Office of Public Sector Information
PART 7 continued
(1) This section applies where an election is made under section 279A by the taxpayer for the relevant loss to be treated as accruing in an earlier year in accordance with this section.
(2) Where this section applies, the relevant loss shall be treated for the purposes of capital gains tax as if it were a loss accruing to the taxpayer in the earliest year which is an eligible year (the “first eligible year”), instead of in the year of the loss (but subject to, and in accordance with, the following provisions of this section).
(3) The amount of the relevant loss that falls to be deducted from chargeable gains of the first eligible year in accordance with section 2(2)(a) is limited to the amount (the “first year limit”) found by taking the following steps—
Step 1: take the total amount of chargeable gains accruing to the taxpayer in the first eligible year,
Step 2: exclude from that amount any amounts that fall to be disregarded in accordance with section 2(4)(a) for that year,
Step 3: deduct from the amount remaining any amounts in respect of allowable losses (other than the relevant loss or any part of it) that fall to be deducted from that amount in accordance with section 2(2) otherwise than by virtue of section 2(5)(aa)(i) (taking account of any previous elections under section 279A).
The amount so found is the first year limit, unless the first eligible year is a year in relation to which section 2(5)(aa) has effect, in which case the further steps in subsection (4) below must also be taken.
(4) Those further steps are—
Step 4: add to the amount found by taking steps 1 to 3 in subsection (3) above every amount which is treated by virtue of section 77 or 86 as an amount of chargeable gains accruing to the taxpayer for the first eligible year (the “attributed amounts”),
Step 5: deduct from the resulting amount any amounts (other than the relevant loss or any part of it) that fall to be deducted from the attributed amounts in accordance with section 2(5)(aa)(i) (taking account of any previous elections under section 279A).
The amount so found is the first year limit in a case where section 2(5)(aa) applies in relation to the first eligible year.
(5) As respects any later year before the year of the loss, the relevant loss (so far as not previously allowed as a deduction from chargeable gains accruing in any previous year) falls to be deducted in accordance with section 2(2)(b) only if that later year is an eligible year.
(6) The amount of the relevant loss that falls to be deducted from chargeable gains of that later eligible year in accordance with section 2(2)(b) is limited to the amount (the “later year limit”) in respect of which the taxpayer would be chargeable to capital gains tax for that later year—
(a) on the assumption in subsection (7) below,
(b) taking account of any previous elections under section 279A, and
(c) apart from the provisions specified in subsection (8) below.
(7) The assumption is that no part of—
(a) the relevant loss, or
(b) any loss in respect of which an election under section 279A may be, but has not been, made,
falls to be deducted, in consequence of an election under section 279A, from any chargeable gains accruing to the taxpayer in that later eligible year.
The assumption falls to be made immediately after the making of the election in respect of the relevant loss.
(8) The provisions are—
(a) section 2(5)(a)(ii) (taper relief),
(b) section 2(5)(aa)(ii) (taper relief),
(c) section 2(5)(b) (addition of certain amounts treated as amounts of chargeable gains), and
(d) section 2A (taper relief),
except that paragraphs (b) and (d) above are not to affect the operation of section 2(7) for the purposes of subsection (6) above.
(9) All such adjustments shall be made, whether by discharge or repayment of tax, the making of assessments or otherwise, as are required to give effect to the election under section 279A made by the taxpayer for the relevant loss to be treated as accruing in an earlier year in accordance with this section.
(10) Any reference in this section or section 279D to deduction in accordance with section 2(2)(a), section 2(2)(b) or section 2(2) includes a reference to such deduction by virtue of section 2(5)(a)(i) or (aa)(i).
(1) An election under section 279A is irrevocable.
(2) Any election under that section must be made by giving a notice in accordance with this section.
(3) The notice must be given to an officer of the Board.
(4) Subsections (5) to (8) below have effect in relation to the notice given by the taxpayer in respect of the relevant loss.
