: alternative finance arrangements

(1) In FA 2003, after section 73A insert— Exempt interests 73B (1) An interest held by a financial institution as a result of the first transaction within the meaning of section 71A(1)(a), 72(1)(a) or 72A(1)(a) is an exempt interest for the purposes of stamp duty land tax. (2) That interest ceases to be an exempt interest if— (a) the lease or agreement mentioned in section 71A(1)(c), 72(1)(b) or 72A(1)(b) ceases to have effect, or (b) the right under section 71A(1)(d), 72(1)(c) or 72A(1)(c) ceases to have effect or becomes subject to a restriction. (3) Subsection (1) does not apply if the first transaction is exempt from charge by virtue of Schedule 7. (4) Subsection (1) does not make an interest exempt in respect of— (a) the first transaction itself, or (b) a further transaction or third transaction within the meaning of section 71A(4), 72(4) or 72A(4). (2) In section 48 of that Act (stamp duty land tax: exempt interests), after subsection (3) insert— (3A) Section 73B makes additional provision about exempt interests in relation to alternative finance arrangements. (3) For the text of sections 71A(8), 72(7), 72A(8) and 73(5)(a) of that Act (alternative finance arrangements: meaning of “financial institution”), substitute “ In this section “financial institution” has the meaning given by section 46 of the Finance Act 2005 (alternative finance arrangements). ” (4) The amendments made by this section— (a) have effect in relation to anything that would, but for the exemption provided by new section 73B inserted by subsection (1) above, be a land transaction with an effective date on or after 22nd March 2007, and (b) apply, in accordance with paragraph (a), to interests irrespective of the date of their creation.

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76 SDLT: exchanges

(1) In section 47(1) of FA 2003 (exchanges), insert at the end “ (and they are not linked transactions within the meaning of section 108) ”. (2) In section 108 of that Act (linked transactions), insert at the end— (4) This section is subject to section 47(1). (3) The amendments made by this section have effect in relation to a set of land transactions if the effective date of any of them is on or after the day on which this Act is passed.

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77 SDLT: shared ownership trusts

(1) In Schedule 9 to FA 2003 (right to buy and shared ownership leases), insert at the end— Shared ownership trust: introduction 7 (1) In this Schedule “shared ownership trust” means a trust of land, within the meaning of section 1 of the Trusts of Land and Appointment of Trustees Act 1996, which satisfies the following conditions. (2) Condition 1 is that the trust property is— (a) a dwelling, and (b) in England or Wales. (3) Condition 2 is that one of the beneficiaries (“the social landlord”) is a qualifying body (within the meaning of paragraph 5(2)). (4) Condition 3 is that the terms of the trust— (a) provide for one or more of the individual beneficiaries (“the purchaser”) to have exclusive use of the trust property as the only or main residence of the purchaser, (b) require the purchaser to make an initial payment to the social landlord (“the initial capital”), (c) require the purchaser to make additional payments to the social landlord by way of compensation under section 13(6)(a) of the Trusts of Land and Appointment of Trustees Act 1996 (“rent-equivalent payments”), (d) enable the purchaser to make other additional payments to the social landlord (“equity-acquisition payments”), (e) determine the initial beneficial interests of the social landlord and of the purchaser by reference to the initial capital, (f) specify a sum, equating or relating to the market value of the dwelling, by reference to which the initial capital was calculated, and (g) provide for the purchaser's beneficial interest in the trust property to increase, and the social landlord's to diminish (or to be extinguished), as equity-acquisition payments are made. (5) Section 118 (meaning of “market value”) does not apply to this paragraph. (6) In Condition 1 “dwelling” includes— (a) a building which is being constructed or adapted for use as a dwelling, (b) land which is to be used for the purpose of the construction of a dwelling, and (c) land which is, or is to become, the garden or grounds of a dwelling. Shared ownership trust: “purchaser” 8 For the purposes of the application of stamp duty land tax in relation to a shared ownership trust, the person (or persons) identified as the purchaser in accordance with paragraph 7, and not the social landlord or any other beneficiary, is (or are) to be treated as the purchaser of the trust property. Shared ownership trust: election for market value treatment 9 (1) This paragraph applies where— (a) a shared ownership trust is declared, and (b) the purchaser elects for tax to be charged in accordance with this paragraph. (2) An election must be included in— (a) the land transaction return for the declaration of the shared ownership trust, or (b) an amendment of that return. (3) An election may not be revoked. (4) Where this paragraph applies— (a) the chargeable consideration for the declaration of the shared ownership trust shall be taken to be the amount stated in accordance with paragraph 7(4)(f), and (b) no account shall be taken for the purposes of stamp duty land tax of rent-equivalent payments. (5) The transfer to the purchaser of an interest in the trust property upon the termination of the trust is exempt from charge if— (a) an election was made under this paragraph, and (b) any tax chargeable in respect of the declaration of the shared ownership trust has been paid. Shared ownership trust: treatment of staircasing transaction 10 (1) An equity-acquisition additional payment under a shared ownership trust, and the consequent increase in the purchaser's beneficial interest, shall be exempt from charge if— (a) an election was made under paragraph 9, and (b) any tax chargeable in respect of the declaration of trust has been paid. (2) An equity-acquisition additional payment under a shared ownership trust, and the consequent increase in the purchaser's beneficial interest, shall also be exempt from charge if following the increase the purchaser's beneficial interest does not exceed 80% of the total beneficial interest in the trust property. Shared ownership trust: treatment of additional payments where no election made 11 Where no election has been made under paragraph 9 in respect of a shared ownership trust— (a) the initial capital shall be treated for the purposes of stamp duty land tax as chargeable consideration other than rent, and (b) any rent-equivalent additional payment by the purchaser shall be treated for the purposes of stamp duty land tax as a payment of rent. (2) The amendment made by subsection (1) has effect in relation to land transactions with an effective date on or after the day on which this Act is passed.

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78 SDLT: shared ownership lease

In paragraph 2 of Schedule 9 to FA 2003 (stamp duty land tax: shared ownership lease), after sub-paragraph (4) insert— (4A) Where this paragraph applies no account shall be taken for the purposes of stamp duty land tax of the rent mentioned in sub-paragraph (2)(d).

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79 Certain transfers of school land

(1) In Chapter 7 of Part 2 of the School Standards and Framework Act 1998 (c. 31) (“the 1998 Act”) (new framework for maintained schools), omit sections 79 and 79A (no stamp duty or SDLT payable in respect of certain transfers). (2) The repeal of— (a) section 79A of the 1998 Act, and (b) section 79 of that Act as it applies for the purposes of section 79A, has effect in relation to any land transaction of which the effective date is on or after the day on which this Act is passed. (3) Subject to that, the repeal of section 79 of the 1998 Act has effect in relation to any instrument executed on or after that day.

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