Finance Act 2000 (c. 17)

(The document as of February, 2008)

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(11) This section has effect in relation to payments made on or after 1st April 2000; and--

(a) so much of an accounting period as falls before that date; and

(b) so much of it as falls after 31st March 2000,

shall be treated as separate accounting periods for the purposes of the amendment made by subsection (5) above.

41 Covenanted payments to charities

(1) In subsection (5)(b) of section 338 of the Taxes Act 1988 (allowances of charges on income and capital), for "a covenanted donation to charity" there shall be substituted "a qualifying donation".

(2) In section 347A of that Act (annual payments and interest: general rule), subsections (2)(b), (7) and (8) shall cease to have effect.

(3) In subsection (3) of section 348 of that Act (payments out of profits or gains brought into charge to income tax: deductions of tax), at the end there shall be inserted "or to any payment which is a qualifying donation for the purposes of section 25 of the [1990 c. 29.] Finance Act 1990".

(4) In subsection (1) of section 349 of that Act (payments not out of profits or gains brought into charge to income tax, and annual interest), at the end there shall be inserted "or to any payment which is a qualifying donation (within the meaning of section 339) or a qualifying donation for the purposes of section 25 of the [1990 c. 29.] Finance Act 1990".

(5) In subsection (6) of section 505 of that Act (charities: general), the words "and, for this purpose, all covenanted payments to charity (within the meaning of section 347A(7)) shall be treated as a single item" shall cease to have effect.

(6) In subsection (9) of section 660A of that Act (income arising under a settlement where settlor retains an interest), for paragraph (b) there shall be substituted--

" (b) qualifying donations for the purposes of section 25 of the Finance Act 1990. " .

(7) Section 59 of the [1989 c. 26.] Finance Act 1989 (covenanted subscriptions) shall cease to have effect.

(8) Where a deed of covenant executed by an individual before 6th April 2000 provides for the payment of specified amounts, any amount payable under the deed on or after that date shall be determined as if the individual were entitled to deduct tax from that amount at the basic rate.

(9) This section shall have effect in relation to covenanted payments--

(a) falling to be made by individuals on or after 6th April 2000; or

(b) made by companies on or after 1st April 2000.

42 Millennium gift aid

(1) In section 48 of the [1998 c. 36.] Finance Act 1998 (gifts of money for relief in poor countries), subsections (3), (6) and (7) shall cease to have effect.

(2) In subsection (4) of that section--

(a) in paragraph (a), after "made" there shall be inserted "before 6th April 2000";

(b) after paragraph (b) there shall be inserted--

" (bb) the subsequent gift, or at least one of the subsequent gifts, is made on or after 6th April 2000; " ; and

(3) In subsection (8) of that section, for the definition of "relevant gift" there shall be substituted--

" "relevant gift" means a gift to which this section applies--

(a) which satisfies the requirements of subsection (2) of section 25 of the [1990 c. 29.] Finance Act 1990 (as amended by section 39 of the Finance Act 2000); or

(b) which would satisfy those requirements if paragraph (e) of that subsection were disregarded. " .

43 Gifts of shares and securities to charities etc

(1) After section 587A of the Taxes Act 1988 there shall be inserted--

" 587B Gifts of shares and securities to charities etc

(1) Subsections (2) and (3) below apply where, otherwise than by way of a bargain made at arm's length, an individual, or a company which is not itself a charity, disposes of the whole of the beneficial interest in a qualifying investment to a charity.

(2) On a claim made in that behalf to an officer of the Board--

(a) the relevant amount shall be allowed--

(i) in the case of a disposal by an individual, as a deduction in calculating his total income for the purposes of income tax for the year of assessment in which the disposal is made;

(ii) in the case of a disposal by a company, as a charge on income for the purposes of corporation tax for the accounting period in which the disposal is made; and

(b) no relief in respect of the disposal shall be given under section 83A or any other provision of the Income Tax Acts;

but paragraph (a)(i) above shall not apply for the purposes of any computation under section 550(2)(a) or (b).

