Finance Act 2003 (c. 14)

(The document as of February, 2008)

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(5) Where--

(a) the qualifying contract is a currency contract which arises from the exercise of a currency option which is or was itself a qualifying contract (or a series of such currency options), and

(b) that currency option was entered into or varied on or after 30th September 2002 (or, in the case of a series of currency options, any of them was entered into or varied on or after that date),

the provisions specified in subsection (4) shall be taken to have effect in the case of the company, so far as relating to the currency option (or, in the case of a series of currency options, each of the options entered into or varied on or after 30th September 2002), in relation to the earliest accounting period ("the relevant options period") in which the option (or any of the options) was so entered into or varied and any subsequent accounting periods.

(6) Where the provisions specified in subsection (4) have effect by virtue of this section in relation to a currency contract or currency option the following provisions of the Finance Act 2002, namely--

(a) section 81 (transitional provision), so far as relating to section 80 and Schedule 24, and

(b) Schedule 28 (derivative contracts: transitional provisions etc),

shall have effect accordingly.

(7) In the application of Schedule 28 to the Finance Act 2002 by virtue of this section, any reference to the company's commencement day is to be taken--

(a) in the case of a currency contract, as a reference to the first day of the relevant contract period; or

(b) in the case of a currency option, as a reference to the first day of the relevant options period.

(8) This section does not apply in relation to any contract entered into or varied in an accounting period beginning on or after 1st October 2002 unless the contract arises from the exercise of a currency option which was entered into or varied on or after 30th September 2002 and in an accounting period beginning on or before that date.

(9) In this section the following expressions, namely--

(a) qualifying company,

(b) qualifying contract,

(d) currency option,

have the same meaning as in Chapter 2 of Part 4 of the Finance Act 1994 (c. 9), (disregarding for this purpose the provisions specified in subsection (4)) and references to the exercise of an option shall be construed accordingly.

(10) In this section "statutory accounts" has the meaning given by paragraph 52 of Schedule 26 to the Finance Act 2002 (c. 23).

(11) This section shall be deemed to have come into force on 30th September 2002.

178 Loan relationships: amendments

Schedule 37 to this Act (which makes amendments in relation to loan relationships) has effect.

179 Derivative contracts: transactions within groups

(1) In paragraph 28 of Schedule 26 to the Finance Act 2002 (c. 23), in sub-paragraph (3)(a) (credits and debits to be brought into account: disregard of the transaction or series of transactions except for certain purposes) after "except" insert--

" (i) for the purpose of determining the credits and debits to be brought into account in respect of exchange gains or losses and identifying the company which is to bring them into account, or

(ii) " .

(2) In sub-paragraph (3)(b) of that paragraph (transferor and transferee deemed to be the same person, except for that purpose) for "that purpose" substitute "those purposes".

(3) For sub-paragraph (4) of that paragraph substitute--

" (4) References in this paragraph to one company replacing another as party to a derivative contract shall include references to a company becoming party to any derivative contract which--

(a) confers rights or imposes liabilities, or

(b) both confers rights and imposes liabilities,

where those rights or liabilities, or rights and liabilities, are equivalent to those of the other company under a derivative contract to which that other company has previously ceased to be party. " .

(4) For paragraph 30 of that Schedule (amount to be brought into account on transaction within a group where transferor uses mark to market basis of accounting) substitute--

" 30 (1) Paragraph 28 does not apply where the transferor company uses an authorised mark to market basis of accounting as respects the derivative contract in question, but in any such case--

(a) the amount to be brought into account by the transferor company in respect of the transaction referred to in that paragraph, or in respect of the series of transactions there referred to, taken together, must be the fair value of the derivative contract as at the date of transfer to the transferee company; and

(b) the amount to be brought into account by the transferee company in respect of the transaction referred to in that paragraph, or in respect of the series of transactions there referred to, taken together, must be the same as the amount brought into account by the transferor company in respect of that transaction or, as the case may be, that series of transactions, taken together.

(2) In this paragraph "transferor company" and "transferee company" have the same meaning as in paragraph 28. " .

