Finance Act 2005

For the year 2005-06—

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

In ICTA, after section 686C insert—

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

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—.

After that subsection insert—

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

Section 270A of ITEPA 2003 (limited exemption for qualifying childcare vouchers) is amended as follows.

In subsection (6) (exempt amount), for “£50 for each qualifying week in that year” substitutethe sum of—

After that subsection insert—

After subsection (10) insert—

This section has effect for the year 2005-06 and subsequent years of assessment.

ITEPA 2003 is amended as follows.

In section 237(1) (exemption for provision of workplace parking), for “No liability to income tax arises by virtue of Chapter 10 of Part 3 (taxable benefits: residual liability to charge)” substitute “ No liability to income tax arises ”.

In section 244(1) (exemption for provision of cycles and cyclist's safety equipment), for “No liability to income tax arises by virtue of Chapter 10 of Part 3 (taxable benefits: residual liability to charge)” substitute “ No liability to income tax arises ”.

In section 270A(1) (limited exemption for qualifying childcare vouchers), for “employee, liability” substituteemployee— .

In section 318(1) (childcare: exemption for employer-provided care), for “No liability to income tax arises by virtue of Chapter 10 of Part 3 (taxable benefits: residual liability to charge)” substitute “ No liability to income tax arises ”.

In section 318A(1) (childcare: limited exemption for other care), for “child, liability” substitutechild— .

This section has effect for the year 2005-06 and subsequent years of assessment.

Section 206 of ITEPA 2003 (cost of the benefit: transfer of used or depreciated asset) is amended as follows.

In subsection (3)(a), for “a car (within the meaning of Chapter 6)” substitute “ an excluded asset (see subsection (6)) ”.

After subsection (5) insert—

This section has effect for the year 2005-06 and subsequent years of assessment.

ITEPA 2003 is amended as follows.

In section 310 (counselling and other outplacement services) in subsection (4) (person to have been employed full-time in the employment which is ceasing for a specified period) omit “full-time”.

In section 311 (retraining courses) in subsection (3) (conditions to be satisfied in relation to the course)—

In that section, in subsection (4)(c) (person to be employed full-time in the employment which is ceasing for a specified period) omit “full-time”.

This section has effect in relation to the year 2005-06 and subsequent years of assessment.

ITEPA 2003 is amended as follows.

In subsection (1) of section 393 as originally enacted (application of Chapter 2 of Part 6) after “non-approved retirement benefits scheme” insert “ other than a scheme established by an order under section 1(2) of the Armed Forces (Pensions and Compensation) Act 2004 (armed and reserve forces compensation schemes) ”.

In paragraph (a) of section 639 (exemption from income tax for pensions due to military service etc)—

At the end of section 639 (which becomes subsection (1)) insert—.

After section 640 insert—.

In section 641 (exemption from income tax for armed forces disability pensions etc), after paragraph (g) of subsection (1) insert—.

The amendment made by subsection (2) has effect for the year 2005-06.

The amendments made by subsections (3) and (4) are deemed always to have had effect.

The amendments made by subsections (5) and (6) have effect for the year 2005-06 and subsequent years of assessment.

This Chapter contains tax provision in connection with—

Section 24 contains provision as to the making of claims for special tax treatment under this Chapter.

Sections 25 to 29 contain provision relating to income tax.

Sections 30 to 32 contain provision relating to capital gains tax.

Sections 34 to 36 apply for the purpose of determining whether trusts on which property is held for the benefit of a vulnerable person are qualifying trusts.

In this Chapter “vulnerable person election” means an election under section 37.

In this Chapter “vulnerable person” means—

This section has effect in relation to a tax year if—

Special income tax treatment applies for the tax year in accordance with sections 26 to 29.

But this section does not have effect in relation to the tax year if the property from which the qualifying trusts income arises (or is treated as arising) is property in which a person who is a settlor (within the meaning given by section 620(1) of ITTOIA 2005) is regarded as having an interest for the purposes of sections 624 and 625 of that Act (income arising under settlement where settlor retains an interest).

The trustees' liability to income tax for the tax year is to be reduced by an amount equal to— where— TQTI is an amount determined in accordance with section 27 (income tax liability of trustees in respect of qualifying trusts income), and VQTI is an amount determined in accordance with section 28 (extra income tax to which vulnerable person would be liable if qualifying trusts income were income of his).

The tax reduction is given effect at Step 6 of the calculation in section 23 of ITA 2007.