(5) The notice must specify each of the following—
(a) the amount of the relevant loss;
(b) the right disposed of;
(c) the year of the right’s disposal;
(d) the year of the loss (if different from the year of the right’s disposal);
(e) the year in which the right was acquired;
(f) the original asset or assets.
(6) The notice must also specify each of the following—
(a) the eligible year in which the relevant loss is to be treated in accordance with section 279C(2) as accruing to the taxpayer;
(b) the first year limit (see section 279C(3) and (4));
(c) how much of the relevant loss falls to be deducted in accordance with section 2(2)(a) from chargeable gains accruing to the taxpayer in that year.
(7) If, in accordance with section 279C, any part of the relevant loss falls to be deducted in accordance with section 2(2)(b) from chargeable gains accruing to the taxpayer in any later eligible year, the notice must also specify—
(a) each such year;
(b) in the case of each such year, the later year limit (see section 279C(6));
(c) how much of the relevant loss falls to be deducted in accordance with section 2(2)(b) in each such year from chargeable gains accruing to the taxpayer in that year.
(8) The notice must be given on or before the first anniversary of the 31st January next following the year of the loss.
(9) An election under section 279A is made on the date on which the notice of the election is given.
(10) Different notices must be given in respect of different losses.
(11) Where a person makes two or more elections under section 279A on the same day, the notices must specify the order in which the elections are made.
(12) For the purposes of any provisions of sections 279A to 279C whose operation is affected by the order in which any elections under section 279A are made, elections made by a person on the same day shall be treated as made at different times and in the order specified in accordance with subsection (11) above.”.
(2) Where—
(a) on the disposal of a right to which section 279A of the Taxation of Chargeable Gains Act 1992 (c. 12) applies, an allowable loss would, apart from section 279C of that Act, accrue to a person in any year of assessment,
(b) an election is made under section 279A of that Act for the loss to be treated as accruing in an earlier year in accordance with section 279C, and
(c) the right is an earn-out right, within the meaning of section 138A of that Act, which was conferred before 10th April 2003,
no election may be made under section 138A of that Act (election for earn-out right to be treated as security etc) in respect of the right, whether at the same time as the election under section 279A or subsequently.
(3) The amendment made by subsection (1) has effect in relation to allowable losses that would, apart from that amendment, accrue on or after 10th April 2003.
For this purpose, losses that would, apart from that amendment, be treated by virtue of section 10A of the Taxation of Chargeable Gains Act 1992 as accruing in the year 2003-04 shall be treated as so accruing on or after 10th April 2003.
(4) Subsection (2) shall be deemed to have come into force on 10th April 2003.
(1) For section 85A of the Taxation of Chargeable Gains Act 1992 (c. 12) substitute—
(1) Schedule 4C to this Act has effect with respect to the attribution of gains to beneficiaries where there has been a transfer of value to which Schedule 4B applies.
(2) Sections 86A to 95 have effect subject to the provisions of Schedule 4C.
(3) No account shall be taken of any chargeable gains or allowable losses accruing by virtue of Schedule 4B in computing the trust gains for a year of assessment in accordance with sections 87 to 89, except in computing for the purposes of paragraph 7A(2) of Schedule 4C the amount on which the trustees would have been chargeable to tax under section 2(2) if they had been resident or ordinarily resident in the United Kingdom.
(4) No account shall be taken of any chargeable gains or allowable losses to which sections 87 to 89 apply in computing the gains or losses accruing by virtue of Schedule 4B.”.
(2) Schedule 4C to that Act (transfers of value: attribution of gains to beneficiaries) is amended in accordance with Schedule 29 to this Act.
(3) In section 90 of that Act (transfers between settlements), for subsection (5) substitute—
“(5) This section does not apply—
(a) to a transfer to which Schedule 4B applies, or
(b) to gains to which Schedule 4C applies (that is, to “Schedule 4C gains” within the meaning of that Schedule).”.
