Finance Act 2001 (c. 9)

(The document as of February, 2008)

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197AH Interpretation of sections 197AD to 197AG

Schedule 12AA to this Act defines terms used in sections 197AD to 197AG. " .

(2) In the Taxes Act 1988 insert as Schedule 12AA the Schedule set out in Part 1 of Schedule 12 to this Act.

(3) The consequential amendments in Part 2 of Schedule 12 to this Act have effect.

(4) This section has effect for the year 2002-03 and subsequent years of assessment.

58 Mileage allowances: nil liability notices

(1) This section applies if--

(a) mileage allowance payments are made to an employee or office-holder in respect of the use of a vehicle that is not a company vehicle, or

(b) mileage allowance relief is available in respect of the use by an employee or office-holder of a vehicle.

(2) A nil liability notice in force immediately before 6th April 2002 shall cease to have effect in relation to--

(a) payments made, or

(b) benefits, facilities, non-cash vouchers, credit-tokens or cash vouchers provided,

in respect of expenses incurred in connection with the use of the vehicle by the employee or office-holder for business travel.

(3) In subsection (2) "nil liability notice" means a notice under--

(a) section 144(1) of the Taxes Act 1988 (notice of nil liability in respect of non-cash vouchers, credit-tokens or cash vouchers), or

(b) section 166(1) of that Act (notice of nil liability in respect of payments, benefits or facilities).

(4) In this section--

"business travel" has the meaning given by paragraph 2 of Schedule 12AA to the Taxes Act 1988;
"company vehicle" has the meaning given by paragraph 6 of Schedule 12AA to that Act; and
"mileage allowance payments" has the meaning given by section 197AD(2) of that Act.

59 Employees' vehicles: withdrawal of capital allowances

(1) In Chapter 3 of Part 2 of the Capital Allowances Act 2001 (c. 2) (plant and machinery: qualifying expenditure), for section 36 (restriction on qualifying expenditure in case of employment or office) substitute--

" 36 Restriction on qualifying expenditure in case of employment or office

(1) Where the qualifying activity consists of an employment or office--

(a) expenditure on the provision of a mechanically propelled road vehicle, or a cycle, is not qualifying expenditure, and

(b) other expenditure is qualifying expenditure only if the plant or machinery is necessarily provided for use in the performance of the duties of the employment or office.

(2) In this section "cycle" has the meaning given by section 192(1) of the Road Traffic Act 1988. " .

(2) Section 80 of that Act (vehicles provided for purposes of employment or office) is repealed.

(3) The above amendments apply to expenditure incurred on or after 6th April 2002.

(4) Where immediately before 6th April 2002--

(a) expenditure incurred by an employee on the provision of a mechanically propelled road vehicle, or a cycle, was qualifying expenditure for the purposes of Part 2 of the Capital Allowances Act 2001 (c. 2) , and

(b) the employee is treated for the purposes of that Part as owning an asset as a result of that expenditure having been incurred,

the employee shall be treated for the purposes of that Part of that Act as if he had ceased to own the asset at that time.

(5) In subsection (4)--

"employee" includes an office-holder; and
"cycle" has the meaning given by section 192(1) of the Road Traffic Act 1988 (c. 52).

60 Exemption for works bus services: extension to minibuses

(1) Section 197AA of the Taxes Act 1988 (works bus services: exemption from charge on benefits) is amended as follows.

(2) In subsection (1) (which confers the exemption), after "section 154 (taxable benefits: general charging provision)" insert ", or under section 157 (charge on provision of car for private use),".

(3) In subsection (2) (meaning of works bus service), after "by means of a bus" insert ", or a minibus,".

(4) In subsection (3) after the definition of "bus" insert--

" "minibus" means a vehicle constructed or adapted for the carriage of passengers which has a seating capacity of 9 or more, but less than 12; " .

(5) In subsection (6) after "154" insert "or 157".