For the purposes of section 26, TQTI is the amount of income tax to which the trustees would (apart from this Chapter) be liable for the tax year in respect of the qualifying trusts income arising (or treated as arising) to them in that year (or to which they would be so liable if their liability were computed in accordance with subsection (2) in a case to which that subsection applies).

In a case where— there shall be disregarded, in computing the income tax liability of the trustees for the tax year in respect of the qualifying trusts income arising (or treated as arising) to them in that year, such part of the allowable expenses as bears the same proportion to all those expenses as other income bears to total income.

This section is subject to section 29 (vulnerable person election having effect for only part of tax year).

References in subsection (2) to allowable expenses are to expenses which can be set against the total income in accordance with Chapter 4 of Part 9 of ITA 2007.

For the purposes of section 26, VQTI is an amount equal to— where— TLV2 is an amount determined in accordance with subsection (2) (and subsection (4) where it applies) (total income tax liability of vulnerable person), and TLV1 is an amount determined in accordance with subsection (3) (and subsection (4) where it applies) (what total income tax liability of vulnerable person would be if his income included qualifying trusts income).

TLV2 is the total amount of income tax ... to which the vulnerable person would be liable for the tax year if his income tax liability were computed in accordance with subsections (5) and (6).

TLV1 is what TLV2 would be if the qualifying trusts income arising (or treated as arising) to the trustees in the tax year in respect of which the trustees are liable to income tax were income of the vulnerable person for the tax year.

Where the vulnerable person is non-UK resident for the tax year, his or her income tax liability for the purposes of determining TLV1 and TLV2 is to be computed in accordance with the Income Tax Acts on the assumption that—

For the purposes of this section, in a case where income which has arisen to the trustees (whenever it arose) is distributed to the vulnerable person in the tax year, that income is to be disregarded in computing income tax to which he would be liable for the tax year for the purposes of determining TLV1 and TLV2.

For the purposes of this section, in computing income tax to which the vulnerable person would be liable for the tax year for the purposes of determining TLV1 and TLV2, there is to be disregarded any relief which is given by way of a reduction in the amount of income tax to which the vulnerable person would be liable apart from that relief.

For the purposes of this section—

This section is subject to section 29 (vulnerable person election having effect for only part of tax year).

Where the vulnerable person election has effect for only part of the tax year (“the elected part of the tax year”) sections 26, 27 and 28 apply with the modifications in subsection (2).

Those modifications are—

In a case where this section applies, section 629(1) of ITTOIA 2005 shall not apply in respect of a payment by the trustees of a settlement to a beneficiary under the settlement.

This section applies if in a year of assessment—

This section has effect in relation to a tax year if—

Special capital gains tax treatment applies for the tax year in accordance with—

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But this section does not have effect in relation to the tax year if the vulnerable person dies during that year.

The reference in subsection (1)(a) to chargeable gains accruing to the trustees from the disposal of settled property includes a reference to chargeable gains treated as accruing to them under section 13 of TCGA 1992 (attribution of gains to members of non-resident companies).

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Special capital gains tax treatment applies for the tax year in accordance with this section if the vulnerable person is UK resident for the tax year.

The trustees' liability to capital gains tax for the tax year is to be reduced by an amount equal to— where— TQTG is the amount of capital gains tax to which the trustees would (apart from this Chapter) be liable for the tax year in respect of the qualifying trust gains, and VQTG is the amount arrived at under subsection (3).

That amount is— where— TLVB is the total amount of capital gains tax to which the vulnerable person is liable for the tax year, and TL VA is what TLVB would be if the qualifying trust gains accrued to the vulnerable person (instead of to the trustees) and no allowable losses were deducted from the qualifying trust gains.

Special capital gains tax treatment applies for the tax year in accordance with this section if the vulnerable person is non-UK resident for the tax year.

The trustees' liability to capital gains tax for the tax year is to be reduced by an amount equal to— where— TQTG is the amount of capital gains tax to which the trustees would (apart from this Chapter) be liable for the tax year in respect of the qualifying trusts gains, and VQTG is the amount arrived at under subsection (3).

That amount is— where— TLVB is the total amount of capital gains tax to which the vulnerable person would be liable for the tax year if the vulnerable person's taxable amount for the tax year ... were equal to the vulnerable person's deemed CGT taxable amount for the tax year (if any), and TL VA is what TLVB would be if the vulnerable person's taxable amount for the tax year ... were equal to the aggregate of the vulnerable person's deemed CGT taxable amount for the tax year (if any) and the amount of the qualifying trust gains.