(3) The consideration for which the charity's acquisition of the qualifying investment is treated by virtue of section 257(2) of the 1992 Act as having been made--

(a) shall be reduced by the relevant amount; or

(b) where that consideration is less than that amount, shall be reduced to nil.

(4) Subject to subsections (5) to (7) below, the relevant amount is an amount equal to--

(a) where the disposal is a gift, the market value of the qualifying investment at the time when the disposal is made;

(b) where the disposal is at an undervalue, the difference between that market value and the amount or value of the consideration for the disposal.

(5) Where there are one or more benefits received in consequence of making the disposal which are received by the person making the disposal or a person connected with him, the relevant amount shall be reduced by the value of that benefit or, as the case may be, the aggregate value of those benefits; and section 839 applies for the purposes of this subsection.

(6) Where the disposal is a gift, the relevant amount shall be increased by the amount of the incidental costs of making the disposal to the person making it.

(7) Where the disposal is at an undervalue--

(a) to the extent that the consideration for the disposal is less than that for which the disposal is treated as made by virtue of section 257(2)(a) of the 1992 Act, the relevant amount shall be increased by the amount of the incidental costs of making the disposal to the person making it; and

(b) section 48 of that Act (consideration due after time of disposal) shall apply in relation to the computation of the relevant amount as it applies in relation to the computation of a gain.

(8) In the case of a disposal by a company which is carrying on life assurance business--

(a) if the company is charged to tax under Case I of Schedule D in respect of such business, subsections (2) and (3) above shall not apply;

(b) if the company is not so charged to tax in respect of such business--

(i) subsection (2)(a)(ii) above shall have effect as if for "a charge on income" there were substituted "an expense of management"; and

(ii) the relevant amount given by subsection (4) above shall be reduced by so much (if any) of that amount as is not referable to basic life assurance and general annuity business;

and for the purpose of determining how much (if any) of that amount is not so referable, section 432A shall have effect as if that amount were a gain accruing on the disposal of the qualifying investment to the company.

(9) In this section--

"authorised unit trust" and "open-ended investment company" have the meanings given by section 468;
"charity" has the same meaning as in section 506 and includes each of the bodies mentioned in section 507(1);
"the incidental costs of making the disposal to the person making it" shall be construed in accordance with section 38(2) of the 1992 Act;
"life assurance business" and related expressions have the same meaning as in Chapter I of Part XII;
"offshore fund" means a collective investment scheme (within the meaning of the [1986 c. 60.] Financial Services Act 1986) which is constituted by any company, unit trust scheme or other arrangement falling within paragraph (a), (b) or (c) of section 759(1);
"qualifying investment" means any of the following--
(a)
shares or securities which are listed or dealt in on a recognised stock exchange;
(b)
units in an authorised unit trust;
(c)
shares in an open-ended investment company; and
(d)
an interest in an offshore fund.

(10) Subject to subsection (11) below, the market value of any qualifying investment shall be determined for the purposes of this section as for the purposes of the 1992 Act.

(11) In the case of an interest in an offshore fund for which there are separate published buying and selling prices, section 272(5) of the 1992 Act (meaning of "market value" in relation to rights of unit holders in a unit trust scheme) shall apply with any necessary modifications for determining the market value of the interest for the purposes of this section. " .

(2) In subsection (2) of section 338 of that Act (allowances of charges on income and capital), immediately before paragraph (a) there shall be inserted--

" (za) amounts allowed as charges on income under section 587B(2)(a)(ii); " .

(3) This section has effect in relation to--

(a) disposals made by individuals on or after 6th April 2000; and

(b) disposals made by companies on or after 1st April 2000.

44 Gifts to charity from certain trusts

(1) Chapter IA of Part XV of the Taxes Act 1988 (liability of settlors) shall not apply to any qualifying income which arises under a trust the trustees of which are resident in the United Kingdom (a "UK trust") if--

(a) it is given by the trustees to a charity in the year of assessment in which it arises; or

(b) it is income to which a charity is entitled under the terms of the trust.

