Finance Act 2001 (c. 9)

(The document as of February, 2008)

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" Part 9B Claims relating to remediation of contaminated land

83G Introduction

This Part of this Schedule applies to claims for--

(a) land remediation tax credits under paragraph 14 of Schedule 22 to the Finance Act 2001 ("land remediation tax credits"), and

(b) life assurance company tax credits under paragraph 24 of that Schedule ("life assurance company tax credits").

83H Claim to be included in company tax return

(1) A claim for a land remediation tax credit or a life assurance company tax credit must be made by being included in the claimant company's company tax return for the accounting period for which the claim is made.

(2) It may be included in the return originally made or by amendment.

83I Content of claim

A claim for a land remediation tax credit or a life assurance company tax credit must specify the amount of the tax credit claimed, which must be an amount quantified at the time the claim is made.

83J Amendment or withdrawal of claim

A claim for a land remediation tax credit or a life assurance company tax credit may be amended or withdrawn by the claimant company only by amending its company tax return.

83K Time limit for claims

(1) A claim for a land remediation tax credit or a life assurance company tax credit may be made, amended or withdrawn at any time up to the first anniversary of the filing date for the company tax return of the claimant company for the accounting period for which the claim is made.

(2) The claim may be made, amended or withdrawn at a later date if the Inland Revenue allow it.

83L Penalty

(1) The company is liable to a penalty where it--

(a) fraudulently or negligently makes a claim for a land remediation tax credit or a life assurance company tax credit and that claim is incorrect, or

(b) discovers that such a claim made by it (neither fraudulently nor negligently) is incorrect and does not remedy the error without unreasonable delay.

(2) The penalty is an amount not exceeding the excess land remediation tax credit or excess life assurance company tax credit claimed, that is, the difference between--

(a) the amount of the land remediation tax credit or the life assurance company tax credit claimed by the company for the accounting period to which the claim relates, and

(b) the amount of the land remediation tax credit or the life assurance company tax credit to which the company is entitled for that period. " .

Section 71.

SCHEDULE 24 Creative artists: relief for fluctuating profits

Part 1 New Schedule 4A to the Taxes Act 1988

1 The Schedule inserted after Schedule 4 to the Taxes Act 1988 is as follows--

" SCHEDULE 4A Creative artists: relief for fluctuating profits

Introduction

1 This Schedule enables an individual ("the taxpayer") to make a claim (an "averaging claim") if his profits from a qualifying trade, profession or vocation (his "relevant profits") fluctuate from one tax year to the next.

Qualifying trade, profession or vocation

2 (1) A trade, profession or vocation is a "qualifying trade, profession or vocation" if the taxpayer's profits from it--

(a) are derived wholly or mainly from qualifying creative works, and

(b) are chargeable to tax under Case I or II of Schedule D.

(2) In sub-paragraph (1) "qualifying creative works" means--

(a) literary, dramatic, musical or artistic works, or

(b) designs,

created by the taxpayer personally or, where the trade, profession or vocation is carried on by the taxpayer in partnership, by one or more of the partners personally.

Circumstances in which claim may be made

3 (1) An averaging claim may be made if the taxpayer has been carrying on the qualifying trade, profession or vocation in two consecutive tax years and either--

(a) his relevant profits for one of the tax years are less than 75% of his relevant profits for the other, or

(b) his relevant profits for one (but not both) of the tax years are nil.

(2) For the purposes of paragraph 4 (years in respect of which averaging claim may be made) an averaging claim relates to both of the years involved.

Years in respect of which claim may be made

4 (1) An averaging claim may not be made in relation to a tax year if an averaging claim in respect of the same qualifying trade, profession or vocation has already been made in relation to a later tax year.

(2) An averaging claim may not be made in relation to a tax year in which--

(a) the taxpayer starts, or permanently ceases, to carry on the trade, profession or vocation, or

(b) the trade, profession or vocation begins or ceases to be a qualifying trade, profession or vocation.

(3) An averaging claim may be made in relation to a tax year which was the later year on a previous averaging claim.

Time limit for claim

5 An averaging claim must be made not later than twelve months after the 31st January next following the end of the later of the tax years to which it relates.

This is subject to paragraph 10(2) (extended time limit where profits adjusted for some other reason).

Adjustment of profits on averaging claim

6 (1) Where the taxpayer is entitled to make, and makes, an averaging claim, the amount taken to be his profits from the qualifying trade, profession or vocation for each of the tax years to which the claim relates is adjusted in accordance with this paragraph.