For the purposes of this section “the vulnerable person’s taxable amount for the tax year” means the amount on which that person would be chargeable to capital gains tax for the tax year if no account were taken of section 1K of TCGA 1992.

For the purposes of this section the vulnerable person's deemed CGT taxable amount for the tax year is to be determined in accordance with Schedule 1.

For the purposes of section 32, VQTG is an amount equal to— where— TLVB is an amount determined in accordance with subsection (2) (total tax liability of vulnerable person), and TLVA is an amount determined in accordance with subsection (3) (what total tax liability of vulnerable person would be if it included tax in respect of notional section 77 gains).

TLVB is the total amount of income tax and capital gains tax to which the vulnerable person would be liable for the tax year—

TLVA is what TLVB would be if the vulnerable person’s taxable amount for the tax year for the purposes of section 3 of TCGA 1992 were equal to the sum of the amount mentioned in subsection (2)(b) and his notional section 77 gains for the tax year.

For the purposes of this section— are to be determined in accordance with Schedule 1.

For the purposes of this Chapter where property is held on trusts for the benefit of a disabled person those trusts are qualifying trusts if they secure that the conditions in subsection (2) are met—

Those conditions are—

The trusts on which property is held are not to be treated as failing to secure that the conditions in subsection (2) are met by reason only of—

The reference in subsection (1) to the lifetime of the disabled person is, where property is held for his benefit on trusts of the kind described in section 33 of the Trustee Act 1925 (protective trusts), to be construed as a reference to the period during which such property is held on trust for him.

For the purposes of this section, the “annual limit” for a tax year is whichever is the lower of the following amounts—

The Treasury may by order made by statutory instrument—

An order under subsection (3C) may—

A statutory instrument containing an order under subsection (3C) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.

For the purposes of this Chapter where property is held on trusts for the benefit of a relevant minor those trusts are qualifying trusts if they are—

This subsection applies to trusts— which secure that the conditions in subsection (3) are met.

Those conditions are—

Trusts to which subsection (2) applies are not to be treated as failing to secure that the conditions in subsection (3) are met by reason only of—

In this section “the Criminal Injuries Compensation Scheme” means—

For the purposes of this section, the “annual limit” for a tax year is whichever is the lower of the following amounts—

The Treasury may by order made by statutory instrument—

An order under subsection (4C) may—

A statutory instrument containing an order under subsection (4C) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.

Where the trustees of a settlement hold property on trusts for the benefit of a person, the trustees and that person may jointly make a vulnerable person election in relation to those trusts and that person if—

A vulnerable person election is an election in such form as the Board of Inland Revenue may require—

Those items are—

A vulnerable person election is irrevocable.

A vulnerable person election has effect from the effective date until one of the following events occurs—

If the trustees become aware that an event mentioned in subsection (5) has occurred—

Where— the vulnerable person election shall have effect, in relation to the trusts mentioned in paragraph (a), in respect of matters arising at or after the time when the sub-fund election is treated as having taken effect, as if it had been made by the trustees of the sub-fund settlement and the vulnerable person.

In relation to matters arising before the time when the sub-fund election is treated as having taken effect, nothing in subsection (7)—

In this section—

In this Chapter “disabled person” means—

A person is to be treated as a disabled person under subsection (1)(b) if he satisfies the Inland Revenue—

A person who is (or is treated as) a disabled person under subsection (1)(b) is not to cease to be (or to be treated as) such a disabled person by reason only of provision made by—

In this section “attendance allowance” means an allowance under—

In this section “disability living allowance” means a disability living allowance under—

In this section—

Where a vulnerable person election has been made the Inland Revenue may by notice require the trustees or the vulnerable person by whom the election was made to furnish them with such particulars as they may reasonably require for the purposes of determining—

The notice must specify the time within which the information must be furnished (not being less than 60 days).

If the Board of Inland Revenue determine— they may give notice to the trustees and the person in relation to whom the vulnerable person election was made that the election never had effect or ceased to have effect from a date specified in the notice.

A person aggrieved by a determination of the Board of Inland Revenue under subsection (3) may by notice appeal ....

The notice of appeal must be given to the Board of Inland Revenue within 30 days after the notice of the determination was given under subsection (3).

All such adjustments shall be made, whether by discharge or repayment of tax, the making of assessments or otherwise, as are required to give effect to a determination under subsection (3) (despite any limitation on the time within which any adjustment may be made).

In subsection (6) “tax” means income tax or capital gains tax.

In this Chapter—

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Sections 30 to 32 and Schedule 1 are to be construed as one with TCGA 1992.

