Finance Act 2003 (c. 14)

(The document as of February, 2008)

-- Back --

Page 36

Pages: P.1 | P.2 | P.3 | P.4 | P.5 | P.6 | P.7 | P.8 | P.9 | P.10 | P.11 | P.12 | P.13 | P.14 | P.15 | P.16 | P.17 | P.18 | P.19 | P.20 | P.21 | P.22 | P.23 | P.24 | P.25 | P.26 | P.27 | P.28 | P.29 | P.30 | P.31 | P.32 | P.33 | P.34 | P.35 | P.36 | P.37 | P.38 | P.39

(b) the weekly amount for that child.

(2) The weekly amount for a child is--

(a) £200 for a week throughout which the child is under 11 years old, and

(b) £250 for a week--

(i) in which the child reaches the age of 11, or

(ii) throughout which the child is 11 years old or over.

(3) Where in the case of any week an individual provides foster care for a child during an income period for part only of the week, that part of a week counts as a whole week for the purposes of this paragraph.

(4) Where an income period begins or ends during a week, that week is to be counted for the purposes of this paragraph as falling within the income period which ends during the week (unless there is no such income period, in which case it falls within the income period which begins during the week).

(5) In this paragraph "week" means any period of seven days beginning with a Monday.

Power to alter amounts

9 The Treasury may by order amend the amounts for the time being specified in paragraph 7(1) and 8(2).

Part 2 The exemption and the alternative methods of calculation

The exemption

10 (1) This paragraph applies to an individual for a year of assessment for which--

(a) the individual qualifies for relief under this Schedule,

(b) his total foster care receipts do not exceed his limit, and

(2) If the individual's foster care receipts for the year of assessment are the receipts of a trade, profession or vocation, the profits or losses from that trade, profession or vocation for the year are to be treated as nil.

(3) If, in a case falling within sub-paragraph (2), the individual would, apart from that sub-paragraph, be entitled to a deduction for the year under section 63A(1) or (3) of the Taxes Act 1988 (overlap profits and overlap losses), the individual is entitled to that deduction notwithstanding that sub-paragraph.

(4) Sub-paragraph (5) applies if the individual's foster care receipts for the year of assessment are receipts from one or more foster care arrangements.

(5) For each foster care arrangement from which those receipts arise, the amount of--

(a) the receipts arising in the year of assessment from the arrangement, less

(b) any expenses associated with those receipts,

is to be treated as nil.

Alternative calculation of profits where amount is above the limit

11 The alternative method of calculating profits given in paragraphs 12 and 13 applies to an individual for a year of assessment for which--

(a) the individual qualifies for relief under this Schedule,

(b) his total foster care receipts exceed his limit,

(c) paragraph 15 (cases where accounting date for trade, profession or vocation is other than 5th April) does not apply, and

(d) an election by him under paragraph 14 has effect.

Alternative calculation of profits: income from trade etc

12 (1) This paragraph applies if--

(a) the alternative method of calculating profits applies to an individual for a year of assessment, and

(b) his foster care receipts for the year are the receipts of a trade, profession or vocation.

(2) The profits of the year of assessment of the trade, profession or vocation from which the individual's foster care receipts arise are--

(a) the amount of the foster care receipts for the year arising from the trade, profession or vocation, less

(b) the individual's limit for the year.

Alternative calculation of profits: income charged under Case VI of Schedule D

13 (1) This paragraph applies if--

(a) the alternative method of calculating profits applies to an individual for a year of assessment, and

(b) his foster care receipts for the year are receipts from one or more foster care arrangements.

(2) The amount of the profits of the year of assessment from all of the foster care arrangements from which the individual's foster care receipts arise is--

(a) the sum of the foster care receipts for the year from each foster care arrangement from which those receipts arise, less

(b) the individual's limit for the year.

Election for alternative method

14 (1) An individual may elect--

(a) for the alternative method of calculating profits given in paragraph 12 or 13 to apply if the conditions specified in paragraph 11(a), (b) and (c) are met, and

(b) for the alternative method of calculating profits given in sub-paragraph (5) of paragraph 15 to apply if the conditions specified in paragraphs (a) and (b) of sub-paragraph (4) of that paragraph are met.

(2) An election under this paragraph has effect for the year of assessment for which it is made.

(3) Subject to sub-paragraphs (5) and (6), an election under this paragraph must be made on or before the election deadline for the year of assessment to which it relates.

(4) The election deadline for a year of assessment is--

(a) the first anniversary of the 31st January next following that year of assessment, or

(b) such later date as the Board may in any particular case allow.