(6) After subsection (8) (determination of seating capacity) insert--

" (9) In determining whether a vehicle is a minibus for the purposes of this section, no account shall be taken of seats in relation to which relevant construction and use requirements are not met.

In this subsection "construction and use requirements" has the same meaning as in Part 2 of the Road Traffic Act 1988 or, in Northern Ireland, Part III of the Road Traffic (Northern Ireland) Order 1995. " .

(7) This section has effect for the year 2002-03 and subsequent years of assessment.

61 Employee share ownership plans

The provisions relating to employee share ownership plans are amended in accordance with Schedule 13 to this Act.

Enterprise incentives

62 Enterprise management incentives

Schedule 14 to this Act (which amends Schedule 14 to the Finance Act 2000 (c. 17) (enterprise management incentives)) has effect.

63 Enterprise investment scheme

Schedule 15 to this Act (which makes amendments relating to the enterprise investment scheme) has effect.

64 Venture capital

(1) Schedule 16 to this Act has effect.

(2) In that Schedule--

Part 1 makes amendments relating to venture capital trusts; and
Part 2 makes amendments relating to the corporate venturing scheme.

Capital allowances

65 Energy-saving plant and machinery

Schedule 17 to this Act (first-year allowances in respect of expenditure on energy-saving plant and machinery) has effect--

(a) for income tax purposes, as respects allowances and charges falling to be made for chargeable periods ending on or after 6th April 2001, and

(b) for corporation tax purposes, as respects allowances and charges falling to be made for chargeable periods ending on or after 1st April 2001.

66 Fixtures provided in connection with energy management services

(1) Schedule 18 to this Act (fixtures provided in connection with provision of energy management services) has effect in relation to expenditure incurred on or after 1st April 2001.

(2) The Schedule has effect--

(a) for income tax purposes, as respects allowances and charges falling to be made for chargeable periods ending on or after 6th April 2001, and

(b) for corporation tax purposes, as respects allowances and charges falling to be made for chargeable periods ending on or after 1st April 2001.

67 Conversion of parts of business premises into flats

Schedule 19 to this Act (capital allowances in respect of expenditure on the conversion of parts of business premises into flats) has effect in relation to expenditure incurred on or after the day on which this Act is passed.

68 Decommissioning of offshore oil infrastructure

Schedule 20 to this Act (capital allowances in respect of expenditure incurred on decommissioning offshore infrastructure) has effect.

69 Minor amendments

(1) Schedule 21 (which makes minor amendments to the Capital Allowances Act 2001 (c. 2) ) has effect.

(2) The amendments made by the Schedule have effect--

(a) for income tax purposes, as respects allowances and charges falling to be made for chargeable periods ending on or after 6th April 2001, and

(b) for corporation tax purposes, as respects allowances and charges falling to be made for chargeable periods ending on or after 1st April 2001.

Other relieving provisions

70 Relief for expenditure on remediation of contaminated land

(1) Schedule 22 to this Act (tax relief for expenditure on land remediation) has effect for accounting periods ending on or after 1st April 2001.

(2) In that Schedule--

Part 1 provides for a deduction for certain capital expenditure in computing the profits of a Schedule A business or the profits of a trade for the purposes of Case I of Schedule D,
Part 2 provides for entitlement to relief,
Part 3 provides for the manner of giving effect to the relief,
Part 4 makes special provision for companies carrying on life assurance business, and
Part 5 contains supplementary provisions.

(3) Schedule 23 to this Act (which contains consequential amendments) has effect accordingly.

71 Creative artists: relief for fluctuating profits

(1) In Chapter 5 of Part 4 of the Taxes Act 1988 (computational provisions relating to the Schedule D charge), before section 96 and after the cross-heading "Special provisions" insert--

" 95A Creative artists: relief for fluctuating profits

Schedule 4A (which enables individuals to make an averaging claim in respect of profits derived wholly or mainly from creative works) shall have effect.