(2) If--

(a) the taxpayer's relevant profits for one of the years amount to 70% or less of his relevant profits for the other year, or

(b) the taxpayer's relevant profits for one (but not both) of the years are nil,

the amount of the adjusted profits for each of the years to which the claim relates is the average of the relevant profits for the two years.

(3) If the taxpayer's relevant profits for one of the years amount to more than 70%, but less than 75%, of his relevant profits for the other year, the amount of the profits in each of the years is calculated as follows, so as to reduce the variation between them.

Step 1

The amount of the adjustment is given by the formula--

---

where--

D is the difference between the taxpayer's relevant profits for the two tax years, and
P is the taxpayer's relevant profits for the year in which those profits are higher.

Step 2

Add the amount of the adjustment to the taxpayer's relevant profits for the year in which those profits are lower.

The result is the amount of the adjusted profits for that year.

Step 3

Subtract the amount of the adjustment from the taxpayer's relevant profits for the year in which those profits are higher.

The result is the amount of the adjusted profits for that year

(4) Subject to the following provisions of this Schedule, the adjusted profits are taken to be the taxpayer's relevant profits for the years to which the claim relates for all the purposes of the Income Tax Acts, including the further application of this Schedule.

How averaging claim is given effect

7 (1) An averaging claim relating to two tax years ("the earlier year" and "the later year") is given effect in the later year.

(2) In so far as the claim involves an adjustment to the profits for the earlier year it is treated as a claim for the amount of the difference between--

(a) the amount in which the taxpayer is chargeable to tax for the earlier year ("amount A"), and

(b) the amount in which he would be so chargeable if effect were given to the adjustment in that year ("amount B").

(3) That claim is given effect in the later year by increasing the amount referred to in section 59B(1)(b) of the Management Act (aggregate amount of payments on account made by the taxpayer) or, as the case may require, by increasing the amount of tax payable.

(4) Where effect falls to be given to two or more associated claims, amounts A and B above shall each be determined on the assumption that effect could have been, and had been, given to the other claim or claims in relation to the earlier year.

(5) Where this paragraph applies twice in relation to the same tax year, the increase or reduction in the amount of tax payable for that year as a result of the earlier application shall be disregarded in determining amounts A and B above for the purposes of the later application.

Extension of time for making other claims

8 (1) A claim by the taxpayer for relief under any other provision of the Income Tax Acts for either of the years to which an averaging claim relates ("the other claim")--

(a) is not out of time if made on or before the last date on which the averaging claim could have been made, and

(b) if already made, may be amended or revoked on or before that date.

(2) If the other claim is made by being included in a return, the reference in sub-paragraph (1)(b) to amending or revoking the claim shall be read as a reference to amending the return by amending or omitting the claim.

Giving effect to late claim for other relief

9 (1) This paragraph applies where--

(a) the taxpayer makes or amends a claim for relief under any other provision of the Income Tax Acts for either of the years to which an averaging claim relates, and

(b) the making or amendment of the claim would be out of time but for paragraph 8.

(2) The claim or amendment is given effect in the later year.

(3) In so far as the claim or amendment relates to income of the earlier year, the amount claimed, or (as the case may be) the increase or reduction in the amount claimed, shall be equal to the difference between--

(a) the amount in which the taxpayer is chargeable to tax for the earlier year ("amount A"), and

(b) the amount in which he would be so chargeable on the assumption that effect could be, and was, given to the claim or amendment in relation to that year ("amount B").

(4) That claim or amendment is given effect in the later year by increasing the amount referred to in section 59B(1)(b) of the Management Act (aggregate amount of payments on account made by the taxpayer) or, as the case may require, by increasing the amount of tax payable.

(5) Where effect falls to be given to two or more associated claims, amounts A and B above shall each be determined on the assumption that effect could have been, and had been, given to the other claim or claims in relation to the earlier year.

(6) In this paragraph "amend" includes revoke and "amendment" has a corresponding meaning.

Effect of later adjustment of profits

10 (1) If after the taxpayer has made an averaging claim, his relevant profits in either or both of the tax years to which the claim relates are adjusted for some other reason--

(a) the averaging claim shall be disregarded, and

(b) a further averaging claim may be made in relation to the taxpayer's relevant profits as adjusted.

(2) A further averaging claim is not out of time provided it is made not later than twelve months after the 31st January next following the tax year in which the adjustment for the other reason is made.

Interpretation of references to profits

11 (1) References in this Schedule to the taxpayer's profits from a qualifying trade, profession or vocation are to profits before making deductions for losses sustained in any tax year.

