Finance Act 2003 (c. 14)

(The document as of February, 2008)

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a statement to that effect is sufficient compliance with so much of any notice under section 8 of the Management Act as requires information for the purposes of establishing the amount in which he is chargeable to capital gains tax for that year.

(2) For the purposes of subsection (1)(a) above--

(a) the amount of chargeable gains accruing to an individual in a year of assessment for which no deduction falls to be made in respect of allowable losses is the amount after any reduction for taper relief;

(b) the amount of chargeable gains accruing to an individual in a year of assessment for which such a deduction does fall to be made is the amount before deduction of losses or any reduction for taper relief.

(3) For the purposes of subsection (1)(b) above a "chargeable disposal" is any disposal other than--

(a) a disposal on which any gain accruing is not a chargeable gain, or

(b) a disposal the consideration for which is treated by virtue of section 58 (husband and wife) as being such that neither a gain nor a loss would accrue.

(4) Subsection (1) above applies to personal representatives (for the year of assessment in which the individual in question dies and for the next 2 following years) as it applies to an individual.

(5) Subsection (1) above applies to the trustees of a settlement in accordance with Schedule 1.

(6) In this section "exempt amount" has the meaning given by section 3 (read, where appropriate, with Schedule 1). " .

2 (1) In the heading to Schedule 1 to that Act (application of exempt amount in cases involving settled property) after " Exempt Amount " insert " And Reporting Limits ".

(2) In paragraph 1 of that Schedule (trustees for person with a disability) after sub-paragraph (5) insert--

" (5A) In its application to the trustees of a settlement, section 3A(1) has effect with the substitution for the reference to section 8 of the Management Act of a reference to section 8A of that Act. " .

(3) In paragraph 2 of that Schedule (other trustees) after sub-paragraph (6) insert--

" (6A) In its application to the trustees of a settlement, section 3A(1) has effect with the substitution for the reference to section 8 of the Management Act of a reference to section 8A of that Act. " .

Part 2 Annual exempt amount

3 (1) Section 3 of the Taxation of Chargeable Gains Act 1992 (c. 12) is amended as follows.

(2) Omit subsection (6).

(3) In subsection (7) for "subsections (1) to (6)" substitute "subsections (1) to (5C)".

(4) After that subsection insert--

" (7A) As they apply by virtue of subsection (7) above--

(a) subsection (5A) has effect with the omission of paragraph (b), and

(b) subsection (5B) has effect with the omission of the words "or (b)". " .

4 (1) Paragraph 1 of Schedule 1 to that Act is amended as follows.

(2) In sub-paragraph (1), in the words following paragraph (b)--

(a) for "section 3(1) to (6)" substitute "sections 3(1) to (5C) and 3A";

(b) at the end insert ", but with the modifications specified in this paragraph".

(3) After sub-paragraph (2) insert--

" (2A) As they apply by virtue of sub-paragraph (1) above--

(a) section 3(5A) has effect with the omission of paragraph (b), and

(b) section 3(5B) has effect with the omission of the words "or (b)". " .

(4) In sub-paragraph (3)--

(a) for "section 3" substitute "sections 3 and 3A(1)(a)";

(b) after "the exempt amount for the year", where it first occurs, insert "(except the one in section 3(2))".

(5) In sub-paragraph (7) for "An inspector" substitute "An officer of the Board".

5 (1) Paragraph 2 of that Schedule is amended as follows.

(2) In sub-paragraph (1) for "section 3(1) to (6)" substitute "sections 3(1) to (5C) and 3A".

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

(a) for "subsections (1) and (5)" substitute "section 3(1), (5A), (5B) and (5C)";

(b) after "section 3(1), (5A), (5B) and (5C)" insert "and section 3A(1)(a)".

(4) After sub-paragraph (2) insert--

" (2A) As they apply by virtue of sub-paragraph (1) above--

(a) section 3(5A) has effect with the omission of paragraph (b), and

(b) section 3(5B) has effect with the omission of the words "or (b)". " .

(5) Omit sub-paragraph (3).

(6) In sub-paragraph (9) for "An inspector" substitute "An officer of the Board".

6 In the first column of the Table in section 98 of the Taxes Management Act 1970 (c. 9) (penalty for failure to furnish particulars etc), at the appropriate place insert--

" Paragraph 1(7) of Schedule 1 to the 1992 Act. " .