The provisions of that Schedule apply for the year 2000-01 and subsequent years of assessment (so that the first years which may be the subject of an averaging claim are 2000-01 and 2001-02). " .

(2) After Schedule 4 to that Act insert the Schedule 4A set out in Part 1 of Schedule 24 to this Act.

(3) The following provisions of the Taxes Act 1988 are repealed--

section 534 (relief for copyright payments etc.);
section 535 (relief where copyright sold after ten years or more);
section 537A (relief for payments in respect of designs);
section 538 (relief for painters, sculptors and other artists).

The repeals have effect in relation to payments actually receivable on or after 6th April 2001.

(4) Part 2 of Schedule 24 to this Act contains amendments consequential on the preceding provisions of this section.

72 Expenditure on film production etc

In section 48(2)(a) of the Finance (No.2) Act 1997 (c. 58) (favourable tax treatment for certain expenditure on film production, etc. incurred before 2nd July 2002) for "2nd July 2002" substitute "2nd July 2005".

73 Deductions for business gifts: yearly limit

(1) Section 577 of the Taxes Act 1988 (prohibition on deduction of expenses in providing business entertainment or gifts) is amended as follows.

(2) In subsection (8)(b) (under which gifts not amounting to more than £10 in any year are disregarded)--

(a) for "year" substitute "relevant tax period", and

(b) for "£10" substitute "£50".

(3) After that subsection insert--

" (8A) In subsection (8)(b) "relevant tax period" means--

(a) for the purposes of corporation tax, an accounting period;

(b) for the purposes of income tax--

(i) for a year of assessment in relation to which sections 60 to 63 apply and give a basis period, that basis period;

(ii) in any other case, a year of assessment. " .

(4) This section applies in relation to the year 2001-02 and subsequent years of assessment or, in the case of companies, in relation to accounting periods beginning on or after 1st April 2001.

Pension funds

74 Payments to employers out of pension funds

(1) Section 601 of the Taxes Act 1988 (charge on payment to employer out of funds held for purposes of exempt approved scheme) is amended as follows.

(2) In subsection (2) (amount recoverable by Board from employer) for "40 per cent. of the payment" substitute "the relevant percentage of the payment".

(3) After that subsection insert--

" (2A) The relevant percentage is 35% or such other percentage (whether higher or lower) as may be prescribed. " .

(4) This section applies to payments made to employers after the passing of this Act.

Limited liability partnerships

75 Limited liability partnerships: general

(1) For section 118ZA of the Taxes Act 1988 (treatment of limited liability partnerships) substitute--

" 118ZA Treatment of limited liability partnerships

(1) For the purposes of the Tax Acts, where a limited liability partnership carries on a trade, profession or other business with a view to profit--

(a) all the activities of the partnership are treated as carried on in partnership by its members (and not by the partnership as such),

(b) anything done by, to or in relation to the partnership for the purposes of, or in connection with, any of its activities is treated as done by, to or in relation to the members as partners, and

References in this subsection to the activities of the limited liability partnership are to anything that it does, whether or not in the course of carrying on a trade, profession or other business with a view to profit.

(2) For all purposes, except as otherwise provided, in the Tax Acts--

(a) references to a partnership include a limited liability partnership in relation to which subsection (1) above applies,

(b) references to members of a partnership include members of such a limited liability partnership,

(d) references to members of a company do not include members of such a limited liability partnership.

(3) Subsection (1) above continues to apply in relation to a limited liability partnership which no longer carries on any trade, profession or other business with a view to profit--

(a) if the cessation is only temporary, or

(b) during a period of winding up following a permanent cessation, provided--

(i) the winding up is not for reasons connected in whole or in part with the avoidance of tax, and

(ii) the period of winding up is not unreasonably prolonged,

but subject to subsection (4) below.