(2) Subject to subsection (3) below, where in any year of assessment qualifying income arising under a UK trust from different sources exceeds the amount of that income falling within subsection (1) above, that amount shall be rateably apportioned between those sources.

(3) Nothing in subsection (2) above shall affect the operation of any requirement that the whole, or any specified part, of the income from a particular source be given to a charity.

(4) Where in any year of assessment qualifying income arising under a UK trust exceeds the amount of that income falling within subsection (1) above, any management expenses for that year shall be rateably apportioned between--

(a) so much of that income as is equal to that amount; and

(b) so much of that income as exceeds that amount.

(5) In this section--

"charity" has the same meaning as in section 506 of the Taxes Act 1988 and includes each of the bodies mentioned in section 507 of that Act;
"qualifying income" means--
(i)
income which is to be accumulated;
(ii)
income which is payable at the discretion of the trustees or any other person (whether or not the trustees have power to accumulate it); or
(iii)
income which (before being distributed) is income of any person other than the trustees;
"resident", in relation to the trustees of a trust, shall be construed in accordance with section 110 of the [1989 c. 26.] Finance Act 1989;

and the reference to Chapter IA of Part XV of the Taxes Act 1988 includes a reference to that Chapter as it has effect by virtue of section 660E of that Act (application to settlements by two or more settlors).

(6) This section has effect in relation to qualifying income arising to a UK trust on or after 6th April 2000.

45 Loans to charities

(1) In Chapter IA of Part XV of the Taxes Act 1988 "settlement" does not include any arrangement so far as it consists of a loan of money made by an individual to a charity either--

(a) for no consideration; or

(b) for a consideration which consists only of interest.

(2) In this section "charity" has the same meaning as in section 44 above.

(3) This section has effect in relation to income arising on or after 6th April 2000 on loans made before, as well as loans made on or after, that date.

46 Exemption for small trades etc

(1) Subject to subsection (2) below, exemption from tax under Case I or VI of Schedule D shall be granted, on a claim made in that behalf to the Board, in respect of any income of a charity if the requirements of subsection (3) below are satisfied with respect to the income.

(2) Exemption shall not be granted under subsection (1) above in respect of income which is chargeable to tax under Case VI of Schedule D by virtue of any of the following--

(a) section 30 of the [1970 c. 9.] Taxes Management Act 1970;

(b) sections 214, 412, 547(1)(b) and (6), 553(6), 660C, 677, 703, 776, 788, 790 and 804 of the Taxes Act 1988;

(d) paragraph 52(4) of Schedule 18, and paragraph 13(7) of Schedule 19, to the [1998 c. 36.] Finance Act 1998; and

(e) any other enactment specified in an order made by the Treasury.

(3) The requirements of this subsection are satisfied with respect to any income for a chargeable period if it is applied solely for the purposes of the charity and either--

(a) the charity's gross income for the chargeable period does not exceed the requisite limit; or

(b) the charity had, at the beginning of the period, a reasonable expectation that its gross income for the period would not exceed that limit.

(4) Subject to subsection (5) below, the requisite limit is whichever is the greater of--

(a) £5,000; and

(b) whichever is the lesser of £50,000 and 25% of all of the charity's incoming resources for the chargeable period.

(5) For a chargeable period of less than twelve months, the amounts of £5,000 and £50,000 specified in subsection (4) above shall be proportionally reduced.

(6) In this section--

"charity" means any body of persons or trust established for charitable purposes only;
"gross income", in relation to a charity, means income before deduction of any expenses;
"income", in relation to a charity, means any profits or gains or other income which is chargeable to tax under Case I or VI of Schedule D and which is not, apart this section, exempted from tax under that Case.

(7) This section applies for the year 2000-01 and subsequent years of assessment or, in the case of charities which are companies, for accounting periods beginning on or after 1st April 2000.

Employee share ownership

47 Employee share ownership plans

Schedule 8 to this Act (employee share ownership plans) shall have effect.

48 Relief for transfers to employee share ownership plans

(1) In the [1992 c. 12.] Taxation of Chargeable Gains Act 1992, after section 236 insert--

" Employee share ownership plans

236A Relief for transfers to employee share ownership plans

Schedule 7C (which makes provision for roll-over relief where shares are transferred to an approved employee share ownership plan) shall have effect. " .

