Finance Act 2005 (c. 7)

(The document as of February, 2008)

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Finance Act 2005

2005 CHAPTER 7

Content

Part 1

Excise duties
1. Tobacco products duty
  1. 1. Rates of tobacco products duty
2. Alcoholic liquor duties
  1. 2. Rate of duty on beer
  2. 3. Rates of duty on wine and made-wine
3. Hydrocarbon oil etc duties
  1. 4. Consolidation of current rates of hydrocarbon oil duties etc.
  2. 5. Rates of hydrocarbon oil duties etc. from 1st September 2005
4. Gaming duty
  1. 6. Rates of gaming duty
5. Vehicle excise duty
  1. 7. Rates
Part 2

Income tax, corporation tax and capital gains tax
1. Chapter 1
  
  Income tax and corporation tax charge and rate bands
  1. Income tax
    1. 8. Charge and rates for 2005-06
    2. 9. Personal allowances for those aged 65 or more
  2. Corporation tax
    1. 10. Charge and main rate for financial year 2006
    2. 11. Small companies' rate and fraction for financial year 2005
    3. 12. Corporation tax starting rate and fraction for financial year 2005
    4. 13. Non-corporate distribution rate for financial year 2005
  3. Trusts
    1. 14. Special trust rates not to apply to first slice of trust income
2. Chapter 2
  
  Personal taxation
  1. Taxable benefits
    1. 15. Childcare vouchers: exempt amount
    2. 16. Extension of exemptions for childcare, workplace parking, cycles etc
    3. 17. Transfer of previously loaned computer or cycle etc
    4. 18. Extension of outplacement services etc exemption: part-time employees
  2. Armed forces
    1. 19. Armed forces pensions and compensation schemes
3. Chapter 3
  
  Employment-related securities
  1. 20. Research institution spin-out companies
  2. 21. Research institution spin-out companies: pre-2nd December 2004 cases
  3. 22. Capital gains
4. Chapter 4
  
  Trusts with vulnerable beneficiary
  1. Introductory
    1. 23. Introduction
    2. 24. Entitlement to make claim for special tax treatment
  2. Income tax
    1. 25. Qualifying trusts income: special income tax treatment
    2. 26. Amount of relief
    3. 27. Trustees' liability: TQTI
    4. 28. Vulnerable person's liability: VQTI
    5. 29. Part years
  3. Capital gains tax
    1. 30. Qualifying trusts gains: special capital gains tax treatment
    2. 31. UK resident vulnerable persons: section 77 treatment
    3. 32. Non-UK resident vulnerable persons: amount of relief
    4. 33. Vulnerable person's liability: VQTG
  4. Qualifying trusts
    1. 34. Disabled persons
    2. 35. Relevant minors
    3. 36. Parts of assets
  5. Vulnerable persons
    1. 37. Vulnerable person election
    2. 38. Meaning of "disabled person"
    3. 39. Meaning of "relevant minor"
  6. Miscellaneous and supplementary
    1. 40. Power to make enquiries
    2. 41. Interpretation etc.
    3. 42. Application in relation to Scotland
    4. 43. Penalties under TMA 1970
    5. 44. Consequential amendments
    6. 45. Commencement
5. Chapter 5
  
  Alternative finance arrangements
  1. Introductory
    1. 46. Alternative finance arrangements
  2. Arrangements giving rise to alternative finance return
    1. 47. Alternative finance arrangements: alternative finance return
    2. 48. Arrangements within section 47: foreign currency and non-residents
  3. Arrangements giving rise to profit share return
    1. 49. Alternative finance arrangements: profit share return
  4. Treatment of alternative finance arrangements
    1. 50. Treatment of alternative finance arrangements: companies
    2. 51. Treatment of alternative finance arrangements: persons other than companies
    3. 52. Provision not at arm's length
    4. 53. Treatment of section 47 arrangements: sale and purchase of asset
    5. 54. Section 49 arrangements: profit share return not to be treated as distribution
  5. Supplementary
    1. 55. Further provisions
    2. 56. Application of Chapter
    3. 57. Interpretation of Chapter
6. Chapter 6
  