(5) The amendments made by this section have effect where the date of transfer to the transferee company falls on or after 9th April 2003.

180 Contributions to urban regeneration companies

(1) After section 79A of the Taxes Act 1988 (contributions to training and enterprise councils and local enterprise companies) insert--

" 79B Contributions to urban regeneration companies

(1) Notwithstanding anything in section 74, but subject to the provisions of this section, where a person carrying on a trade, profession or vocation makes any contribution (whether in cash or in kind) to a designated urban regeneration company, any expenditure incurred by him in making the contribution may be deducted as an expense in computing the profits of the trade, profession or vocation if it would not otherwise be so deductible.

(2) Where any such contribution is made by an investment company, any expenditure allowable as a deduction under subsection (1) above shall for the purposes of section 75 be treated as expenses of management.

(3) Subsection (1) above does not apply in relation to a contribution made by any person if either he or any person connected with him receives or is entitled to receive a benefit of any kind whatsoever for or in connection with the making of that contribution, whether from the urban regeneration company concerned or from any other person.

(4) In any case where--

(a) relief has been given under subsection (1) above in respect of a contribution, and

(b) any benefit received in any chargeable period by the contributor or any person connected with him is in any way attributable to that contribution,

the contributor shall in respect of that chargeable period be charged to tax under Case I or Case II of Schedule D or, if he is not chargeable to tax under either of those Cases for that period, under Case VI of Schedule D on an amount equal to the value of that benefit.

(5) In this section "urban regeneration company" means any body of persons (whether corporate or unincorporate) which the Treasury by order designates as an urban regeneration company for the purposes of this section.

(6) The Treasury may only make an order under subsection (5) above designating a body as an urban regeneration company for the purposes of this section if they consider that each of the criteria in subsection (7) below is satisfied in the case of the body.

(7) The criteria are that--

(a) the sole or main function of the body is to co-ordinate the regeneration of a specific urban area in the United Kingdom;

(b) the body is expected to seek to perform that function by creating a plan for the development of that area and endeavouring to secure that the plan is carried into effect;

(c) in co-ordinating the regeneration of that area, the body is expected to work together with some or all of the public or local authorities which exercise functions in relation to the whole or part of that area.

(8) An order under subsection (5) above may be framed so as to take effect on a date earlier than the making of the order, but not earlier than--

(a) 1st April 2003, in the case of the first order under that subsection, or

(b) three months before the date on which the order is made, in the case of any subsequent order.

(9) Section 839 (connected persons) applies for the purposes of this section.

(10) This section applies to contributions made on or after 1st April 2003. " .

(2) In section 828(4) of the Taxes Act 1988 (orders or regulations under specified provisions not to be subject to Commons negative resolution parliamentary procedure) after "section 1(6)," insert "79B(5),".

181 Repos etc

Schedule 38 to this Act (which contains amendments relating to arrangements for the sale and repurchase of securities etc) has effect.

182 Relevant discounted securities: withdrawal of relief for costs and losses, etc

Schedule 39 to this Act (relevant discounted securities: withdrawal of relief for costs and losses, and extension of definition of "strip") has effect.

183 Court common investment funds

(1) Section 469A of the Taxes Act 1988 (court common investment funds) is amended as follows.

(2) In paragraph (c) of subsection (1) (persons entitled as against the Accountant General to share in fund's investments treated as unit holders in authorised unit trust) for "the persons whose interests entitle them, as against the Accountant General, to share in the fund's investments" substitute "the persons with qualifying interests".

(3) After that subsection insert--

" (1A) For the purposes of subsection (1)(c) above, the persons with qualifying interests are--

(a) in relation to shares in the fund held by the Accountant General, the persons whose interests entitle them, as against him, to share in the fund's investments;

(b) in relation to shares in the fund held by any other person authorised by the Lord Chancellor to hold such shares on behalf of others (an "authorised person")--

(i) if there are persons whose interests entitle them, as against the authorised person, to share in the fund's investments, those persons;

(ii) if not, the authorised person;

(c) in relation to shares in the fund held by persons authorised by the Lord Chancellor to hold such shares on their own behalf, those persons. " .