To the extent that any provision of this Chapter would not, apart from this subsection, form part of Income Tax Acts, the provisions of the Income Tax Acts are to apply for the purposes of any references in the provision relating to income arising (or treated as arising) to a person or to the income tax liability of a person.

This Chapter applies in relation to Scotland with the following modifications.

In section 23(5), for “trusts on which property is held for the benefit of a vulnerable person are qualifying trusts” substitute “ property held in trust for the benefit of a vulnerable person is held in qualifying trust ”.

In section 31(3)(a), for “on the qualifying trusts” substitute “ in qualifying trust (in the same trust as the settled property disposed of) ”.

In section 34—

In section 35—

In section 36, for “the trusts on which it is held are qualifying trusts” substitute “ it is held in qualifying trust ”.

In section 37—

Sections 34(3) and 35(4) do not apply to Scotland

Unless otherwise modified by this section, any reference to anything being held on trusts is to be construed as a reference to it being held in trust.

Unless otherwise modified or disapplied by this section, any reference to trusts is to be construed as a reference to a trust or the trust (as appropriate).

Section 98 of TMA 1970 (special returns, etc) is amended as follows.

In the first column of the table insert at the appropriate place— “ section 40(1) of the Finance Act 2005 ”.

In the second column of the table insert at the appropriate place— “ section 37(3) of the Finance Act 2005; ”, and “ section 37(6) of the Finance Act 2005; ”.

For the purposes of that section, any information, statements or declarations given or made jointly by the trustees of a settlement and a vulnerable person are to be treated as given or made by the trustees.

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In this Chapter “alternative finance arrangements” means arrangements falling within section 47 or 49.

In this Chapter “financial institution” means—

For the purposes of subsection (2)(c) a company is a wholly-owned subsidiary of a bank or building society (“the parent”) if it has no members except the parent and the parent’s wholly-owned subsidiaries or persons acting on behalf of the parent or the parent’s wholly-owned subsidiaries.

Subject to subsection (3) and section 52, arrangements fall within this section if they are arrangements entered into between two persons under which—

The conditions referred to in subsection (1)(a) are—

Arrangements do not fall within this section unless at least one of the parties is a financial institution.

For the purposes of this section “the effective return” is so much of the sale price as exceeds the purchase price.

In this Chapter references to “alternative finance return” are to be read in accordance with subsections (6) and (7).

If under arrangements falling within this section the whole of the sale price is paid on one day, that sale price is to be taken to include alternative finance return equal to the effective return.

If under arrangements falling within this section the sale price is paid by instalments, each instalment is to be taken to include alternative finance return equal to the appropriate amount.

The appropriate amount, in relation to any instalment, is an amount equal to the interest that would have been included in the instalment if—

If alternative finance return is paid in a currency other than sterling— then, as respects that person, the effective return for the purposes of section 47 and the appropriate amount for the purposes of subsection (7) of that section are to be calculated in the other currency and the amount of each payment of alternative finance return is to be translated into sterling at a spot rate of exchange for the day on which the payment is made.

In section 148 of FA 2003 (meaning of “permanent establishment”) after subsection (5) insert—

In section 127 of FA 1995 (persons not treated as UK representatives) in subsection (1), at the end of paragraph (c) but before the “and” insert—.

Subject to section 52, arrangements fall within this section if they are arrangements under which—

In this Chapter references to “profit share return” are references to amounts paid or credited as mentioned in subsection (1)(c) by a financial institution under arrangements falling within this section.

Where a company is a party to arrangements falling within section 47, Chapter 2 of Part 4 of FA 1996 (loan relationships) has effect in relation to the arrangements as if—

Where a company is a party to arrangements falling within section 49, Chapter 2 of Part 4 of FA 1996 (loan relationships) has effect in relation to the arrangements as if—

Accordingly, references in the Corporation Tax Acts to a loan relationship include references to alternative finance arrangements.

In subsection (2)(b), “depositor” is to be read in accordance with section 49(1)(a).

Alternative finance return or profit share return is to be treated for the purposes of ITTOIA 2005 as if it were interest.

Sections 353 to 368 of ICTA (relief for payments of interest) have effect as if— and section 366 (information) shall have effect accordingly.

Subsections (4) and (5) apply to the extent that a person other than a company is a party to alternative finance arrangements for the purposes of a trade, profession or vocation carried on by him or for the purposes of a property business of his.

Alternative finance return or profit share return paid by him is to be treated as an expense of the trade, profession or vocation or of the property business.