(2) After Schedule 7B to that Act insert the Schedule 7C set out in Schedule 9 to this Act.

49 Phasing out of approved profit sharing schemes

(1) The Board shall not approve a profit sharing scheme under Schedule 9 to the Taxes Act 1988 (approval of share option schemes and profit sharing schemes) unless the application for approval is received by the Board before 6th April 2001.

(2) For the purposes of subsection (1) an application for approval which is not accompanied by the particulars and evidence referred to in paragraph 1(2) of that Schedule is not regarded as received by the Board until the required particulars and evidence have been received by them.

(3) In section 186 of that Act (approved profit sharing schemes), in subsection (1) (under which the section applies to appropriations of shares made after 5th April 1979) after "5th April 1979" insert "and before 1st January 2003".

50 Phasing out of relief for payments to trustees of profit sharing schemes

(1) This section has effect to phase out deductions under section 85 of the Taxes Act 1988 (corporation tax relief for payments to trustees of approved profit sharing schemes).

(2) In the case of sums paid to the trustees on or after 21st March 2000 and before 6th April 2002 no deduction may be made by virtue of subsection (2)(a) of that section (sums applied in acquiring shares for appropriation) unless the trustees appropriate the shares acquired, by the application of the sum, as mentioned in that provision--

(a) before the end of the period of nine months beginning on the day following the end of the period of account in which payment to the trustees was made, and

(b) before 1st January 2003.

(3) No deduction may be made by virtue of subsection (2)(a) of that section in respect of any sum paid to the trustees on or after 6th April 2002.

(4) No deduction may be made by virtue of subsection (2)(b) of that section (sums to meet expenses of trustees in administering the scheme) in respect of any sum paid to the trustees more than three years after the date of the last appropriation of shares to individuals which was made--

(a) in accordance with the approved profit sharing scheme, and

(b) before 1st January 2003.

(5) For the purposes of this section references to a deduction under section 85 are to a deduction under subsection (1)(a) or by virtue of subsection (1)(b) of that section.

51 Approved profit sharing scheme: other awards of shares

(1) In Schedule 9 to the Taxes Act 1988 (approved share option schemes and profit sharing schemes), in paragraph 3(2) (grounds for withdrawing approval of profit sharing schemes), after "below" in paragraph (e) insert-- " ,; or

(f) the trustees appropriate shares to participants, one or more of whom have had free shares appropriated to them, at an earlier time in the same year of assessment, under a relevant share plan " .

(2) After paragraph 3(3) of that Schedule insert--

" (4) For the purposes of sub-paragraph (2)(f) above the reference to persons having had free shares appropriated to them includes persons who would have had free shares appropriated to them but for their failure to obtain a performance allowance (within the meaning of paragraph 25 of Schedule 8 to the Finance Act 2000).

(5) In sub-paragraph (2)(f) and (4) above--

"free shares" has the same meaning as in Schedule 8 to the Finance Act 2000;
"relevant share plan", in relation to a profit sharing scheme, means an employee share ownership plan that--
(a)
was established by the grantor or a connected company, and
(b)
is approved under Schedule 8 to that Act.

(6) For the purposes of sub-paragraph (5) above "connected company" means--

(a) a company which controls or is controlled by the grantor or which is controlled by a company which also controls the grantor, or

(b) a company which is a member of a consortium owning the grantor or which is owned in part by the grantor as a member of a consortium. " .

52 Approved profit sharing schemes: restriction on type of shares

(1) Schedule 9 to the Taxes Act 1988 (share option schemes and profit sharing schemes) is amended in accordance with subsections (2) to (4).

(2) In paragraph 9(1) (requirements to be satisfied by shares in share option schemes), after "below" insert "(disregarding paragraph 11A)".

(3) After paragraph 11 (requirements as to listing etc.) insert--

" 11A (1) In the case of a profit sharing scheme, scheme shares must not be shares--

(a) in an employer company, or

(b) in a company that--

(i) has control of an employer company, and

(ii) is under the control of a person or persons within sub-paragraph (2)(b)(i) below in relation to an employer company.