(2) If the taxpayer sustains a loss in the qualifying trade, profession or vocation in any tax year, the profits of that year for the purposes of this Schedule are nil.

This shall not be read as preventing the taxpayer from obtaining relief under the Income Tax Acts for a loss sustained by him in that or any other tax year.

Interpretation of references to amount chargeable to tax

12 In this Schedule any reference to the amount in which a person is chargeable to tax is a reference to the amount in which he is so chargeable after taking into account any relief or allowance for which a claim is made.

Meaning of "claim" and "associated claim"

13 (1) In this Schedule any reference to a claim includes a reference to an election or notice.

(2) For the purposes of this Schedule, two or more claims made by the same person are associated with each other if each of them is any of the following--

(a) a claim to which this Schedule applies, or

(b) a claim to which Schedule 1B to the Management Act applies (other claims involving more than one year to be given effect in later year),

and the same tax year is the earlier year in relation to each of those claims.

(3) In sub-paragraph (2)--

(a) the reference to a claim to which this Schedule applies includes amendments and revocations to which paragraph 9 above applies;

(b) the reference to a claim to which Schedule 1B to the Management Act applies includes amendments and revocations to which paragraph 4 of that Schedule applies.

Meaning of "tax year"

14 In this Schedule a "tax year" means a year of assessment. " .

Part 2 Consequential amendments

2 (1) In section 46C(3) of the Taxes Management Act 1970 (c. 9) (jurisdiction of Special Commissioners over certain claims) for paragraph (d) substitute--

" (d) sections 527 and 536 (reliefs in respect of royalties); " .

(2) This paragraph applies in relation to claims made in respect of payments actually receivable on or after 6th April 2001.

3 (1) In Schedule 1B to that Act (claims for relief involving two or more years), in paragraph 1 (preliminary definitions) for sub-paragraphs (2) and (3) substitute--

" (2) For the purposes of this Schedule, two or more claims made by the same person are associated with each other if each of them is any of the following--

(a) a claim to which this Schedule applies, or

(b) a claim to which Schedule 4A to the principal Act applies (creative artists: relief for fluctuating profits),

and the same year of assessment is the earlier year in relation to each of those claims.

(3) In sub-paragraph (2) above, any reference to claims includes--

(a) in the case of a claim to which this Schedule applies, a reference to amendments and revocations to which paragraph 4 below applies;

(b) in the case of a claim to which Schedule 4A to the principal Act applies, a reference to amendments and revocations to which paragraph 9 of that Schedule applies. " .

(2) This paragraph applies for the year 2000-01 and subsequent years of assessment.

4 (1) In section 537 of the Taxes Act 1988 (application of sections 534, 535 and 536 for public lending right as for copyright)--

(a) for "Sections 534, 535 and 536" substitute "Section 536", and

(b) for "they have" substitute "it has".

(2) This paragraph applies in relation to payments actually receivable on or after 6th April 2001.

Section 76.

SCHEDULE 25 Limited liability partnerships: investment LLPs and property investment LLPs

Meaning of "investment LLP" and "property investment LLP"

1 (1) In Part 19 of the Taxes Act 1988 (supplementary provisions), after section 842A insert--

" 842B Meaning of "investment LLP" and "property investment LLP"

(1) In this Act--

(a) an "investment LLP" means a limited liability partnership whose business consists wholly or mainly in the making of investments and the principal part of whose income is derived therefrom; and

(b) a "property investment LLP" means a limited liability partnership whose business consists wholly or mainly in the making of investments in land and the principal part of whose income is derived therefrom.

(2) Whether a limited liability partnership is an investment LLP or a property investment LLP is determined for each period of account of the partnership.

A "period of account" means any period for which accounts of the partnership are drawn up. " .

(2) In section 832(1) of that Act (interpretation of the Tax Acts), at the appropriate place insert--

" "investment LLP" and "property investment LLP" have the meaning given by section 842B; " .

(3) In section 288(1) of the Taxation of Chargeable Gains Act 1992 (c. 12) (interpretation), at the appropriate place insert--

" "property investment LLP" has the meaning given by section 842B of the Taxes Act; " .

Pension funds, &c.: exclusion of exemptions from tax in case of income from property investment LLPs

2 In Chapter 6 of Part 14 of the Taxes Act 1988 (pension schemes, &c.: miscellaneous provisions), after section 659D insert--

" 659E Treatment of income from property investment LLP's

(1) The exemptions specified below do not apply to income derived from investments, deposits or other property held as a member of a property investment LLP.