Section 58 of ITTOIA 2005 (incidental costs of obtaining finance) has effect as if—

This section applies where—

In this section “relevant return”, in relation to any arrangements, means any amount that would be alternative finance return or profit share return if the arrangements were alternative finance arrangements.

The arrangements are not to be regarded as falling within section 47 or section 49.

Where the arrangements would, but for subsection (3), fall within section 47, the person paying relevant return under the arrangements is not entitled— in respect of the relevant return.

Where the arrangements would, but for subsection (3), fall within section 49, the person paying relevant return under the arrangements is not entitled— in respect of the relevant return.

Where the person paying relevant return under the arrangements is a company, an amount may not be surrendered by way of group relief if a deduction in respect of it is prohibited by subsection (4) or (5).

Where under arrangements falling within section 47 an asset is sold by one party to the arrangements to the other party, the effective return shall be excluded in determining for the purposes of the Tax Acts (apart from that section) and of TCGA 1992 the consideration for the sale and purchase of the asset.

Subsection (1) does not affect the operation of any provision of the Tax Acts or TCGA 1992 which provides that the consideration for a sale or purchase is to be taken for any purpose to be an amount other than the actual consideration.

This Chapter has effect in relation to alternative finance arrangements entered into on or after 6th April 2005.

To the extent provided by subsections (3) to (6), this Chapter also has effect in relation to alternative finance arrangements falling within section 49 entered into before 6th April 2005 under which profit share return is payable on or after that date (“existing profit share arrangements”).

For the purposes of income tax, this Chapter has effect in relation to payments of profit share return made on or after 6th April 2005 under existing profit share arrangements to a person other than a company.

Where a company is a party to existing profit share arrangements—

For the purposes of subsection (4)(b) the notional carrying value is the amount which would have been the carrying value of the asset or liability in the accounts of the company (prepared in accordance with generally accepted accounting practice) if a period of accounts had ended immediately before 6th April 2005.

Section 54 has effect in relation to profit share return paid by a company on or after 6th April 2005 under existing profit share arrangements.

In section 48 of F(No 2)A 1997 (relief for production and acquisition expenditure on limited-budget films), in subsection (2)—

In section 139 of ITTOIA 2005 (certified master versions: production expenditure on limited-budget films), in subsection (1)—

In section 140 of that Act (certified master versions: acquisition expenditure on limited-budget films), in subsection (1)—

The Treasury may by order amend any of the enactments amended by subsections (1) to (3), so as to substitute for a date inserted by or under this section a later date.

The amendments made by subsection (1) have effect in relation to claims made under section 42 of F(No 2)A 1992 on or after 2nd July 2005.

The amendments made by subsections (2) and (3) have effect in relation to deductions made under section 139 or 140 of ITTOIA 2005 on or after 2nd July 2005.

Schedule 3 (films: restrictions on relief for production and acquisition expenditure) has effect.

In that Schedule—

This section applies where—

C is to be treated for corporation tax purposes as receiving, in the relevant period in respect of which the claim is made, an amount of income from the relevant trade equal to the amount of excess relief.

If, at the time immediately after the end of the 15 year period, C is carrying on the relevant trade, C is to be treated for the purposes of section 40B of F(No 2)A 1992 (allocation of expenditure to periods) as incurring at that time relevant film expenditure of an amount equal to the amount of excess relief.

The “amount of excess relief” is the amount given by the following formula— where— D is the amount which C is entitled to deduct under section 42 of F(No 2)A 1992 by virtue of the claim; T1 is the number of days in the 15 year period; T2 is the number of days in the period which begins with the operative date and ends with the final deferral date.

The “15 year period” means the period of 15 years which begins with the operative date.

The “operative date” means—

The “final deferral date” means—

“Relevant film expenditure” means expenditure of a revenue nature on the production or acquisition of the original master version of the film.

Any income received in a relevant period by virtue of this section is in addition to any other income received in that period.

This section is deemed to have come into force on 2nd December 2004.

For the purposes of section 60, a “deferred income agreement in respect of a film” means an agreement which satisfies condition A or condition B.

Condition A is that the agreement (whether or not it supplements or varies another agreement)—

Condition B is that the agreement—

The “last date of deferral” means the last date upon which an amount of the guaranteed income will or may arise.

It does not matter whether any of the agreements mentioned in subsection (2) or (3) existed before 2nd December 2004.

For the purposes of this section—

This section is deemed to have come into force on 2nd December 2004.

This section applies where—

C is to be treated for corporation tax purposes as receiving, in the relevant period in which C entered into the deferred income agreement, an amount of income from the relevant trade equal to the net excess relief.