(4) Subsection (1) above ceases to apply in relation to a limited liability partnership--

(a) on the appointment of a liquidator or (if earlier) the making of a winding-up order by the court, or

(b) on the occurrence of any event under the law of a country or territory outside the United Kingdom corresponding to an event specified in paragraph (a) above. "

(2) In the Taxation of Chargeable Gains Act 1992 (c. 12), for section 59A (limited liability partnerships) substitute--

" 59A Limited liability partnerships

(1) Where a limited liability partnership carries on a trade or business with a view to profit--

(a) assets held by the limited liability partnership are treated for the purposes of tax in respect of chargeable gains as held by its members as partners, and

(b) any dealings by the limited liability partnership are treated for those purposes as dealings by its members in partnership (and not by the limited liability partnership as such);

and tax in respect of chargeable gains accruing to the members of the limited liability partnership on the disposal of any of its assets shall be assessed and charged on them separately.

(2) For all purposes, except as otherwise provided, in the enactments relating to tax in respect of chargeable gains--

(a) references to a partnership include a limited liability partnership in relation to which subsection (1) above applies,

(b) references to members of a partnership include members of such a limited liability partnership,

(d) references to members of a company do not include members of such a limited liability partnership.

(3) Subsection (1) above continues to apply in relation to a limited liability partnership which no longer carries on any trade or business with a view to profit--

(a) if the cessation is only temporary, or

(b) during a period of winding up following a permanent cessation, provided--

(i) the winding up is not for reasons connected in whole or in part with the avoidance of tax, and

(ii) the period of winding up is not unreasonably prolonged,

but subject to subsection (4) below.

(4) Subsection (1) above ceases to apply in relation to a limited liability partnership--

(a) on the appointment of a liquidator or (if earlier) the making of a winding-up order by the court, or

(b) on the occurrence of any event under the law of a country or territory outside the United Kingdom corresponding to an event specified in paragraph (a) above.

(5) Where subsection (1) above ceases to apply in relation to a limited liability partnership with the effect that tax is assessed and charged--

(a) on the limited liability partnership (as a company) in respect of chargeable gains accruing on the disposal of any of its assets, and

(b) on the members in respect of chargeable gains accruing on the disposal of any of their capital interests in the limited liability partnership,

it shall be assessed and charged on the limited liability partnership as if subsection (1) above had never applied in relation to it.

(6) Neither the commencement of the application of subsection (1) above nor the cessation of its application in relation to a limited liability partnership shall be taken as giving rise to the disposal of any assets by it or any of its members. " .

(3) In Chapter 2 of Part 5 of the Taxation of Chargeable Gains Act 1992 (c. 12) (relief for gifts of business assets), after section 169 insert--

" 169A Cessation of trade by limited liability partnership

(1) This section applies where section 59A(1) ceases to apply to a limited liability partnership.

(2) A member of the partnership who immediately before the time at which section 59A(1) ceases to apply holds an asset, or an interest in an asset, acquired by him--

(a) on a disposal to members of a partnership, and

(b) for a consideration which is treated as reduced under section 165(4)(b) or 260(3)(b),

shall be treated as if a chargeable gain equal to the amount of the reduction accrued to him immediately before that time. "

(4) In section 170(9) of the Taxation of Chargeable Gains Act 1992 (groups of companies: meaning of "company"), in paragraph (b) after "company" insert "(other than a limited liability partnership)".

(5) Subsection (3) above shall be deemed to have come into force on 3rd May 2001 and applies where section 59A(1) of the Taxation of Chargeable Gains Act 1992 ceased or ceases to apply as mentioned in section 169A of that Act (as inserted by that subsection) on or after that date.

(6) The other provisions of this section shall be deemed to have come into force on 6th April 2001.

76 Limited liability partnerships: investment LLPs and property investment LLPs

(1) Schedule 25 to this Act has effect with respect to limited liability partnerships whose business consists wholly or mainly in the making of investments.

(2) The provisions of that Schedule shall be deemed to have come into force on 6th April 2001.

Chargeable gains

77 Notional transfers within a group

(1) Section 171A of the Taxation of Chargeable Gains Act 1992 (notional transfers within a group) shall be deemed to have been enacted with the following amendments.

