Finance Act 2006 (c. 25)

(The document as of February, 2008)

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(11) Omit paragraphs 8 to 11.

(12) In paragraph 12(1) omit ", supply or appropriation".

(13) After paragraph 12 insert--

" Interpretation

12A For the purposes of section 61 and this Schedule--

(a) a reference to the proposed delivery month in relation to a proposed transaction is a reference to the month in which delivery is to take place,

(b) "relevant delivery" means a delivery of oil under a contract made at arm's length in respect of which there has been no effective nomination, and

(14) This section shall have effect in relation to a transaction whenever proposed, but shall not have effect in relation to a proposed transaction with a transaction base date (within the meaning given by regulations under paragraph 4 of Schedule 10 to FA 1987) on or before 30th June 2006.

(15) Regulations under paragraph 4(1B) of Schedule 10 to FA 1987 (inserted by subsection (5) above) may have retrospective effect.

151 Nomination excesses and corporation tax

(1) After section 493(1) of ICTA (valuation of oil disposed of or appropriated) insert--

" (1A) Where an excess of nominated proceeds in a chargeable period (within the meaning given by section 61 of the Finance Act 1987) is taken into account in computing a person's profits under section 2(5)(e) of the 1975 Act (or would be taken into account if the person were chargeable to tax under that Act in respect of a field)--

(a) for the purposes of subsection (1) the amount of the excess shall be added to the consideration which the person is deemed to have received in respect of oil disposed of by him in the period, and

(b) for the purposes of corporation tax, that amount shall be available to the person as a deduction in computing the profits of any trade to which section 492(1) does not apply. "

(2) This section shall have effect in relation to deliveries of oil made on or after 1st July 2006.

Ring fence trades

152 Increase in rate of supplementary charge

(1) In section 501A of ICTA (supplementary charge in respect of ring fence trades), in subsection (1) (charge of 10 per cent on adjusted ring fence profits), for "10 per cent" substitute "20 per cent".

(2) The amendment made by subsection (1) has effect in relation to any accounting period beginning on or after 1st January 2006 (but see also subsection (3)).

(3) For the purpose of calculating the amount of the supplementary charge on a company for an accounting period (a "straddling period") beginning before 1st January 2006 and ending on or after that date--

(a) so much of the straddling period as falls before 1st January 2006, and so much of the straddling period as falls on or after that date, are treated as separate accounting periods, and

(b) the company's adjusted ring fence profits for the straddling period are apportioned to the two separate accounting periods in proportion to the number of days in those periods.

(4) The amount of the supplementary charge on the company for the straddling period is the sum of the amounts of supplementary charge that would, in accordance with subsection (3), be chargeable on the company for those separate accounting periods.

(5) In the case of a company's straddling period--

(a) the Instalment Payments Regulations apply as if the amendment made by subsection (1) had not been made, but

(b) those Regulations also apply separately, in accordance with the following subsection, in relation to the increase in the amount of any supplementary charge on the company for that period that arises as a result of that amendment.

(6) In that separate application of those Regulations as mentioned in subsection (5)(b), those Regulations have effect as if, for the purposes of those Regulations,--

(a) the straddling period were an accounting period beginning on 1st January 2006,

(b) supplementary charge were chargeable on the company for that period, and

(c) the amount of that charge were equal to the increase in the amount of the supplementary charge for the straddling period that arises as a result of the amendment made by subsection (1).

(7) Any reference in the Instalment Payments Regulations to the total liability of a company is, accordingly, to be read--

(a) in their application as a result of subsection (5)(a), as a reference to the amount that would be the company's total liability for the straddling period if the amendment made by subsection (1) had not been made, and

(b) in their application as a result of subsection (5)(b), as a reference to the amount of the supplementary charge on the company for the deemed accounting period under subsection (6)(a).

(8) For the purposes of the Instalment Payments Regulations--

(a) a company is to be regarded as a large company as respects the deemed accounting period under subsection (6)(a) if (and only if) it is a large company for those purposes as respects the straddling period, and

(b) any question whether a company is a large company as respects the straddling period is to be determined as it would have been determined if the amendment made by subsection (1) had not been made.