(2) For the purposes of this paragraph a company is "an employer company" if--

(a) the business carried on by it consists substantially in the provision of the services of the persons employed by it, and

(b) the majority of those services are provided to--

(i) a person who has, or two or more persons who together have, control of the company, or

(ii) a company associated with the company.

(3) For the purposes of sub-paragraph (2)(b)(ii) above a company shall be treated as associated with another company if both companies are under the control of the same person or persons.

(4) For the purposes of sub-paragraphs (1) to (3) above--

(a) references to a person include a partnership, and

(b) where a partner, alone or together with others, has control of a company, the partnership shall be treated as having like control of that company.

(5) For the purposes of this paragraph the question whether a person controls a company shall be determined in accordance with section 416(2) to (6). " .

(4) In paragraph 12--

(a) in sub-paragraph (1), in paragraph (c) for "other than" to the end of that paragraph there shall be substituted "other than those permitted by sub-paragraph (1A) below.", and

(b) after sub-paragraph (1) insert--

" (1A) Subject to sub-paragraph (1B) below, scheme shares may be subject to--

(a) restrictions which attach to all shares of the same class, or

(b) a restriction authorised by sub-paragraph (2) below.

(1B) In the case of a profit sharing scheme, scheme shares must not be subject to any restrictions affecting the rights attaching to those shares which relate to--

(a) dividends, or

(b) assets on a winding-up of the company,

other than restrictions which attach to all other ordinary shares in the same company. " .

(5) Subsections (1) to (4) shall be deemed to have come into force on 21st March 2000.

(6) Subsections (3) and (4) do not have effect in relation to shares acquired before 21st March 2000 by the trustees of a profit sharing scheme approved under Schedule 9 to the Taxes Act 1988.

53 Approved profit sharing schemes: loan arrangements

(1) In paragraph 2 of Schedule 9 to the Taxes Act 1988 (conditions for approval of share option schemes and profit sharing schemes), after sub-paragraph (2) insert--

" (2A) The Board shall not approve a profit sharing scheme unless they are satisfied--

(a) that the arrangements for the scheme do not make any provision, and are not in any way associated with any provision made, for loans to some or all of the employees of--

(i) the company that established the scheme, or

(ii) in the case of a group scheme, any participating company, and

(b) that the operation of the scheme is not in any way associated with such loans.

(2B) For the purposes of sub-paragraph (2A) above "arrangements" includes any scheme, agreement or understanding, whether or not legally enforceable. " .

(2) In paragraph 3(2) of that Schedule (withdrawal of approval of profit sharing schemes), before paragraph (d) insert--

" (ca) the Board--

(i) cease to be satisfied of the matters mentioned in paragraph 2(2A) above, or

(ii) in the case of a scheme approved before 21st March 2000, are not satisfied of those matters; or " .

(3) This section shall be deemed to have come into force on 21st March 2000.

54 Employee share ownership trusts

No claim for relief under section 229(1) or (3) of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (roll-over relief where disposal made to employee share ownership trust) may be made in relation to a disposal of shares, or an interest in shares, made on or after 6th April 2001.

55 Shares transferred from employee share ownership trust

(1) Section 69 of the [1989 c. 26.] Finance Act 1989 (chargeable events in relation to employee share ownership trusts) is amended in accordance with subsections (2) to (5).

(2) In subsection (1) (definition of "chargeable event"), after paragraph (d) insert--

" (e) where--

(i) the trustees make a qualifying transfer within subsection (3AA) below for a consideration, and

(ii) they do not, during the period specified in subsection (5A) below, expend a sum of not less than the amount of that consideration for one or more qualifying purposes,

the expiry of that period. " .

