Finance Act 2003 (c. 14)

(The document as of February, 2008)

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(a) in the opening words--

(i) for "it ceases" substitute "the transferee company ceases", and

(ii) for "it holds" substitute "it or a relevant associated company (as defined in sub-paragraph (4) below) holds";

(b) in sub-paragraph (i) for "to it" substitute "to the transferee company"; and

(c) for the closing words substitute "and that has not subsequently been transferred at market value by a duly stamped instrument on which ad valorem duty was paid and in respect of which group relief was not claimed".

(7) In the closing words of that sub-paragraph, for the words from "as if" to the end substitute "as if the transferee had then ceased to be a member of the same group as the transferor company and had then held the estate or interest referred to in paragraph (b).".

(8) After that sub-paragraph insert--

" (4) In sub-paragraph (3)(b) "relevant associated company", in relation to the transferee company, means a company that is in the same group as the transferee company immediately before the transferee company ceases to be a member of the new group and which ceases to be a member of the new group in consequence of the transferee company so ceasing. " .

(9) This section applies to instruments executed after 14th April 2003.

(10) But this section does not apply to an instrument giving effect to a contract made on or before 9th April 2003, unless--

(a) the instrument is made in consequence of the exercise after that date of any option, right of pre-emption or similar right, or

(b) the instrument transfers the property in question to, or vests it in, a person other than the purchaser under the contract because of an assignment (or, in Scotland, assignation) or further contract made after that date.

(11) This section shall be deemed to have come into force on 15th April 2003.

127 Circumstances in which relief for company acquisitions withdrawn

(1) Section 113 of the Finance Act 2002 (c. 23) (stamp duty: withdrawal of relief for company acquisitions) is amended as follows.

(2) In subsection (1)(b) (circumstances in which relief withdrawn: change of control of acquiring company within two years) for "two years" substitute "three years".

(3) In subsection (1)(c) (circumstances in which relief withdrawn: acquiring company holding estate or interest when control changes)--

(a) in the opening words, after "the acquiring company" insert "or a relevant associated company";

(b) in sub-paragraph (i) for "to it" substitute "to the acquiring company"; and

(4) In subsection (3) for "what the acquiring company holds" substitute "what is held by that company or, as the case may be, by that company and any relevant associated companies".

(5) After subsection (3) insert--

" (3A) In this section "relevant associated company", in relation to the acquiring company, means a company--

(a) that is controlled by the acquiring company immediately before the control of that company changes, and

(b) of which control changes in consequence of the change of control of that company. " .

(6) In Schedule 35 to the Finance Act 2002 (withdrawal of relief for company acquisitions: supplementary provisions), in paragraphs 3(3)(b) and 4(3)(b) (withdrawal of relief on later change of control)--

(a) in the opening words, after "the acquiring company" insert "or a relevant associated company",

(b) in sub-paragraph (i) for "to it" substitute "to the acquiring company", and

(7) This section applies to instruments executed after 14th April 2003.

(8) But this section does not apply to an instrument giving effect to a contract made on or before 9th April 2003, unless--

(a) the instrument is made in consequence of the exercise after that date of any option, right of pre-emption or similar right, or

(9) This section shall be deemed to have come into force on 15th April 2003.

128 Exemption of certain leases granted by registered social landlords

(1) No stamp duty is chargeable under Part 2 of Schedule 13 to the Finance Act 1999 (c. 16) on a lease of a dwelling granted by a registered social landlord to one or more individuals in accordance with arrangements to which this section applies if the lease is for an indefinite term or is terminable by notice of a month or less.

(2) "Registered social landlord" means--

(a) in relation to England and Wales, a body registered in the register maintained under section 1(1) of the Housing Act 1996 (c. 52);

(b) in relation to Scotland, a body registered in the register maintained under section 57 of the Housing (Scotland) Act 2001 (asp 10);

(c) in relation to Northern Ireland, a housing association registered in the register maintained under Article 14 of the Housing (Northern Ireland) Order 1992 (S.I. 1992/1725 (N.I. 15)).