(9) If the Instalment Payments Regulations--

(a) apply in relation to a company's liability to supplementary charge for the deemed accounting period under subsection (6)(a), and

(b) would (but for this subsection) treat any instalment payment in respect of that liability as being due and payable on a date falling on or before 22nd March 2006,

those Regulations have effect as if the payment were due and payable instead at the end of the period of 14 days beginning with that date.

(10) In this section--

"adjusted ring fence profits" has the meaning given by section 501A of ICTA,
"the Instalment Payments Regulations" means the Corporation Tax (Instalment Payments) Regulations 1998 (S.I. 1998/ 3175),
"supplementary charge" means any sum chargeable under section 501A(1) of ICTA as if it were an amount of corporation tax.

153 Election to defer capital allowances

(1) This section applies if--

(a) a company carries on a ring fence trade in an accounting period beginning on or after 1st January 2006,

(b) relevant expenditure is incurred for the purposes of or in relation to the ring fence trade (see subsections (4) to (7)), and

(c) the relevant expenditure would (but for this section) be treated as incurred for the purposes of CAA 2001 in the period of 12 months ending with 31st December 2005.

(2) The company may elect for the relevant expenditure to be treated instead as if it were incurred on the first day of the company's first accounting period beginning on or after 1st January 2006.

(3) The election--

(a) has effect for the purposes of CAA 2001 other than those of section 45G (expenditure not first-year qualifying expenditure under section 45F if plant or machinery used for less than 5 years in a ring fence trade), and

(b) must be made by notice given to an officer of Revenue and Customs on or before 31st December 2007.

(4) Expenditure is relevant expenditure if it falls within any of Cases A to C.

(5) Expenditure falls within Case A if--

(a) it is first-year qualifying expenditure on the provision of plant or machinery under section 45F of CAA 2001 (expenditure on plant and machinery for use wholly in a ring fence trade), and

(b) no disposal event (see subsection (8)) in relation to the plant or machinery occurs in the relevant period.

(6) Expenditure falls within Case B--

(a) if it is first-year qualifying expenditure under section 416B of CAA 2001 (mineral extraction allowances: expenditure incurred by a company for purposes of a ring fence trade),

(b) if no disposal event in relation to any asset representing the expenditure occurs in the relevant period,

(c) if (or so far as) it is expenditure to which no part of any capital sum received by the company in the relevant period is reasonably attributable under section 425(2) of CAA 2001, and

(d) if no entitlement to a balancing allowance for a chargeable period in respect of the expenditure arises under any of sections 426 to 431 of CAA 2001 as a result of an event that occurs in the relevant period (as well as in that chargeable period).

The reference in paragraph (b) to any asset representing the expenditure is to be read in accordance with section 416B(4) of CAA 2001.

(7) Expenditure falls within Case C if--

(a) it is qualifying expenditure on research and development under Part 6 of CAA 2001 where the ring fence trade is the trade by reference to which the expenditure is qualifying expenditure, and

(b) no disposal event in relation to any asset representing the expenditure occurs in the relevant period.

(8) In this section--

"disposal event"--
(a)
in relation to first-year qualifying expenditure under section 45F of CAA 2001, means an event of a kind that requires a disposal value to be brought into account under Part 2 of that Act (whether under section 61(1) or otherwise),
(b)
in relation to first-year qualifying expenditure under section 416B of CAA 2001, means an event of a kind that requires a disposal value to be brought into account under section 421 or 422 of that Act,
(c)
in relation to qualifying expenditure on research and development under Part 6 of CAA 2001, means an event of a kind that requires a disposal value to be brought into account under section 443(1) of that Act,
"the relevant period", in relation to any expenditure for the purposes of or in relation to a company's ring fence trade, means the period--
(a)
beginning with the day on which the expenditure would (but for this section) be treated as incurred for the purposes of CAA 2001, and
(b)
ending with the first day of the company's first accounting period beginning on or after 1st January 2006,
"ring fence trade" means a ring fence trade in respect of which tax is chargeable under section 501A of ICTA (supplementary charge in respect of ring fence trades).