(4) This section has effect in relation to income arising to a common investment fund on or after 6th April 2003.

(5) In this section "common investment fund" means a common investment fund established under section 42 of the Administration of Justice Act 1982 (c. 53).

184 Intangible fixed assets: tax avoidance arrangements and related parties

(1) Schedule 29 to the Finance Act 2002 (c. 23) (gains and losses of a company from intangible fixed assets) is amended as follows.

(2) In paragraph 111 (tax avoidance arrangements to be disregarded)--

(a) in sub-paragraph (1) for the words following "in determining" substitute "whether a debit or credit is to be brought into account under this Schedule or the amount of any such debit or credit", and

(b) in sub-paragraph (2)--

(i) for "under paragraph 9" in paragraph (a), and

(ii) for "under Part 4" in paragraph (b),

substitute "under this Schedule".

(3) In paragraph 95(1) (cases in which persons are "related parties") at the end add--

" Case Four

P is a company and C is another company in the same group. "

(4) The amendments in this section--

(a) have effect in relation to the debits or credits to be brought into account for accounting periods beginning on or after 20th June 2003, and

(b) in relation to the debits or credits to be brought into account for any such period shall be deemed always to have had effect.

(5) For this purpose an accounting period beginning before, and ending on or after, that date is treated as if so much of that period as falls before that date, and so much of that period as falls on or after that date, were separate accounting periods.

Part 8 Other taxes

Inheritance tax

185 Gifts with reservation

(1) Section 102 of the Finance Act 1986 (c. 41) (gifts with reservation) is amended as follows.

(2) In subsection (5) (section not to apply where disposal is an exempt transfer by virtue of any of the provisions of the Inheritance Tax Act 1984 specified in the paragraphs of that subsection) at the end of paragraph (a) (section 18: transfers between spouses) insert ", except as provided by subsections (5A) and (5B) below".

(3) After subsection (5) insert--

" (5A) Subsection (5)(a) above does not prevent this section from applying if or, as the case may be, to the extent that--

(a) the property becomes settled property by virtue of the gift,

(b) by reason of the donor's spouse ("the relevant beneficiary") becoming beneficially entitled to an interest in possession in the settled property, the disposal is or, as the case may be, is to any extent an exempt transfer by virtue of section 18 of the 1984 Act in consequence of the operation of section 49 of that Act (treatment of interests in possession),

(c) at some time after the disposal, but before the death of the donor, the relevant beneficiary's interest in possession comes to an end, and

(d) on the occasion on which that interest comes to an end, the relevant beneficiary does not become beneficially entitled to the settled property or to another interest in possession in the settled property.

(5B) If or, as the case may be, to the extent that this section applies by virtue of subsection (5A) above, it has effect as if the disposal by way of gift had been made immediately after the relevant beneficiary's interest in possession came to an end.

(5C) For the purposes of subsections (5A) and (5B) above--

(a) section 51(1)(b) of the 1984 Act (disposal of interest in possession treated as coming to end of interest) applies as it applies for the purposes of Chapter 2 of Part 3 of that Act; and

(b) references to any property or to an interest in any property include references to part of any property or interest. " .

(4) The amendments made by this section have effect in relation to disposals made on or after 20th June 2003.

186 Authorised unit trusts, OEICs and common investment funds

(1) The Inheritance Tax Act 1984 (c. 51) is amended as follows.

(2) In section 6 (excluded property), after subsection (1) insert--

" (1A) A holding in an authorised unit trust and a share in an open-ended investment company is excluded property if the person beneficially entitled to it is an individual domiciled outside the United Kingdom. " .

(3) In section 48 (settlements: excluded property), after subsection (3) insert--

" (3A) Where property comprised in a settlement is a holding in an authorised unit trust or a share in an open-ended investment company--

(a) the property (but not a reversionary interest in the property) is excluded property unless the settlor was domiciled in the United Kingdom at the time the settlement was made, and

(b) section 6(1A) above applies to a reversionary interest in the property but does not otherwise apply in relation to the property. " .