(5) If--

(a) an individual does not make an election under this paragraph for a year of assessment on or before the election deadline for that year, and

(b) an adjustment is made after that deadline to the profits from his provision of foster care on which he is chargeable to tax for that year,

the individual may make an election under this paragraph for the year on or before the date specified in sub-paragraph (6).

(6) That date is--

(a) the first anniversary of the 31st January next following the year of assessment in which the adjustment is made, or

(b) such later date as the Board may in any particular case allow.

(7) Any election under this paragraph must be made in writing to an officer of the Board.

Periods of account ending otherwise than on 5th April

15 (1) This paragraph applies to an individual for a year of assessment for which--

(a) the individual qualifies for relief under this Schedule,

(b) his foster care receipts are the receipts of a trade, profession or vocation, and

(c) the period of account in which his foster care receipts accrue ends on a day other than 5th April in that year of assessment.

(2) If the individual's total foster care receipts for the period of account do not exceed the relevant limit for that period (see sub-paragraph (6) or (8)) the profits or losses from his trade, profession or vocation for the year of assessment are to be treated as nil.

(4) Sub-paragraph (5) applies where--

(a) the individual's total foster care receipts for the period of account exceed the relevant limit for that period, and

(b) an election by him under paragraph 14 has effect.

(5) The profits of the year of assessment of the trade, profession or vocation from which the individual's foster care receipts arise are--

(a) the amount of the foster care receipts arising from the trade, profession or vocation for the period of account, less

(b) the relevant limit for that period.

(6) If the period of account in which the individual's foster care receipts accrue ends in the year 2003-04, "the relevant limit" for that period is found by aggregating--

(a) the individual's share of the fixed amount for the year 2003-04 (found in accordance with paragraph 7), and

(b) each amount per child for that individual for that period of account.

(7) For the purposes of sub-paragraph (6), an individual's amount per child for the period of account is each amount that would be his amount per child by virtue of paragraph 8 for the year 2003-04 if that period of account were the income period for that year.

(8) If the period of account in which the individual's foster care receipts accrue ends in a year subsequent to the year 2003-04, "the relevant limit" for that period is found by aggregating--

(a) the individual's share of the fixed amount for the year in which the period of account ends (found in accordance with paragraph 7), and

(b) for each of the years of assessment in which the period of account falls, each amount per child for that individual for each part of that period of account which falls within that year of assessment.

(9) For the purposes of sub-paragraph (8), an individual's amount per child for a part of a period of account is each amount that would be his amount per child by virtue of paragraph 8 for the year of assessment in which the part of that period falls if that part of the period of account were the income period for that year.

Part 3 Capital allowances

Introductory

16 (1) Paragraphs 17 to 19 make provision for the application of the Capital Allowances Act 2001 (c. 2) ("CAA 2001") in relation to--

(a) a relevant individual, and

(b) a relevant chargeable period of that individual.

(2) For this purpose, a "relevant individual" is an individual who, in a year of assessment, satisfies the conditions in sub-paragraphs (3) and (4).

(3) The first condition is that in the year of assessment the individual would, apart from this Schedule, have foster care receipts chargeable--

(a) under Case I or II of Schedule D as the profits of a trade, profession or vocation, or

(b) under Case VI of Schedule D as the profits of one or more foster care arrangements.

(4) The second condition is that--

(a) the exemption in paragraph 10 or (as the case may be) 15(2) applies to the individual for the year of assessment, or

(b) the individual has elected for the alternative method of calculating profits in paragraph 12, 13 or (as the case may be) 15(5) to apply to him for the year of assessment.

(5) A period is a "relevant chargeable period" of a relevant individual if--

(a) it is a chargeable period of the individual,

(b) it corresponds to an income period for the individual's foster care receipts in a year of assessment, and

Provisions applying in relation to carried forward unrelieved qualifying expenditure

17 (1) This paragraph applies in any case where--

(a) there is any available qualifying expenditure in a relevant pool for a relevant chargeable period of a relevant individual,

(b) that expenditure is unrelieved qualifying expenditure carried forward in the pool from the previous chargeable period under section 59 of CAA 2001, and

(2) In any such case, CAA 2001 has effect in relation to the relevant individual's available qualifying expenditure in the pool for the relevant chargeable period as if--

(a) a disposal event occurred immediately after the beginning of the period,

(b) disposal receipts fall to be brought into account in the pool for that period by reason of that event, and

(c) the total of those disposal receipts equals the amount of the unrelieved qualifying expenditure carried forward in the pool from the previous chargeable period under section 59 of CAA 2001.