154 Ring fence expenditure supplement

(1) Chapter 5 of Part 12 of ICTA (petroleum extraction activities) is amended as follows.

(2) After section 496A (exploration expenditure supplement) insert--

" 496B Ring fence expenditure supplement

Schedule 19C to this Act (ring fence expenditure supplement) shall have effect. " .

(3) Schedule 19B (petroleum extraction activities: exploration expenditure supplement) is amended as follows.

(4) In paragraph 1 (about the Schedule)--

(a) in sub-paragraph (1) (entitlement of company to supplement), in the opening words, after "2004" insert "but before 1st January 2006",

(b) in sub-paragraph (2) (condition that expenditure incurred on or after 1st January 2004), after "2004" insert "but before 1st January 2006".

(5) In paragraph 3 (accounting periods)--

(a) in sub-paragraph (1), in the definition of "post-commencement period", after "2004" insert "but before 1st January 2006",

(b) in sub-paragraph (1), in the definition of "pre-commencement period", after "2004" insert "but before 1st January 2006",

" (3) In the case of an accounting period (a "straddling period") of any qualifying company beginning before 1st January 2006 and ending on or after that date--

(a) so much of the straddling period as falls before 1st January 2006, and

(b) so much of the straddling period as falls on or after that date,

are treated as separate accounting periods for the purposes of this Schedule.

(4) Special provision is made elsewhere in this Schedule in relation to straddling periods (see paragraphs 16, 18A and 22). " .

(6) In paragraph 6 (qualifying E&A expenditure), in sub-paragraph (2) (condition that expenditure incurred on or after 1st January 2004), after "2004" insert "but before 1st January 2006".

(7) In paragraph 15 (supplement in respect of a post-commencement period), in sub-paragraph (2) (supplement to be treated as a loss for the purposes of Corporation Tax Acts), for "this Schedule)" substitute "this Schedule or Part 4 of Schedule 19C)".

(8) In paragraph 16 (amount of post-commencement supplement for a post-commencement period), after sub-paragraph (2) (proportionate reduction of supplement if post-commencement period less than 12 months) insert--

" (2A) But, if the post-commencement period is the deemed accounting period under paragraph 3(3) ending before 1st January 2006, sub-paragraph (2) has no effect in relation to the amount of the supplement for that period. " .

(9) After paragraph 18 (ring fence losses and non-qualifying losses) insert--

" Special rule for straddling periods

18A (1) This paragraph applies in any case where the period of the loss in which a ring fence loss is incurred is the deemed accounting period under paragraph 3(3) ending before 1st January 2006.

(2) The following assumption shall be made for the purpose of calculating the amount of the qualifying E&A loss and the amount of the non-qualifying loss.

(3) The assumption is that the loss made in the trade is taken to be the loss incurred in the accounting period beginning before 1st January 2006 and ending on or after that date (disregarding paragraph 3(3)).

(4) The amount of the non-qualifying loss (found in accordance with that assumption) is then reduced (but not below nil) by the following amount.

(5) The amount is the amount of the ring fence loss in the deemed accounting period beginning on 1st January 2006 determined under paragraph 18 of Schedule 19C for the purposes of Part 4 of that Schedule. " .

(10) In paragraph 22 (reductions in respect of utilised ring fence profits), at the end insert--

" (4) If the post-commencement period is the deemed accounting period under paragraph 3(3) ending before 1st January 2006 ("the deemed accounting period"), the amount of the profits of the deemed accounting period is determined as follows.

(5) The amount of the profits of the straddling period is apportioned to the deemed accounting period in proportion to the number of days in the deemed accounting period that fall in the straddling period.

(6) The apportioned amount is taken for the purposes of this paragraph to be the amount of the profits of the deemed accounting period.

(7) In this paragraph "the straddling period", in relation to a qualifying company, means an accounting period of the company beginning before 1st January 2006 and ending on or after that date (disregarding paragraph 3(3)). " .

(11) After Schedule 19B insert the Schedule 19C set out in Schedule 19 to this Act.