(4) In section 178(1) (sale of shares etc from deceased's estate: preliminary)--

(a) in the definition of "qualifying investments", after "authorised unit trust" insert ", shares in an open-ended investment company", and

(b) for "section 1 of the Administration of Justice Act 1965" substitute "section 42 of the Administration of Justice Act 1982".

(5) Section 272 (general interpretation) is amended as follows.

(6) After the definition of "amount" insert--

" "authorised unit trust" means a scheme which is a unit trust scheme for the purposes of section 469 of the Taxes Act 1988 (see subsection (7) of that section) and in the case of which an order under section 243 of the Financial Services and Markets Act 2000 is in force; " .

(7) After the definition of "mortgage" insert--

" "open-ended investment company" means an open-ended investment company within the meaning given by section 236 of the Financial Services and Markets Act 2000 which is incorporated in the United Kingdom; " .

(8) This section has effect in relation to transfers of value or other events occurring on or after 16th October 2002.

Landfill tax

187 Rate of landfill tax

In section 42 of the Finance Act 1996 (c. 8) (amount of landfill tax), for the amount specified in subsection (1)(a), and the corresponding amount in subsection (2), substitute--

(a) "£14" in relation to taxable disposals made, or treated as made, on or after 1st April 2003 and before 1st April 2004;

(b) "£15" in relation to taxable disposals made, or treated as made, on or after 1st April 2004.

Climate change levy

188 Exemption for fuel used in recycling processes

(1) In Schedule 6 to the Finance Act 2000 (c. 17) (climate change levy), after paragraph 18 insert--

" Exemption: supply for use in recycling processes

18A (1) A supply of a taxable commodity is exempt from the levy if the person to whom the supply is made intends to cause the commodity to be used as fuel in a prescribed recycling process falling within sub-paragraph (2).

(2) A recycling process falls within this sub-paragraph if there is another process ("the competing process") that--

(a) is not a recycling process,

(b) uses taxable commodities otherwise than as fuel,

(d) uses a greater amount of energy than the recycling process to produce a given quantity of that product, and

(e) involves a lesser charge to levy for a given quantity of that product than would, but for this paragraph, be the case for the recycling process.

(3) For the purposes of sub-paragraph (2)(b) taxable commodities are used "otherwise than as fuel" only if the supplies of those commodities to the person using them are exempted from the levy by virtue of paragraph 18.

(4) Sub-paragraphs (5) and (6) apply where the recycling process or the competing process, as well as producing a product that is of the same kind as one produced by the other process ("the corresponding product"), also produces one or more products that are not ("different products").

(5) If the production of the different products is merely incidental to the production of the corresponding product, the different products shall be treated for the purposes of sub-paragraph (2)(d) and (e) as being of the same kind as the corresponding product.

(6) If the production of the different products is not merely incidental to the production of the corresponding product--

(a) the amounts of energy referred to in sub-paragraph (2)(d), and the amounts of the charge to levy referred to in sub-paragraph (2)(e), shall be determined on a just and reasonable apportionment;

(b) the exemption conferred by sub-paragraph (1) shall be restricted to the proportion of the supply that is the same as the proportion of the energy used by the recycling process to produce the corresponding product (as determined for the purposes of paragraph (a)).

(7) In this paragraph "prescribed" means prescribed by regulations made by the Treasury. " .

(2) The following amendments to that Schedule are consequential on that made by subsection (1)--

(a) in paragraph 14(3A)(a) (use of electricity in an "exemption-retaining" way) for "and 18" substitute ", 18 and 18A";

(b) in paragraph 101(2)(a)(ii) (penalty for incorrect exemption notification) after "18" insert ", 18A";

(d) in paragraph 147 (interpretation), in the definition of "prescribed", after "16(3)" insert ", 18A".

189 CHP exemption to be based on current efficiency

(1) Schedule 6 to the Finance Act 2000 (c. 17) (climate change levy) is amended as follows.