Part 3 Commencement

7 The amendments in paragraphs 1, 2, 3(2) and (3), 4(2)(a) and (4)(a) and 5(2), (3)(b) and (5) of this Schedule apply in relation to any notice under section 8 or, as the case may be, section 8A of the Taxes Management Act 1970 given in relation to the year 2003-04 or any subsequent year of assessment.

8 The amendments in paragraphs 3(4), 4(2)(b), (3) and (4)(b) and 5(3)(a) and (4) of this Schedule shall be deemed always to have had effect.

9 The amendments in paragraphs 4(5), 5(6) and 6 of this Schedule have effect in relation to any notice given in respect of the year 2002-03 or any subsequent year of assessment, except that the amendment in paragraph 6 has effect only in relation to such a notice given after the passing of this Act.

Section 163(2)

SCHEDULE 29 Transfers of value: attribution of gains to beneficiaries

Introduction

1 Schedule 4C to the Taxation of Chargeable Gains Act 1992 (c. 12) (transfers of value: attribution of gains to beneficiaries) is amended as follows.

Scope and scheme of Schedule

2 For paragraphs 1 and 2 (introduction and general scheme of Schedule) substitute--

" Introduction

1 (1) This Schedule applies where the trustees of a settlement ("the transferor settlement") make a transfer of value to which Schedule 4B applies ("the original transfer").

(2) Where this Schedule applies, the following gains--

(a) any Schedule 4B trust gains accruing by virtue of the transfer (see paragraphs 3 to 7), and

(b) any outstanding section 87/89 gains of the transferor settlement at the end of the year of assessment in which the transfer is made (see paragraph 7A),

are pooled for the purpose of attributing them, in accordance with this Schedule, to beneficiaries who receive capital payments.

Paragraph 7B provides for further gains to be brought into the pool in the case of a further transfer of value.

(3) The gains mentioned in sub-paragraph (2) are referred to in this Schedule as "Schedule 4C gains" and the pool is referred to as the transferor settlement's "Schedule 4C pool".

(4) Paragraphs 8 to 9 provide for the attribution of gains in a settlement's Schedule 4C pool.

(5) References in this Schedule to a transfer to which Schedule 4B applies include any such transfer, whether or not any chargeable gain or allowable loss accrues under that Schedule by virtue of the transfer. "

Other gains to be brought into Schedule 4C pool

3 After paragraph 7 insert--

" Outstanding section 87/89 gains

7A (1) The amount of outstanding section 87/89 gains of a settlement at the end of a year of assessment is given by--

G - B + NC

where--

G is the amount of the settlement's section 87/89 gains for the year (see sub-paragraph (2)),
B is the amount of the gains treated in accordance with section 87(4) or 89(2) as accruing in that year to beneficiaries, and
NC is the amount of gains so treated as accruing in that year to beneficiaries who were not chargeable to tax for that year.

(2) The amount of a settlement's section 87/89 gains for a year of assessment is--

(a) if section 87 applies to the settlement for the year--

(i) the amount of the settlement's trust gains within the meaning of section 87(2), together with

(ii) any amount by which that amount falls to be increased under section 90(1)(a), or would fall to be increased but for section 90(2) or (3);

(b) if section 89(2) applies to the settlement for the year (otherwise than by virtue of section 90(1)(c))--

(i) the amount of the trust gains referred to in section 89(2), together with

(ii) any amount by which that amount falls to be increased under section 90(1)(b), or would fall to be increased but for section 90(2) or (3);

(c) if section 90(1)(c) applies to the settlement for the year, the amount that falls to be treated as trust gains in accordance with that provision, or would fall to be so treated but for section 90(2) or (3).

Gains to be brought into pool on subsequent transfer of value

7B (1) Where the trustees of a settlement who have made a transfer of value to which Schedule 4B applies make a further transfer of value to which that Schedule applies, the following provisions apply.

(2) If the further transfer is made in the same year of assessment as the original transfer, any Schedule 4B trust gains accruing by virtue of the further transfer are brought into the settlement's Schedule 4C pool at the end of the year.

(3) If the further transfer is made in a later year of assessment at the beginning of which there are outstanding gains in the settlement's Schedule 4C pool--

(a) any Schedule 4B trust gains accruing by virtue of the further transfer, and

(b) any outstanding section 87/89 gains of the settlement at the end of the later year of assessment,

are brought into the settlement's Schedule 4C pool at the end of the later year.

"Outstanding gains in the settlement's Schedule 4C pool" means gains in that pool that have not been attributed to beneficiaries in accordance with this Schedule.