(4) The following provisions have effect with respect to the coming into force of the amendments made by this section and Schedule 29—
(a) the amendments apply where the trustees of a settlement have made a transfer to which Schedule 4B applies at any time on or after 21st March 2000;
(b) where there has been a transfer of value to which Schedule 4B applies before 9th April 2003, the transferor settlement shall be treated as having a Schedule 4C pool as from that date containing such Schedule 4C gains as would fall to be included in the pool if—
(i) a year of assessment had ended with 8th April 2003, and
(ii) the reference in paragraph 1(2)(b) of Schedule 4C as amended to the end of the year of assessment in which the transfer of value was made were to that date;
(c) where a transferor settlement ceased to exist on or after 21st March 2000 and before 9th April 2003, Schedule 4C as amended applies as if it had ceased to exist on 8th April 2003 (so that paragraph (b) above applies);
(d) so much of Schedule 4C as amended as provides—
(i) that gains treated as accruing to beneficiaries who are not chargeable to tax are treated as outstanding section 87/89 gains, or
(ii) that gains in a settlement’s Schedule 4C pool are not to be treated as accruing to such beneficiaries,
applies only in relation to capital payments made on or after 9th April 2003;
(e) gains included in a settlement’s Schedule 4C pool by virtue of paragraph 1(2)(b) of that Schedule as amended shall only be attributed in accordance with the provisions of that Schedule to beneficiaries who receive capital payments on or after 9th April 2003.
(5) Paragraph 8A(3) and (4) of Schedule 4C, inserted by paragraph 4 of Schedule 29 to this Act, applies only where the transfer referred to in that provision occurs on or after 9th April 2003.
(6) Expressions used in subsection (4) that are defined for the purposes of Schedule 4C to the Taxation of Chargeable Gains Act 1992 (c. 12) as amended by Schedule 29 to this Act have the same meaning as in that Schedule.
(1) In Chapter 5 of Part 12 of the Capital Allowances Act 2001 (c. 2) (miscellaneous supplementary provisions), after section 570 insert—
(1) This section applies where an event occurs in relation to an asset (a “balancing event”) as a result of which a balancing allowance would (but for this section) fall to be made to a person (“the taxpayer”) under Part 3, 4, 4A, 5 or 10.
(2) The taxpayer is not entitled to any balancing allowance if, as a result of a tax avoidance scheme, the amount to be brought into account as the proceeds from the event is less than it would otherwise have been.
(3) In subsection (2) a “tax avoidance scheme” means a scheme or arrangement the main purpose, or one of the main purposes, of which is the obtaining of a tax advantage by the taxpayer.
(4) Where this section applies to deny a balancing allowance, the residue of qualifying expenditure immediately after the balancing event is nevertheless calculated as if the balancing allowance had been made.
(5) In this section as it applies for the purposes of Part 5 (mineral extraction allowances)—
(a) the references to the proceeds from the balancing event that are to be brought into account shall be read as references to the disposal value to be brought into account, and
(b) the reference to the residue of qualifying expenditure shall be read as a reference to the unrelieved qualifying expenditure.”.
(2) This section applies in relation to any balancing event (within the meaning of section 570A, inserted by subsection (1) above) occurring on or after 27th November 2002, except where the event—
(a) occurs in pursuance of a contract entered into before that date, and
(b) does not occur in consequence of the exercise on or after that date of an option, right of pre-emption or similar right.
In section 45(1) of the Capital Allowances Act 2001 (c. 2) (ICT expenditure incurred by small enterprises: first-year qualifying expenditure), in paragraph (a) (under which the expenditure must be incurred on or before 31st March 2003) for “31st March 2003” substitute “31st March 2004”.
(1) Section 45 of the Capital Allowances Act 2001 (first-year allowances for ICT expenditure incurred by small enterprises) is amended as follows.
(2) In subsection (1)(d) (expenditure must not be excluded by general exclusions in section 46) at the end insert “or subsection (4) below”.
(3) After subsection (3) insert—
“(4) Expenditure on an item within Class C is not first-year qualifying expenditure under this section if the person incurring it does so with a view to granting to another person a right to use or otherwise deal with any of the software in question.”.
