Finance Act 2001 (c. 9)

(The document as of February, 2008)

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Further assessments to interest on penalties

8 (1) Where an assessment is made under paragraph 7 above to an amount of penalty interest under paragraph 5 above--

(a) the notice of assessment shall specify a date, not later than the date of the notice of assessment, to which the amount of interest which is assessed is calculated; and

(b) if the interest continues to accrue after that date, a further assessment or further assessments may be made under paragraph 7 above in respect of the amounts so accruing.

(2) Where--

(a) an assessment to penalty interest is made specifying a date for the purposes of sub-paragraph (1)(a) above, and

(b) within such period as may for the purposes of this sub-paragraph have been notified by the Commissioners to the person liable for the interest, the amount on which the interest is payable is paid,

that amount shall be deemed for the purposes of any further liability to interest to have been paid on the specified date.

Section 53.

SCHEDULE 11 Children's tax credit: baby rate: supplementary

Introduction

1 Schedule 13B to the Taxes Act 1988 (children's tax credit: provisions applicable where child lives with more than one adult in a year of assessment) is amended as follows.

Child living with married or unmarried couple

2 After paragraph 3(2) (provisions applicable where neither partner has income above the basic rate limit: entitlement where both partners claim in respect of a relevant child) insert--

" (2A) If a relevant child is a qualifying baby the reference in sub-paragraph (2)(b) above to the amount mentioned in section 257AA(2) is to the higher amount applicable by virtue of subsection (2A) of that section. " .

Election that credit should go to lower-earning partner

3 In paragraph 5(4) (circumstances in which election may be made for current year of assessment), after paragraph (c) insert--

" (ca) a relevant child is born in that year, or " .

Child living with more than one adult: other cases

4 (1) Paragraph 6 (provisions applicable in case of child living with more than one adult) is amended as follows.

(2) After sub-paragraph (4) (apportionment of entitlement) insert--

" (4A) If the child is a qualifying baby the reference in sub-paragraph (4) above to the amount mentioned in section 257AA(2) is to the higher amount applicable by virtue of subsection (2A) of that section. " .

(3) After sub-paragraph (7) (claim by person with more than one allotted proportion) insert--

" (7A) Where sub-paragraph (7) above applies in relation to a person, and any child in respect of which a proportion has been, or could have been, allotted to that person is a qualifying baby, the reference in that sub-paragraph to the amount mentioned in section 257AA(2) is to the higher amount applicable by virtue of subsection (2A) of that section. " .

Combined cases

5 In paragraph 7 (provisions applicable where child lives with more than one couple or with one or more couples and one or more other adults), after sub-paragraph (2) insert--

" (3) Where paragraph 6(4A) or (7A) above applies, the reference in sub-paragraph (2) above to the amount mentioned in section 257AA(2) is to the higher amount applicable by virtue of subsection (2A) of that section. " .

Change of circumstances

6 (1) Paragraph 8 (change of circumstances) is amended as follows.

(2) In sub-paragraph (4) (periods before and after change to be treated as years of assessment for certain purposes), after "section 257AA" insert "(except subsection (4A))".

(3) After sub-paragraph (5) (apportionment of amounts) insert--

" (5A) If the child is a qualifying baby the references in sub-paragraph (5) above to the amount specified in section 257AA(2) are to the higher amount applicable by virtue of subsection (2A) of that section. " .

Section 57.

SCHEDULE 12 Mileage allowances

Part 1 New Schedule 12AA to the Taxes Act 1988

After Schedule 12 to the Taxes Act 1988 insert--

" SCHEDULE 12AA Mileage allowances: interpretation

Introduction

1 (1) The provisions of this Schedule apply for the purposes of sections 197AD to 197AG (Schedule E exemption for mileage allowance payments and passenger payments and mileage allowance relief).

(2) Expressions defined in this Schedule for those purposes have the same meaning for the purposes of this Schedule.

(3) In this Schedule "mileage allowance payments" has the meaning given by section 197AD(2) and "passenger payments" has the meaning given by section 197AE(2).

Business travel

2 "Business travel" means travelling the expenses of which, if incurred and defrayed by the employee in question out of the emoluments of his employment, would (in the absence of sections 197AD to 197AF) be deductible under section 198(1) (general relief for necessary expenses).