(4) If the further transfer is made in a later year of assessment at the beginning of which the settlement no longer has a Schedule 4C pool, the provisions of this Schedule apply in relation to the further transfer as they applied in relation to the original transfer.

(5) For the purposes of this paragraph a settlement is treated as continuing to have a Schedule 4C pool until the end of the last year of assessment in which there are any gains in the pool. " .

Attribution of gains to beneficiaries

4 (1) For paragraphs 8 and 9 (attribution of gains to beneficiaries) substitute--

" Attribution of Schedule 4C gains to beneficiaries

8 (1) The gains in a settlement's Schedule 4C pool at the end of any year of assessment are treated as chargeable gains accruing in that year to beneficiaries who receive in that year, or have received in an earlier year, capital payments from the trustees of any settlement that is a relevant settlement in relation to the pool.

Paragraph 8A defines "relevant settlement" for this purpose.

(2) The attribution of chargeable gains to beneficiaries under this paragraph shall be made in proportion to, but shall not exceed, the amounts of the capital payments made to them.

Paragraphs 8B and 8C provide for the matching of gains with available capital payments.

(3) A chargeable gain shall not be treated as accruing to a beneficiary under this Schedule unless he is chargeable to tax for that year of assessment.

(4) For the purposes of this Schedule a beneficiary is "chargeable to tax" for a year of assessment if, and only if--

(a) he is resident in the United Kingdom for any part of that year or is ordinarily resident in the United Kingdom for that year, and

(b) he is domiciled in the United Kingdom for any part of that year.

(5) Any gains in a settlement's Schedule 4C pool that are not attributed to beneficiaries in a year of assessment are carried forward to the following year of assessment, when this paragraph applies again.

Relevant settlements

8A (1) This paragraph specifies what settlements are relevant settlements in relation to a Schedule 4C pool.

(2) The transferor and transferee settlements in relation to the original transfer of value are relevant settlements.

(3) If the trustees of any settlement that is a relevant settlement in relation to a Schedule 4C pool--

(a) make a transfer of value to which Schedule 4B applies, or

(b) make a transfer of settled property to which section 90 applies,

any settlement that is a transferee settlement in relation to that transfer is also a relevant settlement in relation to that pool.

(4) If the trustees of a settlement that is a relevant settlement in relation to a Schedule 4C pool make a transfer of value to which Schedule 4B applies, any other settlement that is a relevant settlement in relation to that pool is also a relevant settlement in relation to the Schedule 4C pool arising from the further transfer.

Attribution of gains in Schedule 4C pool

8B (1) The following rules apply as regards the attribution of the gains in a settlement's Schedule 4C pool to beneficiaries of relevant settlements.

This paragraph has effect subject to paragraph 8C (order of attribution as between gains in Schedule 4C pool and other trust gains).

(2) Gains of earlier years are attributed to beneficiaries before gains of later years.

(3) For the purposes of this Schedule the year of a gain is determined as follows--

(a) a Schedule 4B trust gain is a gain of the year of assessment in which the transfer of value in question takes place;

(b) a section 87/89 gain is a gain of the year of assessment in which it first forms part of a settlement's trust gains in accordance with section 87(2).

(4) Gains of the same year are matched with available capital payments made at any time by trustees of any relevant settlement.

(5) If gains of one year are wholly matched, gains of the next year are then matched, and so on.

(6) The gains are attributed to beneficiaries in proportion to, but not so as to exceed, the amount of available capital payments received by them.

Attribution of gains: Schedule 4C pool gains and other gains

8C (1) Where in a year of assessment--

(a) gains in a settlement's Schedule 4C pool fall to be attributed to beneficiaries of relevant settlements, and

(b) one or more of those settlements also have gains that fall to be attributed to beneficiaries under section 87(4) or 89(2),

the provisions of paragraph 8B have effect as follows.

(2) The rules in that paragraph apply in relation to all the gains falling to be so attributed.

(3) As between gains of the same year, Schedule 4C gains are attributed to beneficiaries before other gains.

Attribution of gains: available capital payments

9 (1) In any year of assessment capital payments made to a beneficiary by the trustees of a relevant settlement, in that year or any earlier year, are available for the purposes of paragraphs 8 to 8C subject to the following provisions.

(2) A capital payment is no longer available to the extent that chargeable gains have, by reason of it, been treated as accruing to the recipient in an earlier year of assessment--

(a) under this Schedule, or

(b) under section 87(4) or 89(2).