Part 6 Inheritance tax

Future rates and bands

155 Rates and rate bands for 2008-09 and 2009-10

(1) For the Table in Schedule 1 to IHTA 1984 (rates and rate bands), as it has effect in relation to chargeable transfers made on or after 6th April 2008, there shall be successively substituted--

(a) the 2008-09 Table, which shall apply to any chargeable transfer made on or after 6th April 2008 (but before 6th April 2009), and

(b) the 2009-10 Table, which shall apply to any chargeable transfer made on or after 6th April 2009.

(2) Subsection (1)(b) is without prejudice to the application of section 8 of IHTA 1984 (indexation) by virtue of the difference between the retail prices index for the month of September in 2008 or any later year and that for the month of September in the following year.

(3) The 2008-09 Table is--

Table of Rates of Tax

Portion of value		Rate of tax
Lower limit (£)	Upper limit (£)	Per cent.
0	312,000	Nil
312,000	--	40

(4) The 2009-10 Table is--

Table of Rates of Tax

Portion of value		Rate of tax
Lower limit (£)	Upper limit (£)	Per cent.
0	325,000	Nil
325,000	--	40

(5) Section 8(1) of IHTA 1984 (indexation of rate bands) shall not have effect as respects any difference between the retail prices index--

(a) for the month of September 2006 and that for the month of September 2007, or

(b) for the month of September 2007 and that for the month of September 2008.

Trusts

156 Rules for trusts etc

(1) Schedule 20 contains--

(a) amendments of provisions of IHTA 1984 relating to settled property,

(b) amendments of provisions relating to property that, for purposes of that Act, is property subject to a reservation, and

(2) Those amendments have effect as mentioned in that Schedule.

157 Purchase of interests in foreign trusts

(1) Section 48 of IHTA 1984 (settled property: excluded property) is amended as follows.

(2) In subsection (3) (circumstances in which settled property situated outside the United Kingdom is excluded property), after paragraph (b) insert--

" ; but this subsection is subject to subsection (3B) below. " .

(3) In subsection (3A) (circumstances in which a holding in an authorised unit trust or a share in an open-ended investment company comprised in settled property is excluded property), after paragraph (b) insert--

" ; but this subsection is subject to subsection (3B) below. " .

(4) After subsection (3A) insert--

" (3B) Property is not excluded property by virtue of subsection (3) or (3A) above if--

(a) a person is, or has been, beneficially entitled to an interest in possession in the property at any time,

(b) the person is, or was, at that time an individual domiciled in the United Kingdom, and

(c) the entitlement arose directly or indirectly as a result of a disposition made on or after 5th December 2005 for a consideration in money or money's worth.

(3C) For the purposes of subsection (3B) above--

(a) it is immaterial whether the consideration was given by the person or by anyone else, and

(b) the cases in which an entitlement arose indirectly as a result of a disposition include any case where the entitlement arose under a will or the law relating to intestacy. " .

(5) If, in consequence of the amendments made by this section, an amount of inheritance tax would (but for this subsection) fall due before the day on which this Act is passed, that amount is to be treated instead as falling due at the end of the period of 14 days beginning with that day.

(6) This section is deemed to have come into force on 5th December 2005.

Part 7 Pensions

158 Taxable property held by investment-regulated pension schemes

(1) Schedule 21 (taxable property held by investment-regulated pension schemes) has effect.

(2) This section and that Schedule are deemed to have come into force on 6th April 2006.

159 Recycling of lump sums

(1) In Schedule 29 to FA 2004 (authorised lump sums), after paragraph 3 insert--

" 3A (1) Where this paragraph applies in relation to a pension commencement lump sum paid to the member, the pension scheme is to be treated as making to the member an unauthorised payment of the appropriate amount.

(2) Subject to sub-paragraphs (3) and (4), this paragraph applies in relation to a pension commencement lump sum if--

(a) because of the lump sum, the amount of the contributions paid by or on behalf of, or in respect of, the member to the pension scheme, or to any other registered pension scheme, is significantly greater than it otherwise would be, and

(b) the member envisaged at the relevant time that that would be so.