(4) This section applies in relation to expenditure incurred on or after 26th March 2003.
Schedule 30 to this Act (first-year allowances for expenditure on environmentally beneficial plant or machinery) has effect in relation to expenditure incurred on or after 1st April 2003.
(1) Schedule 31 to this Act (which makes amendments relating to relief for expenditure on research and development) shall have effect.
(2) In that Schedule—
Part 1 amends Schedule 20 to the Finance Act 2000 (c. 17) (relief for small and medium-sized enterprises);
Part 2 amends Part 1 of Schedule 12 to the Finance Act 2002 (c. 23) (relief for large companies);
Part 3 amends Part 2 of that Schedule (work sub-contracted to small or medium-sized enterprise);
Part 4 inserts a new Part 2A into that Schedule (entitlement of small or medium-sized enterprise to additional relief available to large companies in respect of subsidised expenditure);
Part 5 makes supplementary amendments to Parts 3 to 6 of that Schedule; and
Part 6 amends Schedule 13 to the Finance Act 2002 (expenditure on vaccine research etc).
(3) Except as provided by subsection (4)—
(a) the amendments made by Parts 1 and 6 of Schedule 31 have effect in relation to expenditure incurred on or after the appointed day, and
(b) the amendments made by Parts 2 to 5 of that Schedule have effect in relation to expenditure incurred on or after 9th April 2003.
(4) The exceptions are that—
(a) the amendments made by paragraphs 2 and 3 in Part 1 have effect for accounting periods beginning on or after the appointed day;
(b) in the application of paragraph 5 of Schedule 20 to the Finance Act 2000 (c. 17) (staffing costs) for any purpose of Schedule 12 to the Finance Act 2002 (c. 23) by virtue of paragraph 17(b) of that Schedule (meaning of “staffing costs”), the amendments made by paragraph 5 in Part 1 of Schedule 31 to this Act (persons partly engaged directly and actively in R&D) have effect in relation to expenditure incurred on or after 9th April 2003;
(c) the amendments made by paragraph 6 in Part 1 (qualifying expenditure on externally provided workers), in their application by virtue of paragraph 19 in Part 5 (application for purposes of Schedule 12 to the Finance Act 2002 (c. 23)), have effect in relation to expenditure incurred on or after 9th April 2003;
(d) the amendments made by—
(i) paragraph 9 in Part 2,
(ii) paragraphs 12 and 13 in Part 3, and
(iii) paragraph 15 in Part 4,
have effect for accounting periods beginning on or after 9th April 2003;
(e) the amendments made by paragraph 21 in Part 6 (reduction of company’s required minimum qualifying expenditure in an accounting period from £25,000 etc to £10,000 etc) have effect for accounting periods beginning on or after the appointed day.
(5) In this section the “appointed day” means such day as the Treasury may by order appoint; and different days may be so appointed for different provisions or different purposes.
Schedule 32 to this Act (tonnage tax: restrictions on capital allowances for lessors of ships) has effect.
Schedule 33 to this Act (which makes provision about the taxation of insurance companies, including companies which have ceased to be insurance companies after a transfer of business) has effect.
(1) Schedule 34 to this Act (which makes provision relating to Chapter 2 of Part 13 of the Taxes Act 1988) has effect.
(2) In that Schedule—
Part 1 relates to group life policies;
Part 2 relates to charitable and non-charitable trusts;
Part 3 restricts the meaning of “life annuity”; and
Part 4 makes provision for and in connection with the repeal of section 540(2) of the Taxes Act 1988 (rollover of gain on maturity into new policy).
(3) This section and that Schedule shall be deemed to have come into force on 9th April 2003.
(1) In Schedule 15 to the Taxes Act 1988 (provisions for determining whether an insurance policy is a “qualifying policy”)—
(a) in paragraph 12(a) (disregard of so much of premium as is charged on the grounds of exceptional risk of death), and
(b) in paragraph 12(b) (disregard of provision in policy charging, on those grounds, a sum as a debt against capital sum guaranteed on death),
after “death” insert “or disability”.