(3) Capital payments received--

(a) before 21st March 2000, or

(b) before the year of assessment preceding the year of assessment in which the original transfer of value was made,

shall be disregarded. " .

(2) After paragraph 12 insert--

" Attribution of gains to beneficiaries in section 10A cases

12A (1) This paragraph applies where by virtue of section 10A an amount of gains would (apart from this Schedule) be treated under section 87 as accruing to a person ("the beneficiary") in the year of return by virtue of a capital payment made to him in an intervening year.

(2) Where this paragraph applies, a capital payment equal to so much of that capital payment as exceeds the amount otherwise charged shall be deemed for the purposes of this Schedule to be made to the beneficiary in the year of return.

(3) The "amount otherwise charged" means the total of any chargeable gains attributed to the beneficiary under section 87(4) or 89(2) by virtue of the capital payment.

(4) For the purposes of paragraph 13(5)(b) a deemed capital payment under this paragraph shall be treated as made when the actual capital payment mentioned in sub-paragraph (1) above was made.

(5) Expressions used in this paragraph and section 10A have the same meanings in this paragraph as in that section " .

Gains attributed to settlor

5 (1) Paragraph 6 is amended as follows.

(2) In sub-paragraph (1), in the opening words, for "the amount of any chargeable gains" substitute "the tapered amount of any chargeable gains".

(3) After that sub-paragraph insert--

" (1A) The reference in sub-paragraph (1) to the tapered amount of any chargeable gains is a reference--

(a) where section 86(4) applies, to the tapered section 86(4) amount as defined in section 87(3A);

(b) where section 10A applies, to the tapered section 86(1)(e) amount as defined in section 86A(7A). " .

Minor and consequential amendments

6 (1) In paragraph 10(1) for "of the transferor settlement, or of any transferee settlement," substitute "of any relevant settlement".

(2) In paragraph 12--

(a) in sub-paragraph (1)(a) for "arising under Schedule 4B" substitute "included in a settlement's Schedule 4C pool",

(b) in sub-paragraph (2) for "the Schedule 4B trust gains" substitute "the settlement's Schedule 4C gains", and

(3) In paragraph 13(5)(a) for "that in which the transfer of value was made" substitute "the year of the gain (determined in accordance with paragraph 8B(3))".

(4) After paragraph 13 insert--

" Effect of settlement ceasing to exist after transfer of value

13A Where a settlement ceases to exist after the trustees have made a transfer of value to which Schedule 4B applies, this Schedule has effect as if a year of assessment had ended immediately before the settlement ceased to exist. " .

Section 167

SCHEDULE 30 First-year allowances for expenditure on environmentally beneficial plant or machinery

Introductory

1 The Capital Allowances Act 2001 (c. 2) is amended as follows.

Types of expenditure for which first-year allowances available

2 In section 39--

(a) after "under" insert "any of the following provisions";

(b) at the end of the entry relating to section 45E, omit "or";

" section 45H

expenditure on environmentally beneficial plant or machinery. " .

First-year qualifying expenditure on environmentally beneficial plant or machinery

3 After section 45G insert--

" Expenditure on environmentally beneficial plant or machinery

45H (1) Expenditure is first-year qualifying expenditure if--

(a) it is expenditure on environmentally beneficial plant or machinery that is unused and not second-hand,

(b) it is incurred on or after 1st April 2003,

(d) it is not excluded by section 46 (general exclusions).

(2) Environmentally beneficial plant or machinery means plant or machinery in relation to which the following conditions are met--

(a) when the expenditure is incurred, or

(b) when the contract for the provision of the plant or machinery is entered into.

(3) The conditions are that the plant or machinery--

(a) is of a description specified by Treasury order, and

(b) meets the environmental criteria specified by Treasury order for plant or machinery of that description.

(4) The Treasury may make such orders under subsection (3) as appear to them appropriate to promote the use of technologies, or products, designed to remedy or prevent damage to the physical environment or natural resources.

(5) Any such order may make provision by reference to any technology list, or product list, issued by the Secretary of State (whether before or after the coming into force of this section).

Certification of environmentally beneficial plant and machinery

45I (1) The Treasury may by order provide that, in such cases as may be specified in the order, no section 45H allowance may be made unless a relevant certificate of environmental benefit is in force.

A "section 45H allowance" means a first-year allowance in respect of expenditure that is first-year qualifying expenditure under section 45H.