If, at the time immediately after the end of the 15 year period, C is carrying on the relevant trade, C is to be treated for the purposes of section 40B of F(No 2)A 1992 (allocation of expenditure to periods) as incurring at that time relevant film expenditure of an amount equal to the net excess relief.

The “net excess relief” is the amount of excess relief reduced (but not below nil) by the recovered amount (if any).

The “amount of excess relief” is the amount given by the following formula— where— D is the amount which there was an entitlement to deduct under section 42 of F(No 2)A 1992 by virtue of the claim; T1 is the number of days in the 15 year period; T2 is the number of days in the period which begins with the operative date and ends with the final deferral date.

The “recovered amount” means the total of—

The “15 year period” means the period of 15 years which begins with the operative date.

The “operative date” means—

For the purposes of this section—

It does not matter for the purposes of subsection (1) whether the claim was made before, or on or after, 2nd December 2004.

Any income received in a relevant period by virtue of this section is in addition to any other income received in that period.

This section is deemed to have come into force on 2nd December 2004.

For the purposes of sections 60 to 62 a company is not to be regarded as entering into an agreement on or after 2nd December 2004 where the company entered into the agreement in pursuance of an obligation of the company which immediately before that date was an unconditional obligation.

In determining, for the purposes of subsection (1), whether an obligation in pursuance of which a company entered into an agreement was an unconditional obligation immediately before 2nd December 2004, the obligation is not to be regarded as a conditional obligation at that time by reason only that it was contingent on a condition the fulfilment of which was outside the control of the company.

For the purposes of this section and sections 60 to 62—

For the purposes of sections 60 to 62 a film is completed when it is first in a form in which it can reasonably be regarded as ready for copies of it to be made and distributed for presentation to the general public.

This section is deemed to have come into force on 2nd December 2004.

Section 60 has effect, for income tax purposes, for the year 2004-05 and earlier years of assessment as if—

Section 62 has effect, for income tax purposes, for the year 2004-05 and earlier years of assessment as if—

Section 63 has effect, for income tax purposes, for the year 2004-05 and earlier years of assessment as if, in subsections (1) and (2), for “company” there were substituted “person”.

This section is deemed to have come into force on 2nd December 2004.

After section 142 of ITTOIA 2005 (when expenditure is incurred) insert—

The amendment made by this section has effect for the year 2005-06 and subsequent years of assessment.

A chargeable event occurs in relation to a company (“C”) where an exit event occurs in relation to C and the following conditions are satisfied—

C is a “film rights company” at a particular time if, at that time, it—

An agreement “guarantees” C an amount of income if the agreement, or any part of it, is designed to secure the receipt by C of that amount (or at least that amount) of income.

An “exit event” occurs in relation to C on each occasion, on or after 2nd December 2004, when one of the following happens—

A “relevant claim” means a claim in respect of expenditure relating to the film and, for the purposes of subsection (1)(b)(i), it does not matter whether the claim was made before, or on or after, 2nd December 2004.

For the purposes of sections 67 to 71—

For the purposes of this section— and an agreement, or part of an agreement, is to be regarded as designed to secure the receipt by C of an amount (or at least an amount) if it was designed to secure the receipt of that amount (or at least that amount) by another person and C is that person’s successor under the agreement.

This section is deemed to have come into force on 2nd December 2004.

This section applies where a chargeable event occurs in relation to C by virtue of section 66 and the exit event in question is exit event X or Y.

C is to be treated for corporation tax purposes as receiving, immediately before the exit event, an amount of income from the relevant trade equal to the chargeable amount.

Where the exit event is exit event X, an amount equal to the chargeable amount is to be treated for corporation tax purposes as a loss of the relevant trade brought forward under section 393 of ICTA (relief of trading losses against future trading profits) to the exit accounting period.

But that loss may only be set off against income which— and, in particular, may not be set off against the income which C is treated as receiving under subsection (2) by virtue of the exit event.

The “chargeable amount” is the value immediately before the exit event of the rights to guaranteed income under the guaranteed income agreement calculated in accordance with section 70.

Any income received in, or losses brought forward to, an accounting period by virtue of this section are in addition to any other income received in, or losses brought forward to, that period.

In this section “exit accounting period” means the accounting period of C in which the exit event occurs.

This section is deemed to have come into force on 2nd December 2004.

This section applies for the purposes of— section 66(4)(c) (definition of exit event Z), section 69 (consequences of a chargeable event: exit event Z), and section 70 (valuation of the “disposed rights”).