(2) The exemptions are those provided by--

section 592(2) (exempt approved schemes),
section 608(2)(a) (former approved superannuation funds),
section 613(4) (Parliamentary pension funds),
section 614(3) (certain colonial, &c. pension funds),
section 614(4) (the Overseas Service Pension Fund),
section 614(5) (other pension funds for overseas employees),
section 620(6) (retirement annuity trust schemes), and
section 643(2) (approved personal pension schemes).

(3) The income to which subsection (1) above applies includes relevant stock lending fees, in relation to any investments, to which any of the provisions listed in subsection (2) above would apply by virtue of section 129B.

(4) Section 659A (treatment of futures and options) applies for the purposes of subsection (1) above. " .

Pension funds, &c.: exclusion of exemption from trusts rate in case of income from property investment LLPs

3 (1) Section 686 of the Taxes Act 1988 (accumulation and discretionary trusts: special rates of tax) is amended as follows.

(2) In subsection (2)(c) (income excluded from trusts rate or Schedule F trusts rate), before the words "income from investments, deposits or other property" (which relate to income of certain pension funds or schemes) insert ", subject to section (6A) below,".

(3) After subsection (6) insert--

" (6A) The exemptions provided for by subsection (2)(c) above in relation to income from investments, deposits or other property held as mentioned in sub-paragraph (i) or (ii) of that paragraph do not apply to income derived from investments, deposits or other property held as a member of a property investment LLP. " .

Pension funds, &c.: exclusion of exemptions in case of gains from property investment LLPs

4 In section 271 of the Taxation of Chargeable Gains Act 1992 (c. 12) (miscellaneous exemptions), after subsection (11) insert--

" (12) Subsection (1)(b), (c), (d), (g) and (h) and subsection (2) above do not apply to gains accruing to a person from the acquisition and disposal by him of assets held as a member of a property investment LLP. " .

Insurance companies: treatment of income or gains arising from property investment LLP

5 In Chapter 1 of Part 12 of the Taxes Act 1988 (insurance companies, &c.), after section 438A insert--

" 438B Income or gains arising from property investment LLP

(1) Where an asset held by an insurance company as an asset of its long term business fund is held by the company as a member of a property investment LLP, the policy holders' share of any income arising from, or chargeable gains accruing on the disposal of, the asset which--

(a) is attributable to the company, and

(b) would otherwise be referable by virtue of section 432A to pension business,

shall be treated for the purposes of the Corporation Tax Acts as referable to basic life assurance and general annuity business.

(2) For the purposes of this section the property business of the insurance company for the purposes of which the asset is held shall be treated as a separate business.

"Property business" means a Schedule A business or overseas property business.

(3) Where (apart from this subsection) an insurance company would not be carrying on basic life assurance and general annuity business, it shall be treated as carrying on such business if any income or chargeable gains of the company are treated as referable to the business by virtue of subsection (1) above.

(4) A company may be charged to tax by virtue of this section--

(a) notwithstanding section 439A, and

(b) whether or not the income or chargeable gains to which subsection (1) above applies is taken into account in computing the profits of the company for the purposes of any charge to tax in accordance with Case I of Schedule D.

(5) The policy holders' share of income or chargeable gains to which subsection (1) above applies--

(a) shall not be treated as relevant profits for the purposes of section 88 of the Finance Act 1989 (corporation tax on policy holders' fraction of profits), and

(b) shall not be treated as part of the BLAGAB profits for the purposes of section 88A of that Act (lower corporation tax rate on certain profits);

but the whole of the income or gains to which that subsection applies shall be chargeable to tax at the rate provided by section 88 of that Act.

(6) So far as income is brought into account as mentioned in section 83(2) of the Finance Act 1989, sections 432B to 432F (apportionment of receipts brought into account) have effect as if subsection (1) above did not apply.

438C Determination of policy holders' share for purposes of s.438B

(1) For the purposes of section 438B the policy holders' share of any income or chargeable gains to which subsection (1) of that section applies is what remains after deducting the shareholders' share.

(2) The shareholders' share is found by applying to the whole the fraction--

---

where--

A is the amount of the profits of the company for the period which are chargeable to tax under section 436; and
B is an amount equal to the excess of--
- (a) the amount taken into account as receipts of the company in computing those profits (apart from premiums and sums received by virtue of a claim under a reinsurance contract), over
- (b) the amounts taken into account as expenses in computing those profits.

(3) Where there is no such excess as is mentioned in subsection (2) above, or where the profits are greater than any excess, the whole of the income or gains is treated as the shareholders' share.