(3) This section applies to arrangements between a registered social landlord and a housing authority under which the landlord provides, for individuals nominated by the authority in pursuance of its statutory housing functions, temporary rented accommodation which the landlord itself has obtained on a short-term basis.

The reference above to accommodation obtained by the landlord "on a short-term basis" is to accommodation leased to the landlord for a term of five years or less.

(4) A "housing authority" means--

(a) in relation to England and Wales--

(i) a principal council within the meaning of the Local Government Act 1972 (c. 70), or

(ii) the Common Council of the City of London;

(b) in relation to Scotland, a council constituted under section 2 of the Local Government etc. (Scotland) Act 1994 (c. 39);

(i) the Department for Social Development in Northern Ireland, or

(ii) the Northern Ireland Housing Executive.

(5) An instrument on which stamp duty is not chargeable by virtue only of this section shall not be taken to be duly stamped unless--

(a) it is stamped with the duty to which it would be liable but for this section, or

(b) it has, in accordance with section 12 of the Stamp Act 1891 (c. 39), been stamped with a particular stamp denoting that it is not chargeable with any duty.

(6) This section shall be construed as one with the Stamp Act 1891.

(7) This section applies to instruments executed after the day on which this Act is passed.

129 Relief for certain leases granted before section 128 has effect

(1) This section applies to instruments that--

(a) are executed in the period beginning with 1 January 2000 and ending with the day on which this Act is passed, and

(b) are instruments to which section 128 (exemption of certain leases granted by registered social landlords) would have applied if that provision had been in force when the instrument was executed.

(2) If the instrument is not stamped until after the day on which this Act is passed, the law in force at the time of its execution shall be deemed for stamp duty purposes to be what it would have been if section 128 had been in force at that time.

(3) If the Commissioners are satisfied that--

(a) the instrument was stamped on or before the day on which this Act is passed,

(b) stamp duty was chargeable in respect of it, and

they shall pay to such person as they consider appropriate an amount equal to the duty (and any interest or penalty) that would not have been payable if that section had been in force at the time the instrument was executed.

(4) Any such payment must be claimed before 1st January 2004.

(5) Entitlement to a payment is subject to compliance with such conditions as the Commissioners may determine with respect to the production of the instrument, to its being stamped so as to indicate that it has been produced under this section or to other matters.

(6) For the purposes of section 10 of the Exchequer and Audit Departments Act 1866 (c. 39) (Commissioners to deduct repayments from gross revenues) any amount paid under this section is a repayment.

(7) This section shall be construed as one with the Stamp Act 1891.

(8) For the purposes of this section as it applies in relation to instruments executed before the coming into force of section 57 of the Housing (Scotland) Act 2001 (asp 10), the references in section 128 to a registered social landlord shall be read in relation to Scotland as references to--

(a) a housing association registered in the register maintained under section 3(1) of the Housing Associations Act 1985 (c. 69) by Scottish Homes, or

(b) a body corporate whose objects corresponded to those of a housing association and which, pursuant to a contract with Scottish Homes, was registered in a register kept for the purpose by Scottish Homes.

130 Registered social landlords: treatment of certain leases granted between 1st January 1990 and 27 March 2000

(1) This section applies to a lease in relation to which the following conditions are met--

(a) it is a lease of a dwelling to one or more individuals;

(b) it is for an indefinite term or is terminable by notice of a month or less;

(d) at the time it was executed the rate or average rate of the rent (whether reserved as a yearly rent or not) was £5,000 a year or less; and

(e) the landlord's interest has at any time before 26th June 2003 been held by a registered social landlord.