Qualifying vehicles

3 (1) "Qualifying vehicle" means a car, van, motor cycle or cycle.

(2) "Car" means a mechanically propelled road vehicle which is not--

(a) a goods vehicle,

(b) a motor cycle, or

(3) "Van" means a mechanically propelled road vehicle which--

(a) is a goods vehicle, and

(b) has a design weight not exceeding 3,500 kilograms,

and which is not a motor cycle.

(4) "Motor cycle" has the meaning given by section 185(1) of the Road Traffic Act 1988.

(5) "Cycle" has the meaning given by section 192(1) of that Act.

(6) In this paragraph--

"design weight" means the weight which a vehicle is designed or adapted not to exceed when in normal use and travelling on a road laden; and
"goods vehicle" means a vehicle of a construction primarily suited for the conveyance of goods or burden of any description.

The approved amount: mileage allowance payments

4 (1) The approved amount for mileage allowance payments that is applicable to a kind of vehicle is--

M × R

where--

M is the number of miles of business travel by the employee (other than as a passenger), using that kind of vehicle, in the tax year in question; and
R is the rate applicable for that kind of vehicle.

(2) The rates applicable are as follows--

Kind of vehicle	Rate
Car or van	40p per mile for the first 10,000 miles;
	25p per mile after that
Motor cycle	24p per mile.
Cycle	20p per mile.

Note: The reference above to "the first 10,000 miles" is to the total number of miles of business travel in relation to the employment or any associated employment, by car or van, in the tax year in question.

One employment is associated with another if--

(a) the employer is the same;

(b) the employers are partnerships or bodies and an individual or another partnership or body has control over both of them; or

Section 168(12) (meaning of "control") applies for the purposes of paragraph (b).

(3) The Treasury may by regulations amend sub-paragraph (2) so as to alter the rates or rate bands.

The approved amount: passenger payments

5 (1) The approved amount for passenger payments is--

M × R

where--

M is the number of miles of business travel by the employee, by car or van, for which the employee carries a qualifying passenger in the tax year in question and in respect of which passenger payments are made; and
R is 5p per mile.

(2) If the employee carries more than one qualifying passenger for all or part of a tax year, the approved amount for passenger payments is the total of the amounts calculated under sub-paragraph (1) in respect of each qualifying passenger.

(3) In this paragraph "qualifying passenger" means a passenger who is also an employee for whom the travel is business travel.

(4) The Treasury may by regulations amend sub-paragraph (1) so as to alter the rate.

Company vehicles

6 (1) A vehicle is a "company vehicle" in a tax year if in that year--

(a) the vehicle is made available to the employee by reason of his employment and is not available for his private use, or

(b) the employee is chargeable to tax in respect of the vehicle under section 154, 157 or 159AA (charge where benefit provided or car or van available for private use), or

(c) in the case of a car or van, the employee would be chargeable to tax in respect of it under section 157 or 159AA but for section 159 or 159AB (exception for pooled cars and vans), or

(d) in the case of a cycle, the employee would be chargeable to tax in respect of it under section 154 but for section 197AC(1)(a) (exception for cycles made available).

(2) Section 168(6) (when cars and vans are made available for private use and are made available by reason of employment) applies for the purposes of sub-paragraph (1).

Employment

7 "Employment" includes an office and "employee" includes an office-holder.

Tax year

8 "Tax year" means a year of assessment. " .

Part 2 Consequential amendments

The Taxes Act 1988

1 (1) Section 153 of the Taxes Act 1988 (payments in respect of expenses) is amended as follows.

(2) In subsection (1), after "provisions of this Chapter" insert "and sections 197AD and 197AE".

(3) In subsection (2), after "section" insert "197AG,".

2 In section 163(4)(b) of that Act (expenses connected with living accommodation), after "section" insert "197AG,".

3 In section 167(2)(b) of that Act (employment to which Chapter 2 of Part 5 applies), after "section" insert "197AG,".

4 (1) Section 168 of that Act (Chapter 2 of Part 5: other interpretative provisions) is amended as follows.

(2) In subsection (5)(c), after "would" insert "(in the absence of sections 197AD to 197AF)".