  Film relief
  1. Tax relief for limited-budget films
    1. 58. Relief for production and acquisition expenditure on limited-budget films
  2. Restrictions on relief
    1. 59. Restrictions on relief for production and acquisition expenditure
  3. Deferred income agreements
    1. 60. Deferred income agreements which exist when relief claimed
    2. 61. Meaning of "deferred income agreement in respect of a film"
    3. 62. Deferred income agreements entered into after relief claimed
    4. 63. Sections 60 to 62: supplementary
    5. 64. Transitional provision for years of assessment before the year 2005-06
    6. 65. Corresponding provision in ITTOIA 2005
  4. Companies benefited by film relief: exit charges
    1. 66. When a chargeable event occurs
    2. 67. Consequences of a chargeable event: exit event X or Y
    3. 68. Exit event Z: a relevant disposal at an undervalue
    4. 69. Consequences of a chargeable event: exit event Z
    5. 70. Valuation of the "rights to guaranteed income" and "disposed rights"
    6. 71. Meaning of "company" and related terms
7. Chapter 7
  
  Avoidance involving partnership
  1. Partners: restrictions on relief
    1. 72. Removal of restrictions on interest relief
    2. 73. Meaning of "contribution to the trade"
  2. Partners: recovery of excess relief
    1. 74. Recovery of excess relief given under section 380 or 381 of ICTA
    2. 75. Computing the chargeable amount
    3. 76. Meaning of "relevant loss"
    4. 77. Transitional provision for years of assessment before the year 2005-06
    5. 78. Consequential amendments
  3. Partners benefited by film relief
    1. 79. Meaning of "capital contribution to the trade"
8. Chapter 8
  
  Accounting practice and related matters
  1. 80. Accounting practice and related matters
  2. 81. Computation of profits: change of accounting basis
  3. 82. Change of accounting practice: deferment of transitional adjustments
  4. 83. Application of accounting standards to securitisation companies
  5. 84. Taxation of securitisation companies
9. Chapter 9
  
  International matters
  1. Double taxation relief: general
    1. 85. Dividends by reference to which a deduction is allowed: no underlying tax
  2. Double taxation relief: restrictions
    1. 86. Limits on credit: income tax and corporation tax: trading profits
    2. 87. Schemes and arrangements designed to increase relief
    3. 88. Self-assessment amendments
  3. Controlled foreign companies
    1. 89. ADP dividends and double taxation relief
    2. 90. Foreign taxation of group as single entity: exclusion of ADP CFCs
  4. Annual payments and double taxation relief
    1. 91. Tax avoidance involving annual payments and double taxation relief
10. Chapter 10
  
  Miscellaneous
  1. Capital allowances
    1. 92. Capital allowances: renovation of business premises in disadvantaged areas
  2. Tonnage tax
    1. 93. Tonnage tax
Part 3

Stamp taxes
1. Stamp duty land tax
  1. 94. Alternative property finance
2. Stamp duty land tax and stamp duty
  1. 95. Raising of thresholds
  2. 96. Removal of disadvantaged areas relief for non-residential property
3. Stamp duty and stamp duty reserve tax
  1. 97. Demutualisation of insurance companies
Part 4

Other taxes
1. Inheritance tax
  1. 98. Rates and rate bands for the next three years
2. Landfill tax
  1. 99. Rate of landfill tax
3. Lorry road-user charge
  1. 100. Lorry road-user charge
Part 5

Pensions etc
1. 101. Pension schemes etc.
2. 102. Pension Protection Fund etc.
Part 6

Miscellaneous
1. 103. Civil partnerships etc
Part 7

Supplementary provisions
1. 104. Repeals
2. 105. Interpretation
3. 106. Short title
1. Schedule 1
  