(2) A lease to which this section applies (whether or not presented for stamping) shall be treated--

(a) for the purposes of section 14 of the Stamp Act 1891 (c. 39) (production of instrument in evidence) as it applies in relation to proceedings begun after the day on which this Act is passed, and

(b) for the purposes of section 17 of that Act (enrolment etc of instrument) as it applies to any act done after that day,

as if it had been duly stamped in accordance with the law in force at the time when it was executed.

(3) If in the case of a lease to which this section applies the Commissioners are satisfied--

(a) that the instrument was stamped on or before the day on which this Act is passed, and

(b) that stamp duty was charged in respect of it,

they shall pay to such person as they consider appropriate an amount equal to the duty (and any interest or penalty) so charged.

(4) Any such payment must be claimed before 1st January 2004.

(5) Entitlement to a payment under subsection (3) is subject to compliance with such conditions as the Commissioners may determine with respect to the production of the instrument, to its being stamped so as to indicate that it has been produced under this section or to other matters.

(6) For the purposes of section 10 of the Exchequer and Audit Departments Act 1866 (c. 39) (Commissioners to deduct repayments from gross revenues) any amount paid under subsection (3) above is a repayment.

(7) This section shall be construed as one with the Stamp Act 1891.

(8) The reference in subsection (1) above to the landlord's interest being held by a "registered social landlord" is to its being held by a body that--

(a) is registered in a register maintained under--

(i) Article 124 of the Housing (Northern Ireland) Order 1981 (S.I. 1981/156 (N.I. 3)),

(ii) section 3(1) of the Housing Associations Act 1985 (c. 69),

(iii) Article 14 of the Housing (Northern Ireland) Order 1992 (S.I. 1992/1725 (N.I. 15)),

(iv) section 1(1) of the Housing Act 1996 (c. 52), or

(v) section 57 of the Housing (Scotland) Act 2001 (asp 10), or

(b) is a body corporate whose objects correspond to those of a housing association and which, pursuant to a contract with Scottish Homes, is registered in a register kept for the purposes by Scottish Homes.

(9) Section 129 of this Act (relief for certain leases granted on or after 1st January 2000) does not apply to a lease to which this section applies.

Part 6 Income tax and corporation tax: charge and rate bands

Income tax

131 Charge and rates for 2003-04

Income tax shall be charged for the year 2003-04, and for that year--

(a) the starting rate shall be 10%;

(b) the basic rate shall be 22%;

132 Indexed rate bands for 2003-04: PAYE deductions etc

For the year 2003-04, section 1(5A) of the Taxes Act 1988 (which provides that statutory inflation-linked changes to income tax rate bands for a year of assessment do not require changes to be made to PAYE deductions or repayments until 18th May in that year) shall have effect as if "14th June" were substituted for "17th May".

Corporation tax

133 Charge and main rate for financial year 2004

Corporation tax shall be charged for the financial year 2004 at the rate of 30%.

134 Small companies' rate and fraction for financial year 2003

For the financial year 2003--

(a) the small companies' rate shall be 19%, and

(b) the fraction mentioned in section 13(2) of the Taxes Act 1988 (marginal relief for small companies) shall be 11/400ths.

135 Corporation tax starting rate and fraction for financial year 2003

For the financial year 2003--

(a) the corporation tax starting rate shall be 0%, and

(b) the fraction mentioned in section 13AA of the Taxes Act 1988 (marginal relief for small companies) shall be 19/400ths.

Part 7 Income tax, corporation tax and capital gains tax: general

Employment income and related matters

136 Provision of services through intermediary

(1) Chapter 8 of Part 2 of the Income Tax (Earnings and Pensions) Act 2003 (c. 1) (provision of services through an intermediary) is amended as follows.

(2) In section 49(1)(a) (services to which the Chapter applies), for "for the purposes of a business carried on by another person" substitute "for another person".

(3) In consequence of the above amendment--

(a) omit section 49(2) of that Act, and

(b) in section 56(7) of that Act--

(i) at the end of paragraph (a) insert ", and", and

(ii) omit paragraph (c) and the word "and" preceding it.