(3) In subsection (5A)(c), after "would" insert "(in the absence of sections 197AD to 197AF)".

5 In section 192(5) of that Act (relief for foreign emoluments), after "195(7)," insert "197AG,".

6 In section 198 of that Act (general relief for necessary expenses), after subsection (4) add--

" (5) No deduction may be made under this section in respect of qualifying travelling expenses incurred in connection with the use by an employee or office-holder of a vehicle that is not a company vehicle if--

(a) mileage allowance payments (within the meaning of section 197AD(2)) are made to that person in respect of the use of the vehicle; or

(b) mileage allowance relief is available in respect of the use of the vehicle by that person.

"Company vehicle" has the meaning given by paragraph 6 of Schedule 12AA. " .

7 In section 200A(1)(b) (incidental overnight expenses), for "195, 198 or 332" substitute "195 or 332 or (in the absence of sections 197AD to 197AF) 198".

8 For section 200C(2) (cap on travelling and subsistence expenditure exempt under section 200B) substitute--

" (2) Section 200B shall not apply in the case of any expenditure incurred in paying or reimbursing any expenses of travelling or subsistence, except to the extent that, on the assumptions in subsection (2A) below--

(a) mileage allowance relief would be available in respect of those expenses if no mileage allowance payments (within the meaning of section 197AD(2)) had been made; or

(b) those expenses would be deductible under section 198.

(2A) The assumptions are--

(a) that the employee undertook the training in question in the performance of the duties of his office or employment under the employer; and

(b) that the employee incurred the expenses in question out of the emoluments of that office or employment. " .

9 For section 200F(2) (cap on travelling and subsistence expenditure exempt under section 200E) substitute--

" (2) Section 200E shall not apply in the case of any expenditure incurred in paying or reimbursing any expenses of travelling or subsistence, except to the extent that, on the assumptions in subsection (2A) below--

(a) mileage allowance relief would be available in respect of those expenses if no mileage allowance payments (within the meaning of section 197AD(2)) had been made; or

(b) those expenses would be deductible under section 198.

(2A) The assumptions are--

(a) that the employee undertook the education or training in question in the performance of the duties of--

(i) his office or employment under the employer, or

(ii) where the employee no longer holds an office or employment under the employer, the last office or employment that he did hold under the employer; and

(b) that the employee incurred the expenses in question out of the emoluments of that office or employment. " .

10 In section 332 of that Act (expenditure of ministers of religion), after subsection (3) insert--

" (3A) No deduction may be made under subsection (3) above in respect of qualifying travelling expenses incurred in connection with the use by a clergyman or minister of a vehicle that is not a company vehicle if--

(a) mileage allowance payments are made to that person in respect of the use of the vehicle; or

(b) mileage allowance relief is available in respect of the use of the vehicle by that person.

(3B) In subsection (3A)--

"company vehicle" has the meaning given by paragraph 6 of Schedule 12AA;
"mileage allowance payments" has the meaning given by section 197AD(2); and
"qualifying travelling expenses" has the meaning given by section 198(1A). " .

11 In section 578A(1) of that Act (deductions for expenditure on car hire)--

(a) after paragraph (a) insert "or"; and

(b) omit paragraph (c) and the word "or" immediately preceding it.

12 For section 589(6) (cap on travelling expenses exempt under section 588) substitute--

" (6) The travelling expenses referred to in subsection (5)(d) above are--

(a) those in respect of which, on the assumptions in subsection (6A) below, mileage allowance relief would be available if no mileage allowance payments (within the meaning of section 197AD(2)) had been made; or

(b) those which, on those assumptions, would be deductible under section 198.

(6A) The assumptions are--

(a) that attendance at the course is one of the duties of the employee's office or employment; and

(b) if the employee has in fact ceased to be employed by the employer, that he continues to be employed by him. " .

13 For section 589B(4) (cap on travelling expenses exempt under section 589A) substitute--

" (4) In relation to services, allowable travelling expenses are--

(a) those in respect of which, on the assumptions in subsection (4A) below, mileage allowance relief would be available if no mileage allowance payments (within the meaning of section 197AD(2)) had been made; or

(b) those which, on those assumptions, would be deductible under section 198.