(2) In paragraph 15 (exemption for supplies to combined heat and power stations)--

(a) for paragraph (b) of sub-paragraph (4) substitute--

" (b) the "efficiency percentage" for a combined heat and power station shall be determined in accordance with regulations under paragraph 149. " ;

(b) omit sub-paragraph (5).

(3) In paragraph 148 (meaning of "combined heat and power station" etc)--

(a) in sub-paragraphs (2)(c) and (3)(c), for "complying with sub-paragraph (6) and (so far as applicable)" substitute "complying (so far as applicable) with";

(b) omit sub-paragraph (6) (efficiency percentage to be stated on certificate of full or partial exemption).

(4) In paragraph 149(1) (determination of efficiency percentages for combined heat and power stations) omit "the percentage that is to be stated in a certificate under paragraph 148 as".

(5) This section has effect in relation to supplies made on or after such day as the Treasury may by order made by statutory instrument appoint.

190 Supplies not known to be taxable when made, etc

(1) In Schedule 6 to the Finance Act 2000 (climate change levy), paragraph 24 (deemed supply: change of circumstances or intentions) is amended as follows.

(2) In the heading, for "change of circumstances or intentions" substitute "change of circumstances etc".

(3) For sub-paragraphs (1) and (2) substitute--

" (1) This paragraph applies in the following cases.

(1A) The first case is where--

(a) a supply of a taxable commodity has been made,

(b) the supply was not a taxable supply, and

(c) there is such a change in circumstances or any person's intentions that, if the changed circumstances or intentions had existed at the time the supply was made, the supply would have been a taxable supply.

(1B) The second case is where--

(a) a supply of a taxable commodity has been made,

(b) the supply was made on the basis that it was not a taxable supply, and

(2) This paragraph does not apply where the reason that--

(a) the supply was not a taxable supply, or

(b) the supply was made on the basis that it was not a taxable supply,

is that it was, or was thought to be, exempt from the levy under paragraph 19 or 20A (exemption for supply of electricity produced from renewable sources or in combined heat and power stations) (but see paragraph 20 or 20B). " .

(4) In sub-paragraph (3), at the beginning insert "Where this paragraph applies,".

(5) After that sub-paragraph insert--

" (3A) Where--

(a) had matters been as mentioned in sub-paragraph (1A)(c), only part of the supply would have been a taxable supply, or

(b) the determination referred to in sub-paragraph (1B)(c) is that only part of the supply was a taxable supply,

the reference in sub-paragraph (3) to the commodity shall be read as a reference to a corresponding part of it. " .

(6) In sub-paragraph (5) for "sub-paragraph (1)(c)" substitute "sub-paragraph (1A)(c)".

(7) In paragraph 34(3) of that Act (time when deemed supply under paragraph 24 treated as made) at the end insert "or, as the case may be, upon the later determination".

(8) This section has effect in relation to supplies made on or after such day as the Treasury may by order made by statutory instrument appoint.

191 Deemed supplies

(1) Schedule 6 to the Finance Act 2000 (c. 17) (climate change levy) is amended as follows.

(2) In paragraph 5(3) (levy chargeable on deemed supply of electricity) for "paragraph 23(3)" substitute "paragraph 20(6)(a), 20B(6)(a), 23(3) or 24".

(3) In paragraph 6 (supplies of gas)--

(a) after sub-paragraph (2) insert--

" (2A) Levy is chargeable on a supply of gas that is deemed to be made under paragraph 24. " ;

(b) in sub-paragraph (3) for "sub-paragraphs (1) and (2)" substitute "sub-paragraph (1), (2) or (2A)".

(4) Subsection (2) has effect in relation to supplies deemed to be made on or after 31st March 2003, and subsection (3) in relation to supplies deemed to be made on or after the day on which this Act is passed.

192 Amendments about registration, payment etc

(1) Schedule 6 to the Finance Act 2000 (c. 17) (climate change levy) is amended as follows.