(3) In any such case, section 13 of CAA 2001 (use for qualifying activity of plant and machinery provided for other purposes) shall apply as if, on the first day of the first subsequent chargeable period which is not a relevant chargeable period,--

(a) the relevant individual brings into use for the purposes of his provision of foster care such of the plant or machinery on which the unrelieved qualifying expenditure was incurred as he still owns on that day, and

(b) he owns that plant or machinery as a result of having incurred capital expenditure on its provision for purposes other than those of the provision of foster care.

(4) In this paragraph "relevant pool" means a pool containing expenditure incurred on the provision of plant or machinery wholly or partly for the purposes of the provision of foster care by the relevant individual.

Expenditure incurred in a relevant chargeable period not qualifying expenditure

18 Capital expenditure ("excluded capital expenditure") which is incurred--

(a) by a relevant individual,

(b) in a relevant chargeable period, and

(c) on the provision of plant or machinery wholly or partly for the purposes of the provision of foster care by the individual,

does not constitute qualifying expenditure for the purposes of CAA 2001.

Excluded capital expenditure: subsequent treatment of asset

19 Where a relevant individual incurs excluded capital expenditure in a relevant chargeable period, section 13 of CAA 2001 shall apply as if, on the first day of the first subsequent chargeable period which is not a relevant chargeable period,--

(a) he brings into use for the purposes of his provision of foster care such of the plant or machinery on which the expenditure was incurred as he still owns on that day, and

(b) he owns that plant or machinery as a result of having incurred capital expenditure on its provision for purposes other than those of the provision of foster care.

Interpretation of this Part

20 Expressions which--

(a) are used in this Part, and

(b) are used in CAA 2001, but

have the same meaning in this Part as in that Act.

Part 4 Supplementary

Interpretation

21 In this Schedule--

"CAA 2001" means the Capital Allowances Act 2001 (c. 2);
"excluded capital expenditure" is to be construed in accordance with paragraph 18;
"foster care arrangement" has the meaning given in paragraph 2(5);
"foster care receipts" is to be construed in accordance with paragraph 3;
"income period" is to be construed in accordance with paragraph 3(2) and (3);
"profits" includes gains;
"provision of foster care" has the meaning given in paragraph 4;
"relevant chargeable period" is to be construed in accordance with paragraph 16(5);
"relevant individual" is to be construed in accordance with paragraph 16(2);
"total foster care receipts" is to be construed in accordance with paragraph 5.

Section 178

SCHEDULE 37 Loan relationships: amendments

Part 1 Amendments to Schedule 9 to the Finance Act 1996

Introductory

1 Schedule 9 to the Finance Act 1996 (c. 8) (loan relationships: special computational provisions) is amended as follows.

Late interest

2 (1) Paragraph 2 is amended as follows.

(2) After sub-paragraph (5) insert--

" (5A) A person who is a participator in a company which controls another company shall be treated for the purposes of this paragraph as also being a participator in that other company. " .

(3) In sub-paragraph (6), in the definition of "participator" (which is expressed to have effect in relation to a close company) omit "close".

(4) The amendments made by this paragraph have effect in relation to interest which would, apart from paragraph 2 of Schedule 9 to the Finance Act 1996 (c. 8), be treated as accruing on or after 9th April 2003.

Continuity of treatment: groups etc

3 (1) Paragraph 12 is amended as follows.

(2) In sub-paragraph (2) (determination of credits and debits to be brought into account) in paragraph (a) (disregard of the transaction or series of transactions except for certain purposes) after "except" insert--

" (i) for the purpose of determining the debits or credits 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) " .

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

(4) In sub-paragraph (2A) (amount to be brought into account where transferor company uses authorised mark to market basis of accounting) for paragraph (a) substitute--

" (a) the amount to be brought into account by the transferor company in respect of the transaction, the result of the series of transactions, or the transfer must be--

(i) where an asset is to be brought into account, the fair value of the asset, or of the rights under or interest in the asset, and

(ii) where a liability is to be brought into account, the fair value of the liability,

as at the date on which the transferee company becomes party to the loan relationship;

(aa) the amount to be brought into account by the transferee company in respect of the transaction, the result of the series of transactions, or the transfer must be the same as the amount brought into account by the transferor company in respect of the transaction, or, as the case may be, the result of the series of transactions, or the transfer; and " .

(5) In sub-paragraph (6) (novation: equivalent rights) after "rights" insert ", or (as the case may be) its obligations,".