(3) After subsection (3) insert--

" (3AA) For the purposes of subsection (1)(a) above a transfer is also a qualifying transfer if--

(a) it is a transfer of relevant shares made to the trustees of the plan trust of an employee share ownership plan,

(b) the plan is approved under Schedule 8 to the Finance Act 2000 when the transfer is made, and

(3AB) For the purpose of determining whether a transfer by the trustees is a qualifying transfer within subsection (3AA) above, where on or after 21st March 2000--

(a) the trustees transfer or dispose of part of a holding of shares (whether by way of a qualifying transfer or otherwise), and

(b) the holding includes any relevant shares,

the relevant shares shall be treated as transferred or disposed of before any other shares included in that holding.

For this purpose "holding" means any number of shares of the same class held by the trustees, growing or diminishing as shares of that class are acquired or disposed of.

(3AC) For the purposes of subsections (3AA) and (3AB) above--

"market value" has the same meaning as in Schedule 8 to the Finance Act 2000; and
"relevant shares" means--
(i)
shares that are held by the trustees of the employee share ownership trust at midnight on 20th March 2000, and
(ii)
shares purchased by those trustees with original funds after that time.

(3AD) For the purposes of subsection (3AC) above--

(a) "original funds" means any money held by the trustees of the employee share ownership trust in a bank or building society account at midnight on 20th March 2000, and

(b) any payment made by the trustees after that time (whether to acquire shares or otherwise) shall be treated as made out of original funds (and not out of money received after that time) until those funds are exhausted. " .

(4) In subsection (5) after "(1)(d)" insert "or (e)".

(5) After that subsection insert--

" (5A) The period referred to in paragraph (e) of subsection (1) above is the period--

(a) beginning with the qualifying transfer mentioned in that paragraph, and

(b) ending nine months after the end of the period of account in which that qualifying transfer took place.

For this purpose the period of account means the period of account of the company that established the employee share ownership trust. " .

(6) In section 70 of the [1989 c. 26.] Finance Act 1989 (chargeable amounts), after subsection (3) insert--

" (4) If the chargeable event falls within section 69(1)(e) above the chargeable amount is an amount equal to--

(a) the amount of the consideration received for the qualifying transfer mentioned in section 69(1)(e) above, less

(b) the amount of any expenditure by the trustees for a qualifying purpose during the period mentioned in section 69(5A) above. " .

56 Further provisions about share options

(1) In Chapter IV of Part V of the Taxes Act 1988 (provisions relating to the Schedule E charge: other exemptions and reliefs), after section 187 insert--

" Contributions in respect of share option gains

187A Relief for contributions in respect of share option gains

(1) Where a person ("the earner") is chargeable to tax under section 135 on a gain, relief is available under this section if--

(a) an agreement has been entered into allowing the secondary contributor to recover from the earner the whole or part of any secondary Class 1 contributions in respect of the gain, or

(b) an election is in force which has the effect of transferring to the earner the whole or part of the liability to pay secondary Class 1 contributions in respect of the gain.

(2) The amount of the relief is the total of--

(a) any amount that, in pursuance of any such agreement as is mentioned in subsection (1)(a), is recovered in respect of the gain by the secondary contributor not later than 60 days after the end of the year of assessment in which occurred the event giving rise to the charge to tax under section 135; and

(b) the amount of any liability in respect of that gain that, by virtue of any such election as is mentioned in subsection (1)(b), has become the earner's liability.

(3) Where notice of withdrawal of approval of any such election is given, relief under subsection (2)(b) is limited to so much of the earner's liability in respect of the gain as is met before the end of the 60th day after the end of the year of assessment in which occurred the event giving rise to the charge under section 135.

(4) Relief under this section shall be given by way of deduction from the amount of the gain on which the earner is chargeable to tax under section 135.

(5) Any such deduction does not affect the amount of the gain for the purposes of--

(a) section 120(4) of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (amount treated as consideration for acquisition of shares), or

(b) section 4(4)(a) of the Contributions and Benefits Act (amount treated as remuneration for contributions purposes).

(6) The agreements and elections referred to in this section are those having effect under paragraph 3A or 3B of Schedule 1 to the Contributions and Benefits Act.

References to approval in relation to an election are to approval by the Inland Revenue under paragraph 3B of that Schedule.

(7) In this section--

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