(2) In paragraph 41 (returns and payment of levy)--

(a) for paragraph (a) of sub-paragraph (1) (liability to account for levy by reference to accounting periods) substitute--

" (a) for persons liable to account for levy to do so--

(i) by reference to such periods ("accounting periods") as may be determined by or under the regulations, or

(ii) in such other way as may be so determined; " ;

(b) in sub-paragraph (1)(c) (liability to pay) omit "for any period";

" (2A) Paragraph 91(5) provides for the application of Part 7 of this Schedule (recovery and interest) in relation to cases where, by virtue of regulations under sub-paragraph (1)(a)(ii) above, a person is liable to account for levy otherwise than by reference to accounting periods.

(2B) Regulations under this paragraph may provide for the application of any provision of this Schedule in relation to such cases. " .

(3) In paragraph 53 (requirement to be registered), after sub-paragraph (3) insert--

" (4) Regulations made by the Commissioners may provide that, in such cases or circumstances and subject to such conditions or requirements as may be prescribed in the regulations, the Commissioners may exempt a person from the requirement to be registered. " .

(4) In paragraph 62(2)(b) (provision in regulations about bringing tax credit into account) for "levy due from him for such accounting period or periods" substitute "such levy due from him".

(5) In paragraph 78 (assessments of amounts of levy due), after sub-paragraph (1) insert--

" (1A) Where it appears to the Commissioners--

(a) that any levy for which a person is liable to account otherwise than by reference to an accounting period has become due, and

(b) that there has been a default by that person that falls within sub-paragraph (2),

they may assess the amount of that levy to the best of their judgement and notify it to him. " .

(6) In paragraph 91 (interpretation etc of Part 7) at the end insert--

" (5) In relation to cases where, by virtue of regulations under paragraph 41(1)(a)(ii), a person is liable to account for levy otherwise than by reference to accounting periods, this Part of this Schedule shall have effect as if--

(a) references to levy due for "an" or "any" accounting period were references simply to levy due;

(b) references to levy due for a specified accounting period were references to the levy in question;

(c) references to an assessment for a specified accounting period were references to an assessment in respect of the levy in question;

(d) any time limit framed by reference to the end of the accounting period for which levy is due were framed by reference to the date on which payment of the levy is due;

(e) references to the making of a return for an accounting period were references to the payment of the levy in question;

(f) references to the amount shown in such a return were references to the amount of levy paid;

(g) paragraph 88(8) and (9) were omitted. " .

(7) In paragraph 93(4) (criminal penalty for false return)--

(a) in paragraph (a) after "return" insert "or other notification";

(b) in paragraph (b), and in the words after that paragraph, after "return" insert "or notification".

(8) In paragraph 100(1) (civil penalty for misdeclaration)--

(a) omit "for an accounting period";

(b) in paragraph (a) after "return" insert "or other notification".

(9) In paragraph 125(1) (obligation to keep records) for "persons who are, or are required to be, registered" substitute " persons who--

(a) are registered,

(b) are required to be registered, or

(10) In paragraph 135(1)(c) (Commissioners' certificate as evidence of non-payment of levy shown as due in a return) after "return" insert "or other notification".

193 Electricity from renewable sources etc

(1) Schedule 6 to the Finance Act 2000 (c. 17) (climate change levy) is amended as follows.

(2) In paragraph 20 (exemption under paragraph 19: averaging periods) for sub-paragraphs (6) to (8) substitute--

" (6) If the total mentioned in sub-paragraph (3)(b) exceeds that mentioned in sub-paragraph (3)(a), then--

(a) in a case where, at the time when the balancing period ends, an averaging period also ends because of sub-paragraph (2)(f) or (g), the supplier is for the purposes of this Schedule deemed to make at that time a taxable supply of a quantity of electricity equal to the excess;

(b) in any other case, a balancing debit equal to the excess is carried forward to the next balancing period. " .

(3) In paragraph 20B (exemption under paragraph 20A: averaging periods) for sub-paragraphs (6) to (8) substitute--

" (6) If the total mentioned in sub-paragraph (3)(b) exceeds that mentioned in sub-paragraph (3)(a), then--

(b) in any other case, a balancing debit equal to the excess is carried forward to the next balancing period. " .

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