(4A) The assumptions are--

(a) that receipt of the services is one of the duties of the employee's office or employment; and

(b) if the employee has in fact ceased to be employed by the employer, that he continues to be employed by him. " .

14 In section 646(2)(b) (meaning of "net relevant earnings"), after "section" insert "197AG,".

15 In paragraph 1A of Schedule 12 (foreign earnings), after "195(7)," insert "197AG,".

Finance Act 2000 (c. 17)

16 In Part 2 of Schedule 12 to the Finance Act 2000 (provision of services through an intermediary: the deemed Schedule E payment), in paragraph 11(4), after "higher-paid employment);" insert--

" (ab) for the purposes of section 197AG of that Act (mileage allowance relief); " .

Section 61.

SCHEDULE 13 Employee share ownership plans: amendments

Introductory

1 Schedule 8 to the Finance Act 2000 (c. 17) (employee share ownership plans) is amended in accordance with this Schedule.

The employment requirement

2 (1) In paragraph 14--

(a) in sub-paragraph (1), for paragraph (b)(i) and (ii) (periods counting towards qualifying period) substitute "of a qualifying company", and

(b) after that sub-paragraph insert--

" (1A) Except in the case of a group plan, a qualifying company means--

(a) the company, or

(b) a company that when the individual was employed by it was an associated company--

(i) of the company, or

(ii) of another company qualifying under this paragraph.

(1B) In the case of a group plan, a qualifying company means--

(a) a company that is a participating company at the end of the qualifying period, or

(b) a company that when the individual was employed by it was a participating company, or

(i) a company qualifying under paragraph (a) or (b), or

(ii) another company qualifying under this paragraph. " .

(2) This paragraph has effect in relation to awards of shares (within the meaning of Schedule 8 to the Finance Act 2000 (c. 17)) made after the passing of this Act.

Meaning of "salary"

3 (1) In paragraph 48--

(a) after "(PAYE)" insert "or which would be if that individual were within the scope of Schedule E", and

(b) after "(expenses and benefits in kind)" add "or which would have been had the individual been within the scope of Schedule E".

(2) This paragraph has effect in relation to any award of partnership shares (within the meaning of Schedule 8 to the Finance Act 2000 (c. 17)) in relation to which the eligibility time falls after the passing of this Act.

(3) For this purpose "the eligibility time" means the time at which an individual, in order to participate in the award, is required, in accordance with paragraph 13(1)(b) of that Schedule, to be eligible to so participate.

No charge to tax on award of shares, etc.

4 (1) After paragraph 78(2) add--

" (3) Incidental expenditure of the trustees or the employer in operating the plan is not treated as giving rise to any charge to income tax on employees. " .

(2) This paragraph has effect for the year 2001-02 and subsequent years of assessment.

Charge on disposal of beneficial interest during holding period

5 (1) Omit paragraph 82(2) (reduction for tax paid on capital receipts).

(2) This amendment shall be deemed always to have had effect.

Charge on distributions in respect of unappropriated shares

6 (1) In paragraph 88--

(a) in sub-paragraph (3) (period during which special trust rates of tax do not apply if shares are readily convertible assets), for "Subject to sub-paragraph (4)," substitute "If any of the shares in the company in question are readily convertible assets at the time the shares are acquired by the trustees,", and

(b) in sub-paragraph (4) (period during which special trust rates of tax do not apply if shares are not readily convertible assets), in paragraph (b) for "the shares in question" substitute "any of the shares in that company".

(2) This paragraph has effect in relation to any shares acquired by the trustees of an employee share ownership plan after the passing of this Act.

(3) For the purposes of sub-paragraph (2), "the trustees of an employee share ownership plan" means the body of persons established in accordance with paragraph 68 of Schedule 8 to the Finance Act 2000 (c. 17).

Dividend shares ceasing to be subject to plan: tax credit

7 (1) In paragraph 93(2), for "when the relevant dividend is paid over to him" substitute "when the shares cease to be subject to the plan".

(2) This amendment shall be deemed always to have had effect.