  Non-UK resident vulnerable persons: interpretation
2. Schedule 2
  
  Alternative finance arrangements: further provisions
3. Schedule 3
  
  Films: restrictions on relief for production and acquisition expenditure
  1. Part 1
    
    Restrictions on circumstances in which relief may be obtained
  2. Part 2
    
    Restrictions on amount of relief which may be obtained
  3. Part 3
    
    Minor and consequential amendments
  4. Part 4
    
    Interpretation
4. Schedule 4
  
  Accounting practice and related matters
  1. Part 1
    
    Bad debts and related matters
  2. Part 2
    
    Other provisions connected with accounting practice
5. Schedule 5
  
  Section 804ZA: prescribed schemes and arrangements
6. Schedule 6
  
  Capital allowances: renovation of business premises in disadvantaged areas
  1. Part 1
    
    New Part 3A of the Capital Allowances Act 2001
  2. Part 2
    
    Consequential amendments
7. Schedule 7
  
  Tonnage tax
  1. Part 1
    
    Amendments of Schedule 22 to FA 2000
  2. Part 2
    
    Commencement and transitional provision
8. Schedule 8
  
  Stamp duty land tax: alternative property finance
9. Schedule 9
  
  Stamp duty land tax and stamp duty: removal of disadvantaged areas relief for non-residential property
10. Schedule 10
  
  Pension schemes etc.
11. Schedule 11
  
  Repeals
  1. Part 1
    
    Excise duties
  2. Part 2
    
    Income tax, corporation tax and capital gains tax
  3. Part 3
    
    Stamp taxes
  4. Part 4
    
    Pensions etc

An Act to grant certain duties, to alter other duties, and to amend the law relating to the National Debt and the Public Revenue, and to make further provision in connection with finance.

[7th April 2005]

Most Gracious Sovereign

We , Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom in Parliament assembled, towards raising the necessary supplies to defray Your Majesty's public expenses, and making an addition to the public revenue, have freely and voluntarily resolved to give and to grant unto Your Majesty the several duties hereinafter mentioned; and do therefore most humbly beseech Your Majesty that it may be enacted, and be it enacted by the Queen's most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:--

Part 1 Excise duties

Tobacco products duty

1 Rates of tobacco products duty

(1) For the Table of rates of duty in Schedule 1 to the Tobacco Products Duty Act 1979 (c. 7) substitute--

Table

1.Cigarettes	An amount equal to 22 per cent of the retail price plus £102.39 per thousand cigarettes.
2.Cigars	£149.12 per kilogram.
3.Hand-rolling tobacco	£107.18 per kilogram.
4.Other smoking tobacco and chewing tobacco	£65.56 per kilogram.

(2) This section shall be deemed to have come into force at 6 o'clock in the evening of 16th March 2005.

Alcoholic liquor duties

2 Rate of duty on beer

(1) In section 36(1AA)(a) of ALDA 1979 (rate of duty on beer) for "£12.59" substitute "£12.92".

(2) This section shall be deemed to have come into force at midnight on 20th March 2005.

3 Rates of duty on wine and made-wine

(1) For Part 1 of the Table of rates of duty in Schedule 1 to ALDA 1979 (rates of duty on wine and made-wine) substitute--

Part 1 Wine and made-wine of a strength not exceeding 22 per cent

Description of wine or made-wine	Rates of duty per hectolitre
	£
Wine or made-wine of a strength not exceeding 4 per cent	51.69
Wine or made-wine of a strength exceeding 4 per cent but not exceeding 5.5 per cent	71.07
Wine or made-wine of a strength exceeding 5.5 per cent but not exceeding 15 per cent and not sparkling	167.72
Sparkling wine or sparkling made-wine of a strength exceeding 5.5 per cent but less than 8.5 per cent	166.70
Sparkling wine or sparkling made-wine of a strength of 8.5 per cent or of a strength exceeding 8.5 per cent but not exceeding 15 per cent	220.54
Wine or made-wine of a strength exceeding 15 per cent but not exceeding 22 per cent	223.62

(2) This section shall be deemed to have come into force at midnight on 20th March 2005.