A “relevant disposal” means a disposal by C directly or indirectly to a third party (“TP>”) of rights to guaranteed income under the guaranteed income agreement.

The “disposed rights” are the rights to guaranteed income under the guaranteed income agreement which are the object of the relevant disposal.

A relevant disposal is at an undervalue where the amount of the disposal consideration (“V1”) is less than the value of the disposed rights immediately before the disposal calculated in accordance with section 70 (“V2”).

It does not matter whether the disposed rights are disposed of alone or as part of a larger disposal.

Where the disposed rights are disposed of as part of a larger disposal, the amount of the disposal consideration for the larger disposal which is attributable to the relevant disposal is to be determined on such basis as is just and reasonable.

In this section—

This section is deemed to have come into force on 2nd December 2004.

This section applies where a chargeable event occurs in relation to C by virtue of section 66 and the exit event in question is exit event Z.

C is to be treated for corporation tax purposes as receiving, immediately before the exit event, an amount of income from the relevant trade equal to the chargeable amount.

Where TP is within the charge to corporation tax, an amount equal to the chargeable amount is to be treated for corporation tax purposes as a loss of TP’s trade brought forward under section 393 of ICTA (relief of trading losses against future trading profits) to the accounting period in which TP acquires the disposed rights.

Where TP is within the charge to income tax, an amount equal to the chargeable amount is to be treated for income tax purposes as a loss of TP’s trade brought forward under section 385 of ICTA (carry-forward against subsequent profits) to the year of assessment in which TP acquires the disposed rights.

But a loss brought forward under subsection (3) or (4) may only be set off against income which derives directly from the disposed rights.

The “chargeable amount” is the difference between V1 and V2.

Any income received in, or losses brought forward to, an accounting period by virtue of this section are in addition to any other income received in, or losses brought forward to, that period.

This section is deemed to have come into force on 2nd December 2004.

For the purposes of section 67, the value immediately before the exit event of the rights to guaranteed income under the guaranteed income agreement is calculated as follows— Step 1 Find the amount of each payment of income which at that time the guaranteed income agreement is designed to secure is received by C but which at that time has not been brought into account for the relevant trade by C (“RI”). Step 2 For each payment find the day for payment which the agreement is designed to secure (“the payment day”). Step 3 For each payment find the number of days in the period (“P”) which— begins with the day on which the exit event occurs, and ends with the payment day. Step 4 Calculate the net present value of each payment (“NPVRI”) by applying the following formula— where— T is the temporal discount rate, and i is the number of days in P divided by 365. Step 5 Add together each amount of NPVRI determined under step 4.

For the purposes of section 68, in relation to a relevant disposal, the value of the disposed rights immediately before the disposal is calculated as follows— Step 1 Find the amount of each payment of income which at that time the guaranteed income agreement is designed to secure is received by C by virtue of the disposed rights but which at that time has not been brought into account for the relevant trade by C (“DI”). Step 2 For each payment find the day for payment which the agreement is designed to secure (“the payment day”). Step 3 For each payment find the number of days in the period (“P”) which— begins with the day on which the relevant disposal occurs, and ends with the payment day. Step 4 Calculate the net present value of each payment (“NPVDI”) by applying the following formula— where— T is the temporal discount rate, and i is the number of days in P divided by 365. Step 5 Add together each amount of NPVDI determined under step 4.

For the purposes of this section the “temporal discount rate” is 3.5% or such other rate as may be specified by regulations made by the Treasury.

Regulations under subsection (3) may make such provision as is mentioned in subsection (3)(b) to (f) of section 178 of FA 1989 (power of Treasury to set rates of interest).

Subsection (5) of that section (power of Inland Revenue to specify rate by order in certain circumstances) applies in relation to regulations under subsection (3) as it applies in relation to regulations under that section.

This section is deemed to have come into force on 2nd December 2004.

For the purposes of sections 66 to 70, two companies are deemed to be members of a group of companies if—

For those purposes, the “principal company” of a group of companies means a company—

For the purposes of sections 66 to 70 and this section—

This section is deemed to have come into force on 2nd December 2004.

In section 117 of ICTA (restriction on interest relief and loss relief for limited partners)—

In section 118ZB of that Act (limited liability partnerships: restriction on relief), in subsection (2) omit “, or interest paid by him in connection with the carrying on of a trade,”.

In section 118ZE of that Act (restriction on relief for non-active partners), in subsection (1) omit “353,” and “, or interest paid by him in connection with the carrying on of a trade,”.