Gains accruing to trustees

8 (1) In paragraph 98--

(a) in sub-paragraph (2) (period within which shares that are readily convertible assets must be awarded if gains not to be chargeable), for the words from the beginning to "they" substitute "If any of the shares in the company in question are readily convertible assets at the time the shares", and

(b) in sub-paragraph (3) (period within which shares that are not readily convertible assets must be awarded if gains not to be chargeable)--

(i) for the words from the beginning to "assets" substitute "If at the time of the acquisition of the shares by the trustees none of the shares in the company in question are readily convertible assets", and

(ii) for "the shares in question" substitute "any of the shares in that company".

(2) This paragraph has effect in relation to any shares acquired by the trustees of an employee share ownership plan after the passing of this Act.

Section 62.

SCHEDULE 14 Enterprise management incentives: amendments

Introductory

1 Schedule 14 to the Finance Act 2000 (enterprise management incentives) is amended in accordance with this Schedule.

Period of notice

2 In paragraph 2 (notice of option to be given to Inland Revenue), in subsection (1) for "30 days" substitute "92 days".

3 In paragraph 4 (notice of enquiry), in sub-paragraph (4) for "30 days" substitute "92 days".

General requirements to be met by option

4 In paragraph 8 (general requirements to be met by qualifying option), for paragraph (c) substitute--

" (c) the maximum value of the relevant company's shares in respect of which unexercised options can exist (see paragraph 11). "

Purpose of granting option

5 In paragraph 9 (purpose of granting the option), for "a key" substitute "an".

Value of options in respect of a company's shares

6 For paragraph 11 (number of employees who may hold qualifying options) substitute--

" Maximum value of options in respect of relevant company's shares

11 (1) The total value of shares in the relevant company in respect of which unexercised qualifying options exist must not exceed £3 million.

(2) An option is not a qualifying option if the limit in sub-paragraph (1) is already exceeded at the time it is granted.

(3) If the grant of an option causes that limit to be exceeded the option is not a qualifying option so far as it relates to the excess.

(4) Where the grant of two or more options at the same time causes that limit to be exceeded, then, for the purpose of determining which part of each option relates to that excess, the amount of the excess shall be divided pro rata among the options according to the value of the shares in respect of which each option was granted.

(5) Sub-paragraphs (7) and (8) of paragraph 10 (determination of value of shares) apply for the purposes of this paragraph as they apply for the purposes of that paragraph. "

Income tax: option to acquire shares at less than market value

7 In paragraph 45 (income tax charge on exercise of option to acquire shares at less than market value), for sub-paragraphs (2) to (4) substitute--

" (2) In that case for the purposes of section 135 of the Taxes Act 1988 (taxation of share options) the amount of the gain realised by the exercise of the option is taken to be the amount by which--

(a) the chargeable market value, exceeds

(b) the aggregate of--

(i) the amount or value of the consideration given for the grant of the option, and

(ii) the amount for which the shares are acquired.

(3) For the purposes of this paragraph "the chargeable market value" means--

(a) the market value of the shares--

(i) at the time the option was granted, or

(ii) if it is a replacement value, at the time the original option was granted,

(b) if lower, the market value of the shares at the time the option is exercised.

(4) If the chargeable market value does not exceed the aggregate of the amounts mentioned in sub-paragraph (2)(b)(i) and (ii), no amount is chargeable to income tax under section 135 of the Taxes Act 1988 (taxation of share options) in respect of the exercise of the option. "

Income tax: option to acquire shares at nil cost

8 In paragraph 46 (income tax charge on exercise of option to acquire shares at nil cost), for sub-paragraph (2) substitute--

" (2) In that case for the purposes of section 135 of the Taxes Act 1988 (taxation of share options) the amount of the gain realised by the exercise of the option is taken to be the amount by which--

(a) the chargeable market value (within the meaning of paragraph 45), exceeds

(b) the amount or value of the consideration given for the grant of the option.

(2A) If the chargeable market value does not exceed the amount or value of the consideration given for the grant of the option, no amount is chargeable to income tax under section 135 of the Taxes Act 1988 (taxation of share options) in respect of the exercise of the option. "

Disqualifying events: alteration of share capital

9 In paragraph 47 (main disqualifying events), for sub-paragraph (1)(e) substitute--

" (e) any alteration to the share capital of the relevant company that is within paragraph 49(1)--

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