Hydrocarbon oil etc duties

4 Consolidation of current rates of hydrocarbon oil duties etc.

(1) HODA 1979 is amended as follows.

(2) In subsection (1A) of section 6 (hydrocarbon oil: rates of duty)--

(a) in paragraph (a) (ultra low sulphur petrol), for "£0.4902" substitute "£0.4710",

(b) in paragraph (aa) (sulphur-free petrol), for "£0.4852" substitute "£0.4710",

(c) in paragraph (b) (light oil other than ultra low sulphur petrol and sulphur-free petrol), for "£0.5790" substitute "£0.5620",

(d) in paragraph (c) (ultra low sulphur diesel), for "£0.4902" substitute "£0.4710",

(e) in paragraph (ca) (sulphur-free diesel), for "£0.4852" substitute "£0.4710", and

(f) in paragraph (d) (heavy oil other than ultra low sulphur diesel and sulphur-free diesel), for "£0.5487" substitute "£0.5327".

(3) In subsection (3) of that section (aviation gasoline), for "(1A) above in relation to light oil" substitute "(1A)(b) above".

(4) In section 6AA(3) (biodiesel), for "£0.2852" substitute "£0.2710".

(5) In section 6AD(3) (bioethanol), for "£0.2852" substitute "£0.2710".

(6) In section 8(3) (road fuel gas)--

(a) in paragraph (a) (natural road fuel gas), for "£0.1110" substitute "£0.0900", and

(b) in paragraph (b) (other road fuel gas), for "£0.1303" substitute "£0.0900".

(7) In section 11(1) (rebate on heavy oil)--

(a) in paragraph (a) (fuel oil), for "£0.0624" substitute "£0.0482",

(b) in paragraph (b) (gas oil which is not ultra low sulphur diesel), for "£0.0664" substitute "£0.0522", and

(8) In section 13AA(1) (restrictions on use of rebated kerosene), for "for rebated gas oil which is then in force, instead of at the rate then in force under section 11(1)(c) above" substitute "then in force under paragraph (b) of subsection (1) of section 11, instead of at the rate then in force under paragraph (c) of that subsection".

(9) In section 13A(1) (rebate on unleaded petrol), for "£0.0620" substitute "£0.0601".

(10) In section 14(1) (rebate on light oil for use as furnace oil), for "£0.0624" substitute "£0.0482".

(11) In consequence of the preceding provisions the following instruments are revoked--

(a) the Excise Duties (Surcharges or Rebates) (Hydrocarbon Oils etc.) Order 2004 (S.I. 2004/2063),

(b) the Excise Duties (Road Fuel Gas) (Reliefs) Regulations 2004 (S.I. 2004/2069),

(d) the Excise Duties (Surcharges or Rebates) (Bioethanol) Order 2004 (S.I. 2004/3162).

(12) This section comes into force on the day on which this Act is passed.

5 Rates of hydrocarbon oil duties etc. from 1st September 2005

(1) HODA 1979 is amended as follows.

(2) In subsection (1A) of section 6 (hydrocarbon oil: rates of duty)--

(a) in paragraph (a) (ultra low sulphur petrol), for "£0.4710" substitute "£0.4832",

(b) in paragraph (aa) (sulphur-free petrol), for "£0.4710" substitute "£0.4832",

(c) in paragraph (b) (light oil other than ultra low sulphur petrol and sulphur-free petrol), for "£0.5620" substitute "£0.5766",

(d) in paragraph (c) (ultra low sulphur diesel), for "£0.4710" substitute "£0.4832",

(e) in paragraph (ca) (sulphur-free diesel), for "£0.4710" substitute "£0.4832", and

(f) in paragraph (d) (heavy oil other than ultra low sulphur diesel and sulphur-free diesel), for "£0.5327" substitute "£0.5465".

(3) In section 6AA(3) (biodiesel), for "£0.2710" substitute "£0.2832".