(6) After sub-paragraph (7) (cases where rights are "equivalent") insert--

" (7A) For the purposes of sub-paragraph (6) above a person's obligations under a debtor relationship are equivalent to obligations under another such relationship if they subject the holder of the liability representing the relationship--

(a) to the same obligations to the same persons as to capital, interest and dividends, and

(b) to the same remedies for the enforcement of those obligations,

notwithstanding any difference in the total nominal amounts of the assets representing the corresponding creditor relationships, in the form in which those assets are held or in the manner in which they can be transferred. " .

(7) The amendments made by this paragraph have effect where the date on which the transferee company becomes party to the loan relationship falls on or after 9th April 2003.

Discounted securities where companies have a connection

4 (1) In paragraph 17, for sub-paragraph (8) (reference to person standing in the position of creditor to include person indirectly standing in that position) substitute--

" (8) Any reference in this paragraph to a company which stands in the position of a creditor as respects a relevant discounted security includes a reference to a company which indirectly stands in that position by reference to a series of loan relationships or money debts which would be loan relationships if a company directly stood in the position of creditor or debtor. " .

(2) The amendment made by this paragraph has effect in relation to relevant periods beginning on or after 9th April 2003.

(3) If, in the case of an issuing company, 9th April 2003 falls in a relevant period beginning before that day--

(a) the amendment made by this paragraph also has effect in relation to a proportionate part of the debits of that company relating to the amount of the discount that is referable to that period, and

(b) that proportion is the proportion which the part of that period--

(i) beginning with 9th April 2003, and

(ii) ending with the end of that period,

bears to the whole of that period.

(4) Expressions used in sub-paragraph (2) or (3) and in paragraph 17 of Schedule 9 to the Finance Act 1996 (c. 8) have the same meaning in that sub-paragraph as in that paragraph.

Discounted securities of close companies

5 (1) Paragraph 18 is amended as follows.

(2) In sub-paragraph (2C) (reference to person standing in the position of creditor to include person indirectly standing in that position) for the words from "includes a reference" to the end of that sub-paragraph substitute "includes a reference to a person who indirectly stands in that position by reference to a series of loan relationships or money debts which would be loan relationships if a company directly stood in the position of creditor or debtor".

(3) After sub-paragraph (3B) (meaning of "control") insert--

" (3C) A person who is a participator in a company which controls another company shall be treated for the purposes of this paragraph as also being a participator in that other company. " .

(4) The amendments made by this paragraph have effect in relation to relevant periods beginning on or after 9th April 2003.

(5) If, in the case of an issuing company, 9th April 2003 falls in a relevant period beginning before that day--

(a) the amendments made by this paragraph also have effect in relation to a proportionate part of the debits of that company relating to the amount of the discount that is referable to that period, and

(b) that proportion is the proportion which the part of that period--

(i) beginning with 9th April 2003, and

(ii) ending with the end of that period,

bears to the whole of that period.

(6) Expressions used in sub-paragraph (4) or (5) and in paragraph 18 of Schedule 9 to the Finance Act 1996 (c. 8) have the same meaning in that sub-paragraph as in that paragraph.

Part 2 Transitional provisions

Transitional provisions

6 (1) In Schedule 25 to the Finance Act 2002 (c. 23) (loan relationships) in Part 3 (transitional provisions) after paragraph 61 insert--

" Non-trading deficit carried forward from last old accounting period

61A Any amount carried forward to a new accounting period under subsection (3) of section 83 of the Finance Act 1996 (carry forward of so much of the non-trading deficit on a company's loan relationships as is not the subject of a claim under subsection (2) of that section)--

(a) shall be disregarded for the purposes of any claim under subsection (2) of that section; and

(b) shall not be surrendered as group relief by virtue of section 403 of the Taxes Act 1988. " .

(2) The Finance Act 2002 (c. 23) shall be taken to have been originally enacted with the amendment made by this paragraph.

Section 181

SCHEDULE 38 Sale and repurchase of securities etc

Increase of repurchase price of UK securities by amount of deemed manufactured dividend

1 In section 737C of the Taxes Act 1988 (deemed manufactured payments)--

(a) in subsection (3)(b) (repurchase price of UK equities to be treated as increased by gross amount of deemed manufactured dividend), omit "gross", and

(b) omit subsection (4) (definition of gross amount).

Deemed manufactured payment where transferor or connected person makes payment representative of dividend

2 (1) Section 737A of the Taxes Act 1988 (deemed manufactured payments) is amended as follows.

(2) In subsection (1), for "the conditions set out in subsection (2) below" substitute "either the conditions set out in subsection (2) below or the conditions set out in subsection (2A) below".

(3) In subsection (2), for "conditions" substitute "first set of conditions referred to in subsection (1) above".