(2) Accordingly, in the heading before paragraph 12 of that Schedule, for “mortality risk” substitute “risk of death or disability”.
(3) In paragraph 3 of that Schedule (friendly society policies), omit paragraphs (b)(iii) and (c) of sub-paragraph (8) (which make provision corresponding to paragraph 12(a) and (b) but are unnecessary).
(4) In paragraph 18 of that Schedule (rules about substituted policies applied where policies are varied) insert after sub-paragraph (3)—
“(4) For the purposes of this paragraph there is no variation in the terms of a policy where—
(a) an amount of premium chargeable on the grounds that an exceptional risk of death or disability is involved becomes or ceases to be payable, or
(b) the policy is amended by the insertion, variation or removal of a provision under which, on those grounds, any sum may become chargeable as a debt against the capital sum guaranteed by the policy on death or disability.”.
(5) In section 460 of that Act (registered friendly societies: exemption from tax in respect of life or endowment business), in subsection (3)(b) (which makes provision corresponding to paragraph 12(a) of Schedule 15) after “death” insert “or disability”.
(6) The amendments made by this section shall be deemed always to have had effect; but this section shall be disregarded to the extent that it would prevent a policy from being a qualifying policy at any time before 9th April 2003.
(1) Schedule 35 to this Act (which makes provision for and in connection with charging certain gains on policies of life insurance etc at the lower rate) has effect.
(2) The amendments made by that Schedule have effect in relation to gains treated as arising under Chapter 2 of Part 13 of the Taxes Act 1988 on the happening of chargeable events on or after 6th April 2004.
(1) In section 640A(1) of the Taxes Act 1988 (personal pension arrangements: the earnings cap), for “for the purposes of section 640 above” substitute “for the purposes of section 638 or 640 above”.
(2) In determining “the permitted maximum” for the purposes of any provision of an existing approved scheme designed to meet the requirements of section 638(3) of that Act (maximum annual amount of contributions), a member’s net relevant earnings for the year shall be taken to be the amount of his net relevant earnings after applying section 640A (the earnings cap).
An “existing approved scheme” means a personal pension scheme approved under Chapter 4 of Part 14 of that Act before 9th April 2003.
(3) In section 641A(1) of that Act (election for contributions to be treated as paid in previous year), for “A person who pays a contribution under approved personal pension arrangements” substitute “An individual who under approved personal pension arrangements made by him pays a contribution”.
(4) This section has effect in relation to contributions paid on or after 9th April 2003.
(1) After section 327 of the Taxes Act 1988 insert—
(1) The following payments shall not be treated as income for any purpose of the Income Tax Acts—
(a) any payment or reward falling within section 57(3) of the Adoption Act 1976 (payments authorised by the court) which is made to a person who has adopted, or intends to adopt, a child;
(b) payments under section 57(3A)(a) of that Act (payments by adoption agencies of legal or medical expenses of persons seeking to adopt);
(c) payments of allowances under regulations under section 57A of that Act (permitted allowances to persons who have adopted, or intend to adopt, children) (as at 9th April 2003, see the Adoption Allowance Regulations 1991);
(d) any payment or reward falling within section 51(3) of the Adoption (Scotland) Act 1978 (payments authorised by the court) which is made to a person who has adopted, or intends to adopt, a child;
(e) payments under section 51(4)(a) of that Act (payments by adoption agencies of legal or medical expenses of persons seeking to adopt);
(f) payments of allowances by virtue of section 51B of that Act (transitional provisions) in accordance with a scheme approved by the Secretary of State under section 51(5) of that Act (schemes for payment of allowances to persons who have adopted, or intend to adopt, a child);
(g) payments of allowances in accordance with an adoption allowances scheme under section 51A of that Act;
(h) any payment or reward falling within Article 59(2)(b) of the Adoption (Northern Ireland) Order 1987 (payments authorised by the court) which is made to a person who has adopted, or intends to adopt, a child;
(i) any payment under Article 59(2)(c) of that Order (payments by registered adoption societies) which is made to a person who has adopted, or intends to adopt, a child;
(j) payments of allowances under regulations under Article 59A of that Order (permitted allowances to persons who have adopted, or intend to adopt, children) (as at 9th April 2003, see the Adoption Allowance Regulations (Northern Ireland) 1996);
(k) payments of financial support made in the course of providing adoption support services within the meaning of the Adoption and Children Act 2002 (see sections 2(6) and (7) and 4 of that Act);
(l) payments made under regulations under paragraph 3(1) of Schedule 4 to that Act (transitional and transitory provisions: adoption support services).