(4) In section 6AD(3) (bioethanol), for "£0.2710" substitute "£0.2832".

(5) In section 8(3) (road fuel gas)--

(a) in paragraph (a) (natural road fuel gas), for "£0.0900" substitute "£0.1080", and

(b) in paragraph (b) (other road fuel gas), for "£0.0900" substitute "£0.1270".

(6) In section 11(1) (rebate on heavy oil)--

(a) in paragraph (a) (fuel oil), for "£0.0482" substitute "£0.0604",

(b) in paragraph (b) (gas oil which is not ultra low sulphur diesel), for "£0.0522" substitute "£0.0644", and

(7) In section 13A(1) (rebate on unleaded petrol), for "£0.0601" substitute "£0.0617".

(8) In section 14(1) (rebate on light oil for use as furnace oil), for "£0.0482" substitute "£0.0604".

(9) This section comes into force on 1st September 2005.

Gaming duty

6 Rates of gaming duty

(1) For the Table in section 11(2) of FA 1997 (rates of gaming duty) substitute--

Table

Part of gross gaming yield	Rate
The first £534,500	2.5 per cent.
The next £1,186,500	12.5 per cent.
The next £1,186,500	20 per cent.
The next £2,078,000	30 per cent.
The remainder	40 per cent.

(2) This section has effect in relation to accounting periods beginning on or after 1st April 2005.

Vehicle excise duty

7 Rates

(1) VERA 1994 is amended as follows.

(2) In section 4 (vehicle licences: amount of duty), omit--

(a) subsection (3) (treatment of fractions of five pence in determining rate of duty on six month licence which is set at 55% of annual rate), and

(b) in subsection (7) (power to amend or repeal by order), "or (3)".

(3) In section 13(3)(b) (trade licences: annual rate of duty for licences not to be used only for motorcycles not exceeding 450 kilograms in weight unladen) as currently in force, for "annual rate currently applicable to a vehicle under paragraph 1(2) of Schedule 1" substitute "basic goods vehicle rate currently applicable".

(4) In section 13(4)(b) (trade licences: annual rate of duty for licences not to be used only for motorcycles not exceeding 450 kilogrammes in weight unladen) as set out in paragraph 8(1) of Schedule 4 to have effect on and after a day appointed by order, for "annual rate currently applicable to a vehicle under paragraph 1(2) of Schedule 1" substitute "basic goods vehicle rate currently applicable".

(5) In both versions of section 13, after subsection (6) insert--

" (7) In this section "the basic goods vehicle rate" means the annual rate applicable, by virtue of sub-paragraph (1) of paragraph 9 of Schedule 1, to a rigid goods vehicle which--

(a) is not a vehicle with respect to which the reduced pollution requirements are satisfied, and

(b) falls within column (3) of the table in that sub-paragraph and has a revenue weight exceeding 3,500 kilograms and not exceeding 7,500 kilograms. "

(6) In sections 35A(5) and 36(3) (dishonoured cheques: appropriate annual rate of vehicle excise duty), for the words from "to the annual rate" to "(or" substitute--

" (a) in the case of a vehicle licence, to the annual rate which at the beginning of the relevant period was applicable to a vehicle of the description specified in the application, or

(b) in the case of a trade licence, to the basic goods vehicle rate (within the meaning of section 13) which was applicable at that time (or to the annual rate which at that time was applicable " .

(7) Schedule 1 (annual rates of duty) is amended as follows.

(8) In paragraph 1(2) (general rate of duty except in case of vehicle with engine with cylinder capacity not exceeding 1,549 cubic centimetres), for "£165" substitute "£170".