(4) Subject to that, where there are no profits none of the income or gains is treated as the shareholders' share. " .

Insurance companies: double taxation relief

6 In section 804B of the Taxes Act 1988 (double taxation relief: company carrying on more than one category of life assurance business: restriction of credit)--

(a) in subsection (2) after "sections 432ZA to 432E" insert "or section 438B", and

(b) in subsection (4) after "section 432A" insert "or 438B".

Insurance companies: capital allowances

7 In section 545 of the Capital Allowances Act 2001 (c. 2) (life assurance business: investment assets), for subsection (3) substitute--

" (3) Any allowance under this Act in respect of an investment asset shall be treated as referable to the category or categories of business to which income arising from the asset is or would be referable.

If income so arising is or would be referable to more than one category of business, the allowance shall be apportioned in accordance with sections 432ZA to 432E, or section 438B, of ICTA in the same way as the income. " .

Friendly societies: exclusion of exemptions from tax

8 (1) In section 460 of the Taxes Act 1988 (friendly societies: exemption from tax in respect of life or endowment business), in subsection (2) (restrictions on exemption) after paragraph (ca), and before the word "and" following that paragraph, insert--

" (cb) shall not apply to profits arising from investments, deposits or other property held as a member of a property investment LLP; " .

(2) In section 461 of that Act (registered friendly societies: exemption from tax on other business), after subsection (3) insert--

" (3A) The exemption conferred by subsection (1) above does not apply to profits arising from investments, deposits or other property held as a member of a property investment LLP. " .

(3) In section 461B of that Act (incorporated friendly societies: exemption from tax on other business), after subsection (2) insert--

" (2A) Subsection (1) above shall not apply to any profits arising or accruing to the society from or by reason of its membership of a property investment LLP. " .

Exclusion of relief on loans to buy into investment LLP

9 In section 362(2) of the Taxes Act 1988 (interest relief on loans to buy into partnership: conditions to be met), in paragraph (a) for the words from "otherwise" to "1907" substitute-- " otherwise than--

(i) as a limited partner in a limited partnership registered under the Limited Partnerships Act 1907, or

(ii) as a member of an investment LLP; " .

Section 78.

SCHEDULE 26 Capital gains tax: taper relief: business assets

Introductory

1 Schedule A1 to the Taxation of Chargeable Gains Act 1992 (c. 12) (application of taper relief) is amended as follows.

Conditions for assets other than shares to qualify as business assets

2 (1) Paragraph 5 is amended as follows.

(2) In sub-paragraph (3)(a) (asset used for purposes of trade carried on by trustees of settlement) after "settlement" insert-- " or by a partnership whose members at that time included--

(i) the trustees of the settlement; or

(ii) any one or more of the persons who at that time were the trustees of the settlement (so far as acting in their capacity as such trustees) " .

Companies which are qualifying companies

3 (1) Paragraph 6 is amended as follows.

(2) After sub-paragraph (1) (qualifying company by reference to an individual) insert--

" (1A) A company shall also be taken to have been a qualifying company by reference to an individual at any time when--

(a) the company was a non-trading company or the holding company of a non-trading group,

(b) the individual was an officer or employee of the company, or of a company having a relevant connection with it, and

(c) the individual did not have a material interest in the company or in any company which at that time had control of the company. " .

(3) After sub-paragraph (2) (qualifying company by reference to the trustees of a settlement) insert--

" (2A) A company shall also be taken to have been a qualifying company by reference to the trustees of a settlement at any time when--

(a) the company was a non-trading company or the holding company of a non-trading group,

(b) an eligible beneficiary was an officer or employee of the company, or of a company having a relevant connection with it, and

(c) the trustees of the settlement did not have a material interest in the company or in any company which at that time had control of the company. " .

(4) At the end of the paragraph add--

" (4) For the purposes of this paragraph an individual shall be regarded as having a material interest in a company if--

(a) the individual,

(b) the individual together with one or more persons connected with him, or

has a material interest in the company.

(5) For the purposes of this paragraph the trustees of a settlement shall be regarded as having a material interest in a company if--

(a) the trustees of the settlement,

(b) the trustees of the settlement together with one or more persons connected with them, or

has a material interest in the company.

(6) In this paragraph "company" does not include a unit trust scheme, notwithstanding anything in section 99.

(7) This paragraph is supplemented by paragraph 6A below (meaning of "material interest"). " .

Meaning of "material interest"

4 After paragraph 6 insert--

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