(2) The Treasury may by order amend this section for the purposes of—
(a) adding a description of payment, or
(b) removing a description of payment if the power to make a payment of that description has been repealed or revoked or has otherwise ceased to be exercisable.”.
(2) The amendment made by this section has effect for the year 2003-04 and subsequent years of assessment.
(1) Schedule 36 to this Act (foster carers) has effect.
(2) This section has effect in relation to the year 2003-04 and subsequent years of assessment.
(1) This section applies in any case where at any time on or after 30th September 2002—
(a) a qualifying company becomes party to a qualifying contract which is a currency contract or currency option, or
(b) the terms of such a qualifying contract held by such a company are varied,
and the conditions in subsection (2) are, or subsequently become, satisfied.
(2) The conditions are that—
(a) in accordance with generally accepted accounting practice, the company in preparing its statutory accounts uses the exchange rate implied by the qualifying contract (“the accounting rate”);
(b) there is a difference between the accounting rate and the final payment rate; and
(c) the difference between those exchange rates is more than 1 per cent of the final payment rate.
(3) In subsection (2) “the final payment rate” means the exchange rate found by reference only to the amounts which fall or would, apart from this section and the provisions specified in subsection (4), fall to be regarded for the purposes of subsection (2) or, as the case may be, (7) of section 150 of the Finance Act 1994 (c. 9) as the amounts of the currency to be received, and the currency to be paid in exchange, under the qualifying contract as mentioned in that subsection.
(4) Where this section first applies in relation to the qualifying contract in an accounting period of the company which begins before 1st October 2002 (“the relevant contract period”), the following provisions of the Finance Act 2002 (c. 23), namely—
(a) section 79(1)(b) (repeal of forex),
(b) section 80 and Schedule 24 (corporation tax: currency), and
(c) section 83 and Schedules 26 and 27 (derivative contracts),
shall be taken to have effect in the case of the company, so far as relating to that contract, in relation to that accounting period and any subsequent accounting periods.
(5) Where—
(a) the qualifying contract is a currency contract which arises from the exercise of a currency option which is or was itself a qualifying contract (or a series of such currency options), and
(b) that currency option was entered into or varied on or after 30th September 2002 (or, in the case of a series of currency options, any of them was entered into or varied on or after that date),
the provisions specified in subsection (4) shall be taken to have effect in the case of the company, so far as relating to the currency option (or, in the case of a series of currency options, each of the options entered into or varied on or after 30th September 2002), in relation to the earliest accounting period (“the relevant options period”) in which the option (or any of the options) was so entered into or varied and any subsequent accounting periods.
(6) Where the provisions specified in subsection (4) have effect by virtue of this section in relation to a currency contract or currency option the following provisions of the Finance Act 2002, namely—
(a) section 81 (transitional provision), so far as relating to section 80 and Schedule 24, and
(b) Schedule 28 (derivative contracts: transitional provisions etc),
shall have effect accordingly.
(7) In the application of Schedule 28 to the Finance Act 2002 by virtue of this section, any reference to the company’s commencement day is to be taken—
(a) in the case of a currency contract, as a reference to the first day of the relevant contract period; or
(b) in the case of a currency option, as a reference to the first day of the relevant options period.
Finance Act 2003