(9) For the Table in paragraph 1B (rates of duty applicable to light passenger vehicles registered on or after 1st March 2001 on basis of certificate specifying CO₂ emissions figure) substitute--

CO₂ emissions figure		Rate
(1)	(2)	(3)	(4)	(5)
Exceeding	Not exceeding	Reduced rate	Standard rate	Premium rate
g/km	g/km	£	£	£
--	100	55	65	75
100	120	65	75	85
120	150	95	105	115
150	165	115	125	135
165	185	140	150	160
185	--	160	165	170

(10) In paragraph 3(1A) (rate applicable to buses with respect to which reduced pollution requirements are satisfied), for "the general rate specified in paragraph 1(2)" substitute "£165".

(11) In paragraph 7(3A)(b) (rate applicable to haulage vehicles which are not showman's vehicles and with respect to which reduced pollution requirements are satisfied), for "the general rate specified in paragraph 1(2)" substitute "£165".

(12) In paragraph 10 (trailer supplement)--

(a) in sub-paragraph (2) (rate where plated gross weight of trailer exceeds 4,000 kilograms but does not exceed 12,000 kilograms), for "an amount equal to the amount of the general rate specified in paragraph 1(2)" substitute "£165",

(b) in sub-paragraph (3) (rate where plated gross weight of trailer exceeds 12,000 kilograms), for "an amount equal to 140 per cent of the amount of the general rate specified in paragraph 1(2)" substitute "£230", and

(c) omit sub-paragraphs (3A) and (3B) (rounding of rate set under sub-paragraph (3) as percentage of general rate specified in paragraph 1(2)).

(13) Subsection (2), and subsection (1) so far as relating to it, have effect on the day on which this Act is passed.

(14) Subsection (4), and subsections (1) and (5) so far as relating to it, have effect on and after that day.

(15) Subsection (6), and subsection (1) so far as relating to it, have effect on and after 17th March 2005.

(16) Subject to that, this section has effect in relation to licences taken out on or after 17th March 2005 for a period beginning on or after 1st April 2005.

Part 2 Income tax, corporation tax and capital gains tax

Chapter 1 Income tax and corporation tax charge and rate bands

Income tax

8 Charge and rates for 2005-06

Income tax shall be charged for the year 2005-06, and for that year--

(a) the starting rate shall be 10%;

(b) the basic rate shall be 22%;

9 Personal allowances for those aged 65 or more

(1) For the year 2005-06--

(a) the amount specified in section 257(2) of ICTA (claimant aged 65 or more) shall be £7,090; and

(b) the amount specified in section 257(3) of that Act (claimant aged 75 or more) shall be £7,220.

(2) Accordingly, section 257C(1) of that Act (indexation), so far as it relates to the amounts so specified, does not apply for that year.

Corporation tax

10 Charge and main rate for financial year 2006

Corporation tax shall be charged for the financial year 2006 at the rate of 30%.

11 Small companies' rate and fraction for financial year 2005

For the financial year 2005--

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

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

12 Corporation tax starting rate and fraction for financial year 2005

For the financial year 2005--

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

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

13 Non-corporate distribution rate for financial year 2005

The non-corporate distribution rate for the financial year 2005 shall be 19%.

Trusts

14 Special trust rates not to apply to first slice of trust income

(1) In ICTA, after section 686C insert--

" 686D Special trust rates not to apply to first slice of trust income

(1) This section applies where income arising (or treated as arising) to the trustees of a trust in a year of assessment consists of or includes income subject to a special trust tax rate ("the special trust tax rate income").

(2) "Income subject to a special trust tax rate" means any income which is (or apart from this section would be) chargeable to income tax at--

(a) the dividend trust rate, or

(b) the rate applicable to trusts.

(3) So much of the special trust tax rate income as does not exceed £500 is not chargeable to income tax at the dividend trust rate or the rate applicable to trusts (but is instead chargeable to income tax at the basic rate, the lower rate or the dividend ordinary rate, depending on the nature of the income).

(4) In the following provisions "the relevant purposes" means the purposes of--

(a) determining (in accordance with section 1A(5)) which of the special trust tax rate income is not chargeable to income tax at the dividend trust rate, or the rate applicable to trusts, by virtue of subsection (3), and

(b) determining at which of the basic rate, the lower rate and the dividend ordinary rate that special trust tax rate income is chargeable to income tax.