(4) This section applies in relation to services performed or due to be performed on or after 10th April 2003.

137 Exemption where homeworker's additional expenses met by employer

(1) In Part 4 of the Income Tax (Earnings and Pensions) Act 2003 (c. 1) (employment income: exemptions), after section 316 insert--

" 316A Homeworker's additional household expenses

(1) This section applies where an employer makes a payment to an employee in respect of reasonable additional household expenses which the employee incurs in carrying out duties of the employment at home under homeworking arrangements.

(2) No liability to income tax arises in respect of the payment.

(3) In this section, in relation to an employee--

"homeworking arrangements" means arrangements between the employee and the employer under which the employee regularly performs some or all of the duties of the employment at home; and
"household expenses" means expenses connected with the day to day running of the employee's home. " .

(2) This section applies to payments which the employer makes on or after 6th April 2003 in respect of expenses which the employee incurs on or after that date.

138 Taxable benefits: lower threshold for cars with a CO₂ emissions figure

(1) In section 139 of the Income Tax (Earnings and Pensions) Act 2003 (cash equivalent of the benefit of a car: calculation of the appropriate percentage for a year for cars with a CO₂ emissions figure) the table in subsection (4) (which specifies the lower threshold for each year for the purposes of that calculation) is amended as follows.

(2) In the entry relating to 2004-05 and subsequent tax years omit "and subsequent tax years".

(3) After that entry insert--

" 2005-06 and subsequent tax years

140 " .

(4) In section 170(3) of that Act (power to provide by order for a lower threshold different from that specified in the table in section 139(4) to apply for tax years beginning on or after 6th April 2005) for "6th April 2005" substitute "6th April 2006".

139 Approved share plans and schemes

Schedule 21 to this Act (which contains amendments relating to share incentive plans, SAYE option schemes and CSOP schemes) has effect.

140 Employee securities and options

Schedule 22 to this Act (which makes provision about securities, and options to acquire securities, acquired by reason of employment) has effect.

141 Corporation tax relief for employee share acquisitions

Schedule 23 to this Act has effect with respect to deductions allowable for corporation tax purposes in respect of employee share acquisitions.

142 Ending of relief for contributions to QUESTS

(1) Section 67 of the Finance Act 1989 (c. 26) (tax relief for contributions to trustees of qualifying employee share ownership trust) does not apply in relation to sums expended by a company in an accounting period of the company beginning on or after 1st January 2003.

(2) In section 69 of that Act (chargeable events)--

(a) the definitions in subsections (3AC) and (3AD) (by virtue of which certain transfers of shares by trustees of an employee share ownership trust to a SIP trust are not chargeable events) have effect in relation to 26th November 2002 as they had effect in relation to 20th March 2000;

(b) in relation to shares that are relevant shares by virtue of paragraph (a) above, subsection (3AB) (deemed order of disposal of shares) has effect as if the reference there to 21st March 2000 were to 27th November 2002; and

(3) In consequence of subsection (2), in paragraph 78(2)(b) of Schedule 2 to the Income Tax (Earnings and Pensions) Act 2003 (c. 1) (reference to section 69(3AA) of the Finance Act 1989) after "21st March 2000" insert "or, by virtue of section 142(2) of the Finance Act 2003, 27th November 2002".

143 Restriction of deductions for employee benefit contributions

Schedule 24 to this Act (which makes provision restricting deductions for contributions by employers to third parties for the benefit of employees) has effect.

144 PAYE on notional payments: reimbursement period

(1) In section 222(1)(c) of the Income Tax (Earnings and Pensions) Act 2003 (period within which employee must reimburse employer for amount to be accounted for to Inland Revenue in respect of income tax on notional payment), for "30 days" substitute "90 days".

(2) This section has effect in relation to payments of income treated as made on or after 9th April 2003.