(2) In subsection (2) (corporation tax consequences of election for asset disposed of by member A of a group to be treated as if, immediately before the disposal, it had been transferred to member B of the group) omit the word "and" immediately preceding paragraph (c) and at the end of that paragraph add-- " ; and

(d) any incidental costs to A of making the actual disposal to C shall be deemed to be incidental costs to B of making the deemed disposal to C. " .

(3) In subsection (4) (election to be made before second anniversary of end of accounting period of A in which disposal made) for "before" substitute "on or before".

78 Taper relief: assets qualifying as business assets

(1) Schedule A1 to the Taxation of Chargeable Gains Act 1992 (c. 12) (application of taper relief) shall have effect with the amendments specified in Schedule 26 to this Act.

(2) Those amendments shall have effect, and be deemed always to have had effect, as if they had been included among the amendments made by section 67 of the Finance Act 2000 (c. 17).

79 De-grouping charge: transitional relief

Schedule 29 to the Finance Act 2000 (chargeable gains: non-resident companies and groups etc) shall be deemed to have been enacted with the following paragraph added at the end of Part 3 (transitional provisions) after paragraph 46--

" De-grouping charge: deferral until company leaves new group

47 (1) This paragraph has effect for the purposes of section 179 of the Taxation of Chargeable Gains Act 1992 as that section has effect in relation to assets acquired before 1st April 2000 ("old section 179").

(2) Where--

(a) a company would (apart from this paragraph) fall to be regarded for the purposes of old section 179 as ceasing to be a member of an old group at any time, but

(b) immediately before that time, it is also a member of a new group for the purposes of new section 179,

the company shall not be regarded for the purposes of old section 179 as ceasing to be a member of the old group unless or until it also ceases to be a member of the new group for the purposes of new section 179.

(3) Sub-paragraph (2) above does not prevent the company from being or becoming a member of another old group at any time.

(4) Where a company ceases to be a member of a new group on any occasion, it shall not by virtue of sub-paragraph (2) above be treated for the purposes of old section 179 as if it had on that occasion ceased to be a member of the same old group more than once.

(5) For the purposes of this paragraph--

(a) references to a company being a member of an old group are references to its being, for the purposes of old section 179, a member of a group of companies within the meaning given by old section 170;

(b) references to a company being a member of a new group are references to its being, for the purposes of new section 179, a member of a group of companies within the meaning given by new section 170; and

(c) references to a company ceasing to be a member of an old group or a new group shall be construed in accordance with paragraph (a) or (b) above, as the case may be.

(6) Where, for the purposes of sub-paragraph (2)(b) above, a company is not a member of a new group by reason only that--

(a) the principal company of the old group is not the principal company of the new group, and

(b) the company in question is not an effective 51 per cent subsidiary of the principal company of the new group,

subsection (3)(b) of new section 170 shall not apply in relation to the company for the purposes of this paragraph for so long as it remains an effective 51 per cent subsidiary of the company which was the principal company of the old group.

(7) In this paragraph--

(a) "new section 179" means section 179 of the Taxation of Chargeable Gains Act 1992 (c. 12) as it has effect in relation to assets acquired on or after 1st April 2000;

(b) "new section 170" means section 170 of that Act, as amended by the main amendments;

(c) "old section 170" means section 170 of the Taxation of Chargeable Gains Act 1992, as it stands before the main amendments.

(8) Expressions used in this paragraph and in section 170 of the Taxation of Chargeable Gains Act 1992 shall be construed in accordance with that section. " .

80 Attribution of gains of non-resident companies

(1) Section 13 of the Taxation of Chargeable Gains Act 1992 (attribution of gains to members of non-resident companies) is amended as follows.

(2) In subsection (4) (no attribution if amount does not exceed one twentieth of gain) for "one twentieth" substitute "one tenth".