(2) A certificate of environmental benefit is one certifying that--

(a) particular plant or machinery, or

(b) plant or machinery constructed to a particular design,

meets the environmental criteria specified in relation to that description of plant or machinery by order under section 45H.

(3) A relevant certification of environmental benefit means one issued--

(a) by the Secretary of State or a person authorised by the Secretary of State;

(b) in the case of plant or machinery used or for use in Scotland, by the Scottish Ministers or a person authorised by them;

(c) in the case of plant or machinery used or for use in Wales, by the National Assembly for Wales or a person authorised by it;

(d) in the case of plant or machinery used or for use in Northern Ireland, by the Department of Enterprise, Trade and Investment in Northern Ireland or a person authorised by it.

(4) If a certification of environmental benefit is revoked--

(a) the certificate is treated for the purposes of this section as if it had never been issued, and

(b) all such assessments and adjustments shall be made as are necessary as a result of the revocation.

(5) If a person who has made a tax return becomes aware that, as a result of the revocation of a certificate of environmental benefit after the return was made, the return has become incorrect, he must give notice to the Inland Revenue specifying how the return needs to be amended.

(6) The notice must be given within three months beginning with the day on which the person first became aware that anything in the tax return had become incorrect because of the revocation of the certificate.

Environmentally beneficial components of plant or machinery

45J (1) This section applies for the purpose of apportioning expenditure incurred on plant or machinery where one or more of the components of the plant or machinery (but not all of it) is of a description specified by Treasury order under section 45H(3).

(2) If--

(a) only one of the components is of such a description, and

(b) an amount is specified by the order in respect of that component,

the part of the expenditure that is section 45H expenditure must not exceed that amount.

(3) If--

(a) more than one of the components is of such a description, and

(b) an amount is specified by the order in respect of each of those components,

the part of the expenditure that is section 45H expenditure must not exceed the total of those amounts.

(4) If the expenditure is treated under this Act as incurred in instalments, the proportion of each instalment that is section 45H expenditure is the same as the proportion of the whole expenditure that is section 45H expenditure.

(5) Where this section applies, the expenditure is not apportioned under section 562(3) (apportionment where property sold with other property).

(6) In this section "section 45H expenditure" means expenditure that is first-year qualifying expenditure under section 45H. " .

General exclusions affecting first-year qualifying expenditure

4 (1) In section 46(1)--

(a) after "under" insert "any of the following provisions";

(b) at the end of the entry relating to section 45E, omit "or";

" section 45H

expenditure on environmentally beneficial plant or machinery. " .

(2) In section 46(5) for "or 45E" substitute ", 45E or 45H".

Amount of first-year allowances

5 In section 52(3), in the Table, after the entries relating to expenditure qualifying under section 45F add--

" Expenditure qualifying under section 45H (expenditure on environmentally beneficial plant or machinery)

100% " .

Penalty for failure to provide information etc

6 In the second column of the Table in section 98 of the Taxes Management Act 1970 (c. 9) (penalty for failure to provide information etc), in the entry relating to requirements imposed by the Capital Allowances Act 2001 (c. 2), after "45G(5) and (6)" insert ", 45I(5) and (6)".

Transitory provision: expenditure incurred etc before first order made

7 (1) For the purposes of section 45H(2) of the Capital Allowances Act 2001, where--

(a) expenditure on plant or machinery is incurred, or a contract for the provision of plant or machinery is entered into, before the first order is made under section 45H(3) of that Act, and

(b) if that order had been made before the relevant time, the conditions in section 45H(3) of that Act would have been met,

those conditions shall be treated as if they were met at the relevant time.

(2) In sub-paragraph (1) "the relevant time" means the time when the expenditure was incurred or (as the case may be) the contract was entered into.

Section 168

SCHEDULE 31 Tax relief for expenditure on research and development

Part 1 Small and medium-sized enterprises: Schedule 20 to Finance Act 2000

Introductory

1 Schedule 20 to the Finance Act 2000 (c. 17) (tax relief for expenditure on research and development by small and medium-sized enterprises) is amended in accordance with the following provisions of this Part of this Schedule.

Required minimum aggregate expenditure: reduction from £25,000 to £10,000

2 (1) Paragraph 1 (entitlement to R&D tax relief) is amended as follows.

(2) In sub-paragraph (1)(b) (requirement for minimum aggregate expenditure of £25,000 or time apportioned part of that amount) in sub-paragraphs (i) and (ii) for "£25,000" substitute "£10,000".

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