145 PAYE: regulations and notional payments

(1) In the list in subsection (2) of section 684 of the Income Tax (Earnings and Pensions) Act 2003 (c. 1) (PAYE regulations)--

(a) for item 2 substitute--

" 1A. Provision--

(a) for deductions to be made, if and to the extent that the payee does not object, with a view to securing that income tax payable in respect of any income of a payee for a tax year which is not PAYE income is deducted from PAYE income of the payee paid during that year; and

(b) as to the circumstances and manner in which a payee may object to the making of deductions.

2. Provision--

(a) for repayments or deductions to be made, if and to the extent that the payee does not object, in respect of any amounts overpaid or remaining unpaid (or treated as overpaid or remaining unpaid) on account of--

(i) income tax in respect of income for a previous tax year, or

(ii) capital gains tax in respect of chargeable gains for such a year; and

(b) as to the circumstances in which repayments or deductions may be made, and the circumstances and manner in which a payee may object to the making of repayments or deductions. " ;

(b) after item 4 insert --

" 4A. Provision authorising the recovery from the payee rather than the payer of any amount that the Inland Revenue considers should have been deducted by the payer. " ;

" 7A. Provision for excluding payments of such description as may be specified from the operation of the regulations in such circumstances as may be specified.

8. Provision for the making of decisions by the Board or the Inland Revenue as to any matter required to be decided for the purposes of the regulations and for appeals against such decisions. " .

(2) After subsection (7) of that section insert--

" (7A) Nothing in PAYE regulations may be read--

(a) as preventing the making of arrangements for the collection of tax in such manner as may be agreed by, or on behalf of, the payer and the Inland Revenue, or

(b) as requiring the payer to comply with the regulations in circumstances in which the Inland Revenue is satisfied that it is unnecessary or not appropriate for the payer to do so.

(7B) References in this section and section 685 to income tax in respect of PAYE income are references to income tax in respect of that income if reasonable assumptions are (when necessary) made about other income.

(7C) In this section and section 685--

"payer" means any person paying PAYE income and "payee" means any person in receipt of such income;
"specified" means specified in PAYE regulations. " .

(3) In subsection (2) of section 685 of that Act (tax tables), for paragraph (b) substitute--

" (b) subject to an adjustment in respect of amounts required to be deducted or repaid by PAYE regulations made under item 1A or 2 in the list in section 684(2). " .

(4) After subsection (3) of that section insert--

" (4) PAYE regulations may make provision, where it appears to the Inland Revenue that it is impracticable for a payer to deduct tax by reference to tax tables--

(a) for deductions to be made by the payer in accordance with other arrangements agreed as mentioned in section 684(7A)(a), or

(b) for the payee to be required to keep records and make payments and returns as if he were the payer. " .

(5) In section 707 of that Act (interpretation of Chapter 5 of Part 11), in the definition of "employment", for "this section" substitute "this Chapter".

(6) In section 710 of that Act (notional payments: accounting for tax)--

(a) in subsections (1) and (4), after "must" insert ", subject to and in accordance with PAYE regulations,";

(b) in subsection (5)(b) and (c), for "accounted for" substitute "deducted or accounted for (or required to be deducted or accounted for)"; and

(c) in subsection (6), for "an amount which" substitute "an amount of tax which" and for "is paid by the employee" substitute "is deducted".

(7) Substitute "PAYE regulations"--

(a) for "the said section 203" in subsection (8) of section 59A of the Taxes Management Act 1970 (c. 9) (payments on account of income tax); and

(b) for "that section" in subsection (10) of that section and subsections (2) and (8) of section 59B of that Act (payments of income tax and capital gains tax).

146 Payroll giving: extension of 10% supplement to 5th April 2004

In section 38 of the Finance Act 2000 (c. 17) (which provides for a 10% supplement on donations under the payroll deduction scheme), in subsection (6) (which limits the provision by reference to sums withheld by employers before 6th April 2003, and requires claims for reimbursement to be made before 6th April 2004)--

(a) for "6th April 2003" substitute "6th April 2004", and

(b) for "6th April 2004" substitute "6th April 2005".