(3) This paragraph does not apply in relation to any lump sum paid to the member on any day if the amount of the lump sum, when added to any other pension commencement lump sum paid to the member within the period of 12 months ending with that day, does not exceed 1% of the standard lifetime allowance on that day.

(4) This paragraph does not apply if the amount by which the contributions paid as mentioned in sub-paragraph (2)(a) is greater than it otherwise would be because of the lump sum does not exceed 30% of the amount of the lump sum.

(5) "The appropriate amount" is so much of--

(a) the amount crystallised by the benefit crystallisation event constituted by the payment of the lump sum, as does not exceed

(b) the amount of the member's lifetime allowance which is available on it.

(6) "The relevant time" is--

(a) if paragraph (a) of sub-paragraph (2) is satisfied before the lump sum is paid, the time when that paragraph is first satisfied, and

(b) otherwise, the time when the lump sum is paid. "

(2) This section is deemed to have come into force on 6th April 2006.

160 Inheritance tax

(1) Schedule 22 (provisions about inheritance tax in relation to registered pension schemes) has effect.

(2) This section and that Schedule are deemed to have come into force on 6th April 2006.

161 Miscellaneous

(1) Schedule 23 (miscellaneous amendments relating to pension schemes etc) has effect.

(2) This section and that Schedule are deemed to have come into force on 6th April 2006.

Part 8 Stamp taxes

Stamp duty and stamp duty land tax: thresholds

162 Raising of thresholds

(1) In section 55 of FA 2003 (amount of stamp duty land tax chargeable: general) in subsection (2) (calculation of percentage of chargeable consideration), in Table A (bands and percentages for residential property), for "£120,000", in both places, substitute "£125,000".

(2) In Schedule 5 to FA 2003 (stamp duty land tax: amount of tax chargeable: rent), in paragraph 2(3) (calculation of tax chargeable in respect of rent), in Table A (bands and percentages for residential property), for "£120,000", in both places, substitute "£125,000".

(3) In Schedule 13 to FA 1999 (stamp duty: instruments chargeable and rates of duty), in paragraph 4 (bands and percentages for conveyance or transfer on sale of property other than stock or marketable securities), for "£120,000", in both places, substitute "£125,000".

(4) The amendments made by subsections (1) and (2) have effect in relation to any transaction of which the effective date (within the meaning of Part 4 of FA 2003) is after 22nd March 2006.

(5) The amendment made by subsection (3) has effect in relation to instruments executed after 22nd March 2006.

Stamp duty land tax

163 Partnerships

Schedule 24 (amendments of Schedule 15 to FA 2003) has effect.

164 Leases

(1) In section 77 of FA 2003 (notifiable transactions), for subsection (2A) substitute--

" (2A) The assignment of a lease is notifiable if there is chargeable consideration for the assignment and either--

(a) the lease is for a term of seven years or more, or

(b) the consideration for the assignment is chargeable at a rate of 1% or higher, or would be so chargeable but for a relief. "

(2) In Schedule 5 to FA 2003 (amount of tax chargeable: rent), in paragraph 3 (net present value of rent payable over term of lease), for "in year i" substitute "in respect of year i".

(3) Subsection (1) has effect in relation to any assignment of which the effective date (within the meaning of Part 4 of FA 2003) is on or after the day on which this Act is passed.

(4) Subsection (2) has effect in relation to any lease granted or treated as granted on or after that day.

(5) Schedule 25 (amendments of Schedule 17A to FA 2003) has effect.

165 Reallocation of trust property as between beneficiaries

(1) In Schedule 16 to FA 2003 (trusts and powers), after paragraph 7 insert--

" Reallocation of trust property as between beneficiaries

8 Where--

(a) the trustees of a settlement reallocate trust property in such a way that a beneficiary acquires an interest in certain trust property and ceases to have an interest in other trust property, and

(b) the beneficiary consents to ceasing to have an interest in that other property,

the fact that he gives consent does not mean that there is chargeable consideration for the acquisition. "

(2) Subsection (1) has effect in relation to any acquisition of which the effective date (within the meaning of Part 4 of FA 2003) is on or after the day on which this Act is passed.