In section 118ZF of that Act (meaning of “the aggregate amount”), in subsection (1) omit “353,” and “, or of interest paid by him in connection with carrying it on,”.

In section 118ZG of that Act (meaning of “the individual’s contribution to the trade”), in subsection (2)(b)(ii) omit “353,” and “, or of interest paid by him in connection with carrying it on,”.

In section 118ZJ of that Act (commencement: the first restricted year)—

The amendments made by this section have effect in relation to the application of section 117 of ICTA (including that section as applied by section 118ZB of that Act) and section 118ZE of that Act in relation to—

For the purposes of this section—

In the definition of “post-announcement loss” in subsection (8), the reference to the loss sustained by the individual in the trade in a period is a reference to his share of any losses of the partnership arising for that period from the trade, and—

In subsection (9) the references to “the partnership” are to the partnership as a member of which the individual carries on the trade.

In relation to years of assessment which are before the year 2005-06, subsections (7) to (9) have effect as if—

The amendments made by this section are deemed to have come into force on 2nd December 2004.

After section 118ZM of ICTA insert—

In section 117 of ICTA (restriction on relief for limited partners) at the end add—

In section 118ZC of ICTA (meaning of the contribution to the trade of a member of a limited liability partnership) at the end add—

In section 118ZG of ICTA (meaning of a non-active partner’s contribution to the trade) at the end add—

The amendments made by this section are deemed to have come into force on 2nd December 2004.

This section applies where—

The “restriction provisions” are—

A “chargeable event” occurs in relation to an individual at any time when a relevant decrease in the individual’s contribution to the relevant trade occurs which immediately results in—

Where a chargeable event occurs in relation to an individual—

The “total losses claimed” means the total amount of any losses sustained by the individual in the relevant trade in any eligible year of assessment to the extent that they are losses—

“Reclaimed relief” means the total of the amounts which the individual has been treated as receiving under subsection (4) as a result of the occurrence of any previous chargeable event in relation to the individual in respect of the relevant trade.

The “individual’s contribution to the relevant trade” at any time means the amount of the individual’s contribution to that trade at that time within the meaning given for the purposes of the relevant restriction provision and computed at that time in accordance with that provision.

The “relevant restriction provision” means—

A “relevant decrease in the individual’s contribution to the relevant trade” occurs when the amount of that contribution becomes, as a result of the application of any regulations made under section 118ZN of ICTA (partners: meaning of “contribution to the trade”), less than the amount it would otherwise be apart from the application of those regulations.

The “amount of the relevant decrease in the individual’s contribution to the relevant trade” is the difference between those two amounts.

An “eligible year of assessment” is—

In sections 75 to 77 references to expressions which are defined in this section are to be construed in accordance with this section.

This section is deemed to have come into force on 2nd December 2004.

For the purposes of section 74, the “chargeable amount” is determined by taking whichever is the smallest of amounts A, B and C.

Amount A is the amount of the relevant decrease in the individual’s contribution to the relevant trade which constitutes the chargeable event.

Amount B is the amount given by—

Amount C is the amount given by—

This section is deemed to have come into force on 2nd December 2004.

For the purposes of sections 74 and 75 a “relevant loss” means—

For the purposes of this section—

In the definition of “post-announcement loss” in subsection (2), the reference to the loss sustained by the individual in the relevant trade in a period is a reference to his share of any losses of the partnership arising for that period from the trade, and—

In subsection (3) the references to “the partnership” are to the partnership as a member of which the individual carries on the relevant trade.

This section is deemed to have come into force on 2nd December 2004.

This section applies in relation to years of assessment which are before the year 2005-06.

Subsection (4) of section 74 has effect as if for “individual—” to the end there were substituted “individual, the individual is to be treated as receiving at the time of the occurrence of the chargeable event annual profits or gains which are of an amount equal to the chargeable amount and are chargeable to income tax under Case VI of Schedule D.”.

Section 76 has effect as if—

This section is deemed to have come into force on 2nd December 2004.

In section 117(2) of ICTA (restriction on relief for limited partners)—

In section 118ZF of ICTA (meaning of “the aggregate amount”)—

In section 121 of FA 2004 (definition of “the losses claimed”)—

The amendments made by this section are deemed to have come into force on 2nd December 2004.

After section 122 of FA 2004 insert—

In section 121 of FA 2004 (definition of “the individual’s capital contribution to the trade”) at the end insert—

In section 123(1) of FA 2004 (definition of “film-related losses”) for “and 121” substitute “, 121 and 122A”.

The amendments made by this section are deemed to have come into force on 2nd December 2004.