147 Sub-contractor deductions etc: interest on late payment or repayment

(1) In section 566 of the Taxes Act 1988 (construction industry scheme: powers to make regulations) after subsection (1) insert--

" (1A) Interest required to be paid by regulations under subsection (1) above shall be paid without any deduction of income tax and shall not be taken into account in computing any income, profits or losses for any tax purposes. " .

(2) In the Social Security Contributions and Benefits Act 1992 (c. 4) and the Social Security Contributions and Benefits (Northern Ireland) Act 1992 (c. 7), in paragraph 6 of Schedule 1 (power to combine collection of national insurance contributions with tax) after sub-paragraph (4A) insert--

" (4B) Interest required to be paid, by virtue of sub-paragraph (2)(a) or (b) above, by regulations under sub-paragraph (1) above shall be paid without any deduction of income tax and shall not be taken into account in computing any income, profits or losses for any tax purposes. " .

(3) In section 22 of the Teaching and Higher Education Act 1998 (c. 30) (student loans), after subsection (9) insert--

" (10) Interest required to be paid, by virtue of subsection (5)(d), by regulations under this section shall be paid without any deduction of income tax and shall not be taken into account in computing any income, profits or losses for any tax purposes. " .

(4) In Article 3 of the Education (Student Support) (Northern Ireland) Order 1998 (S.I. 1998/1760 (N.I. 14)) (student loans), after paragraph (9) insert--

" (10) Interest required to be paid, by virtue of paragraph (5)(d), by regulations under this Article shall be paid without any deduction of income tax and shall not be taken into account in computing any income, profits or losses for any tax purposes. " .

(5) In its application to the computation of income, profits or losses for an accounting period (in the case of a company) or a year of assessment (in the case of a person who is not a company), this section has effect in relation to--

(a) accounting periods ending on or after 9th April 2003, or

(b) 2003-04 and subsequent years of assessment.

Taxation of non-resident companies and related matters

148 Meaning of "permanent establishment"

(1) For the purposes of the Tax Acts a company has a permanent establishment in a territory if, and only if--

(a) it has a fixed place of business there through which the business of the company is wholly or partly carried on, or

(b) an agent acting on behalf of the company has and habitually exercises there authority to do business on behalf of the company.

This general definition is subject to the following provisions.

(2) For this purpose a "fixed place of business" includes (without prejudice to the generality of that expression)--

(a) a place of management;

(b) a branch;

(d) a factory;

(e) a workshop;

(f) an installation or structure for the exploration of natural resources;

(g) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources;

(h) a building site or construction or installation project.

(3) A company is not regarded as having a permanent establishment in a territory by reason of the fact that it carries on business there through an agent of independent status acting in the ordinary course of his business.

(4) A company is not regarded as having a permanent establishment in a territory by reason of the fact that--

(a) a fixed place of business is maintained there for the purpose of carrying on activities for the company, or

(b) an agent carries on activities there for and on behalf of the company,

if, in relation to the business of the company as a whole, the activities carried on are only of a preparatory or auxiliary character.

(5) For this purpose "activities of a preparatory or auxiliary character" include (without prejudice to the generality of that expression)--

(a) the use of facilities for the purpose of storage, display or delivery of goods or merchandise belonging to the company;

(b) the maintenance of a stock of goods or merchandise belonging to the company for the purpose of storage, display or delivery;

(c) the maintenance of a stock of goods or merchandise belonging to the company for the purpose of processing by another person;

(d) purchasing goods or merchandise, or collecting information, for the company.

(6) In section 832(1) of the Taxes Act 1988 (interpretation of the Tax Acts), at the appropriate place insert--

" "permanent establishment", in relation to a company, has the meaning given by section 148 of the Finance Act 2003; " .

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