166 Unit trust schemes

(1) Part 4 of FA 2003 (stamp duty land tax) is amended as follows.

(2) Omit section 64A (initial transfer of assets to trustees of unit trust scheme).

(3) In section 101 (unit trust schemes)--

(a) in subsection (1) (application of Part (except for provisions mentioned in subsection (7)) to unit trust schemes) for "provisions" substitute "provision", and

(b) in subsection (7) (provisions for the purposes of which unit trust schemes not to be treated as companies) omit from "section 53" to "companies), or".

(4) This section has effect in relation to any land transaction of which the effective date is, or is after, 22nd March 2006 (but see subsections (5) and (6)).

(5) This section does not have effect in relation to--

(a) any land transaction which is effected in pursuance of a contract entered into and substantially performed before 2 p.m. on 22nd March 2006 ("the relevant time"), or

(b) any other land transaction which is effected in pursuance of a contract entered into before the relevant time and which is not an excluded transaction.

(6) For this purpose, a land transaction effected in pursuance of a contract is an excluded transaction if--

(a) any provision of the contract has effect by reference to a unit trust scheme and the scheme is not established before the relevant time,

(b) at or after the relevant time the contract is varied in a way that significantly affects the land transaction (see subsection (7)),

(c) the subject-matter of the land transaction is not identified in the contract in a way that would have enabled its acquisition before the relevant time,

(d) rights under the contract are assigned at or after the relevant time,

(e) the land transaction is effected in consequence of the exercise, at or after the relevant time, of any option, right of pre-emption or similar right, or

(f) at or after the relevant time there is an assignment, subsale or other transaction (relating to the whole or part of the contract's subject-matter) as a result of which a person other than the purchaser under the contract becomes entitled to call for a conveyance to him.

(7) For the purposes of subsection (6)(b) the contract is varied in a way that significantly affects the land transaction if (and only if)--

(a) it is varied so as to substitute a different purchaser in relation to the land transaction,

(b) it is varied so as to alter the subject-matter of the land transaction, or

(8) Expressions which are used in Part 4 of FA 2003 and in this section have the same meaning in this section as in that Part.

167 Demutualisation of insurance companies

(1) Schedule 7 to FA 2003 (stamp duty land tax: group relief etc) is amended as follows.

(2) In paragraph 2 (restrictions on availability of group relief) in sub-paragraph (1) (no relief if arrangements by virtue of which a person has or could have control of purchaser but not vendor) at the end insert--

" For another exception to this, see sub-paragraph (3A). " .

(3) In that paragraph after sub-paragraph (3) (arrangements which are within sub-paragraph (2)(a)) insert--

" (3A) Sub-paragraphs (1) and (2)(b) do not apply to arrangements in so far as they are for the purpose of facilitating a transfer of the whole or part of the business of a company to another company in relation to which--

(a) section 96 of the Finance Act 1997 is intended to apply (stamp duty relief: demutualisation of insurance companies), and

(b) the conditions for relief under that section are intended to be met. " .

(4) In paragraph 4 (cases in which group relief not withdrawn under paragraph 3)--

(a) after sub-paragraph (6) (the third case where the relief not withdrawn) insert--

" (6A) The fourth case is where--

(a) the purchaser ceases to be a member of the same group as the vendor as a result of the transfer of the whole or part of the vendor's business to another company ("the acquiring company") in relation to which--

(i) section 96 of the Finance Act 1997 applies (stamp duty relief: demutualisation of insurance companies), and

(ii) the conditions for relief under that section are met, and

(b) the purchaser is immediately after that transfer a member of the same group as the acquiring company. " , and

(b) in sub-paragraph (7) (re-imposition of the withdrawal of the relief), in the opening words, after "in a case within sub-paragraph (6)" insert "or (6A)".

(5) The amendments made by this section have effect in relation to any transfer which takes place, or is intended to take place, after 22nd March 2006.

168 Alternative finance

(1) In sections 71A to 73 of FA 2003 (alternative property finance) for "individual" substitute "person" (and for "an individual" substitute "a person").

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