(5) For the relevant purposes the fact that any amount forming part of the special trust tax rate income is subject to a special trust tax rate is to be disregarded if, in any circumstances, an amount of that description is chargeable on trustees at the basic rate, the lower rate or the dividend ordinary rate.

(6) For the relevant purposes any of the special trust tax rate income that consists of--

(a) an amount which, by virtue of section 686A, is treated for the purposes of the Tax Acts as if it were income to which section 686 applies, or

(b) income treated as arising under Chapter 5 of Part 4 of ITTOIA 2005 (stock dividends from UK resident companies),

is to be regarded as income to which section 1A applies and which is chargeable at the dividend ordinary rate.

(7) For the relevant purposes any of the special trust tax rate income that consists of--

(a) income treated as arising under section 761(1) (offshore income gains),

(b) income treated as received under section 68 of FA 1989 (employee share ownership trusts), or

(c) profits or gains which are treated as income under Chapter 12 of Part 4 of ITTOIA 2005 (guaranteed returns on disposals of futures and options) and in relation to which section 568 of that Act applies (profits or gains not meeting conditions of that section),

is or are to be regarded as chargeable at the basic rate.

(8) For the relevant purposes any of the special trust tax rate income that consists of--

(a) income treated as received under section 714(2) or 716(3) (transfers of securities),

(b) profits taken to be income arising under Chapter 8 of Part 4 of ITTOIA 2005 (profits from deeply discounted securities), or

(c) gains which are treated as arising under Chapter 9 of that Part and on which tax is charged at the rate applicable to trusts under section 467(7)(b) of that Act (gains from contracts for life assurance),

is or are chargeable at the lower rate. "

(2) In section 686(1) of ICTA (accumulation and discretionary trusts: special rates of tax), after "shall" insert "(subject to section 686D)".

(3) In subsection (3) of section 687 of ICTA (payments under discretionary trusts: amounts to be set against amount assessable on trustees under subsection (2)(b) of that section), after paragraph (a) insert--

" (aa1) the amount of any tax on income arising to the trustees which is charged by virtue of section 686D(3) at the basic rate or the lower rate; " .

(4) After that subsection insert--

" (3A) Paragraphs (a1) to (bc) of subsection (3) above do not apply in relation to income, distributions or sums chargeable to tax by virtue of section 686D(3) at the basic rate, the lower rate or the dividend ordinary rate. "

(5) This section applies for the year 2005-06 and subsequent years of assessment.

Chapter 2 Personal taxation

Taxable benefits

15 Childcare vouchers: exempt amount

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-- Back --

Stat

Finance Act 2005 (c. 7)

Finance Act 2005

2005 CHAPTER 7

CONTENTS

Content

Part 1 Excise duties

Tobacco products duty

1 Rates of tobacco products duty

Table

Alcoholic liquor duties

2 Rate of duty on beer

3 Rates of duty on wine and made-wine

Part 1 Wine and made-wine of a strength not exceeding 22 per cent

Hydrocarbon oil etc duties

4 Consolidation of current rates of hydrocarbon oil duties etc.

5 Rates of hydrocarbon oil duties etc. from 1st September 2005

Gaming duty

6 Rates of gaming duty

Table

Vehicle excise duty

7 Rates

Part 2 Income tax, corporation tax and capital gains tax

Chapter 1 Income tax and corporation tax charge and rate bands

Income tax

8 Charge and rates for 2005-06

9 Personal allowances for those aged 65 or more

Corporation tax

10 Charge and main rate for financial year 2006

11 Small companies' rate and fraction for financial year 2005

12 Corporation tax starting rate and fraction for financial year 2005

13 Non-corporate distribution rate for financial year 2005

Trusts

14 Special trust rates not to apply to first slice of trust income

" 686D Special trust rates not to apply to first slice of trust income

Chapter 2 Personal taxation

Taxable benefits

15 Childcare vouchers: exempt amount