(4) After that subsection insert--

" (2A) The second set of conditions referred to in subsection (1) above are that--

(a) a dividend which becomes payable in respect of the securities is receivable otherwise than by the transferor,

(b) the transferor or a person connected with him is required under any agreement mentioned in subsection (1) above to make a payment representative of the dividend,

(c) there is no requirement under any such agreement for a person to pay to the transferor on or before the relevant date an amount representative of the dividend, and

(d) it is reasonable to assume that, in arriving at the repurchase price of the securities, account is taken of the circumstances referred to in paragraphs (a) to (c). " .

(5) In subsection (3), for "subsection (2)" substitute "subsections (2) and (2A)".

(6) In subsection (5)(a), after "(2)(a)" insert "or (2A)(a)".

3 In section 737C of the Taxes Act 1988 (deemed manufactured payments: further provisions), after "737A(2)(a)" (in each place) insert "or (2A)(a)".

Provisions to cover both "put" and "call" options

4 In section 727A(1) of the Taxes Act 1988 (accrued income scheme not to apply to transfers of securities under repo agreements), for the words from "and under" to the end of paragraph (b) substitute " and the transferor or a person connected with him--

(a) is required to buy them back in pursuance of an obligation imposed by, or in consequence of the exercise of an option acquired under, that agreement or any related agreement, or

(b) acquires an option to buy them back under that agreement or any related agreement which he subsequently exercises, " .

5 In section 730A(1) of the Taxes Act 1988 (treatment of price differential on sale and repurchase of securities), for paragraph (b) substitute--

" (b) the original owner or a person connected with him--

(i) is required to buy them back in pursuance of an obligation imposed by, or in consequence of the exercise of an option acquired under, that agreement or any related agreement, or

(ii) acquires an option to buy them back under that agreement or any related agreement which he subsequently exercises; and " .

6 In section 731(2D) of the Taxes Act 1988 (provisions about purchase and sale of securities not to apply to repo agreements etc) for the words from "and, in" to "is entitled" in paragraph (c) substitute " and the original owner--

(a) is required to buy them back in pursuance of an obligation imposed by, or in consequence of the exercise of an option acquired under, that agreement or any related agreement,

(b) acquires an option to buy them back under that agreement or any related agreement which he subsequently exercises, or

7 In section 737A(1) of the Taxes Act 1988 (deemed manufactured payments), for the words from "and under" to the end of paragraph (b) substitute " and the transferor or a person connected with him--

(a) is required to buy them back in pursuance of an obligation imposed by, or in consequence of the exercise of an option acquired under, that agreement or any related agreement, or

(b) acquires an option to buy them back under that agreement or any related agreement which he subsequently exercises; " .

8 In section 737E(8) of the Taxes Act 1988 (power to modify provisions about repo arrangements), for paragraph (b) substitute--

" (b) that person or a person connected with him--

(i) is required to buy them back in pursuance of an obligation imposed by, or in consequence of the exercise of an option acquired under, that agreement or any related agreement, or

(ii) acquires an option to buy them back under that agreement or any related agreement which he subsequently exercises. " .

9 In paragraph 12(4) of Schedule 7AC to the Taxation of Chargeable Gains Act 1992 (c. 12) (exemptions for disposals by companies with substantial shareholding: effect of repurchase agreement), for paragraph (b) substitute--

" (b) the original owner or a person connected with him--

(i) is required to buy them back in pursuance of an obligation imposed by, or in consequence of the exercise of an option acquired under, that agreement or any related agreement, or

(ii) acquires an option to buy them back under that agreement or any related agreement which he subsequently exercises. " .

Option premium to be reflected in sale price unless brought into account under derivative contracts provisions

10 In section 730A of the Taxes Act 1988 (treatment of price differential on sale and repurchase of securities), after subsection (8) insert--

" (8A) In this section references to the sale price are to be construed--

(a) in a case where the securities are bought back by the transferor or a person connected with him in compliance with a requirement imposed in consequence of the exercise of an option acquired under the agreement to sell the securities or any related agreement, as references to what would otherwise be the sale price plus the amount of any consideration given for the option, and

(b) in a case where the securities are so bought back in the exercise of an option so acquired, as references to what would otherwise be the sale price less the amount of any consideration so given,

unless the consideration is brought into account under Schedule 26 to the Finance Act 2002 (derivative contracts). " .

Exchange gains and losses

11 (1) Section 730A of the Taxes Act 1988 (treatment of price differential on sale and repurchase of securities) is amended as follows.

(2) In subsection (4) (adjustment of repurchase price), for "this section and sections 737A and 737C" substitute "the excepted provisions specified in subsection (4A) below".

(3) At the end of that subsection add as a second sentence--

-- Back --

Stat