(3) In subsection (5) (gains to which the section does not apply) for paragraph (b) substitute--

" (b) a chargeable gain accruing on the disposal of an asset used, and used only--

(i) for the purposes of a trade carried on by the company wholly outside the United Kingdom, or

(ii) for the purposes of the part carried on outside the United Kingdom of a trade carried on by the company partly within and partly outside the United Kingdom, " .

(4) For subsection (5A) (credit for tax on attributed gain in relation to later distribution) substitute--

" (5A) Where--

(a) an amount of tax is paid by a person in pursuance of subsection (2) above, and

(b) an amount in respect of the chargeable gain is distributed (either by way of dividend or distribution of capital or on the dissolution of the company) before the end of the period specified in subsection (5B) below,

the amount of tax (so far as neither reimbursed by the company nor applied as a deduction under subsection (7) below) shall be applied for reducing or extinguishing any liability of that person to income tax, capital gains tax or corporation tax in respect of the distribution.

(5B) The period referred to in subsection (5A)(b) above is the period of three years from--

(a) the end of the period of account of the company in which the chargeable gain accrued, or

(b) the end of the period of twelve months beginning with the date on which the chargeable gain accrued,

whichever is earlier.

In paragraph (a) above a "period of account" means a period for which the company makes up its accounts. "

(5) After subsection (10A) insert--

" (10B) A chargeable gain that would be treated as accruing to a person under subsection (2) above shall not be so treated if--

(a) it would be so treated only if assets that are assets of a pension scheme were taken into account in ascertaining that person's interest as a participator in the company, and

(b) at the time the gain accrues a gain arising on a disposal of those assets would be exempt from tax by virtue of section 271(1)(b), (c), (d), (g) or (h) or (2).

In paragraph (a) above "assets of a pension scheme" means assets held for the purposes of a fund or scheme to which any of the provisions mentioned in paragraph (b) above applies. " .

(6) This section applies to chargeable gains accruing as mentioned in section 13(1) of the Taxation of Chargeable Gains Act 1992 (c. 12) on or after 7th March 2001.

International matters

81 Double taxation relief

Schedule 27 to this Act (double taxation relief) has effect.

82 Controlled foreign companies: acceptable distribution policy

(1) Part 1 of Schedule 25 to the Taxes Act 1988 (acceptable distribution policy) is amended as follows.

(2) In paragraph 2 (meaning of acceptable distribution policy) at the end of sub-paragraph (1A) (requirement that payment of dividend is taken into account in computing corporation tax) add-- " and--

(a) it is chargeable neither under Case I of Schedule D nor under Case VI of that Schedule in circumstances where by virtue of section 436, 439B or 441 profits are computed in accordance with the provisions of this Act applicable to Case I; or

(b) if it is chargeable under Case I, or under Case VI in the circumstances described in paragraph (a) above, it is not involved in a UK tax avoidance scheme;

and paragraph 2B below has effect for the purposes of paragraph (b) above. "

(3) After paragraph 2A insert--

" 2B (1) This paragraph has effect for the purposes of paragraph 2(1A)(b) above.

(2) No payment of dividend by a controlled foreign company for an accounting period shall be regarded as involved in a UK tax avoidance scheme by reason only that there is no charge to tax under section 747(4)(a) if the controlled foreign company pursues an acceptable distribution policy for that accounting period.

(3) "UK tax avoidance scheme" means a scheme or arrangement the purpose, or one of the main purposes, of which is to achieve a reduction in United Kingdom tax.

(4) A scheme or arrangement achieves a reduction in United Kingdom tax if, apart from the scheme or arrangement, any company--

(a) would have been liable for any such tax or for a greater amount of any such tax; or

(b) would not have been entitled to a relief from or repayment of any such tax or would have been entitled to a smaller relief from or repayment of any such tax.

(5) In this paragraph--

"arrangement" means an arrangement of any kind, whether in writing or not;
"United Kingdom tax" means corporation tax or any tax chargeable as if it were corporation tax. " .

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