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51/00

7 April 2000

PUBLICATION OF THE FINANCE BILL

 

 Proposals to build a stronger and fairer Britain are contained in Finance Bill 2000 published today.

The Bill, once enacted, will take forward the Budget 2000 measures to support those most in need, to promote productivity and increased employment opportunity for all, and to help protect the environment.

Paymaster General Dawn Primarolo said:

"The Budget builds on the success of the last three years. It supports work, families and enterprise and it delivers the largest package of environmental tax reforms ever announced in the UK. It tackles poverty and will help us to continue to deliver the economic stability and growth needed to release new resources to key public services."

The attached background notes briefly describe the clauses and schedules in the Bill. More detailed explanatory notes on clauses are available from HM Treasury.

 

NOTES TO EDITORS

 

1. Copies of the Finance Bill will be on sale to members of the public from Friday 7 April 2000 at all Stationery Office bookshops.

2. Explanatory Notes will be available for each clause and schedule of the Bill. The Notes are being deposited in Parliament, with the authority of Ministers, to provide Parliament with a better understanding of the purpose and effect of the Government's proposals during the passage of the Finance Bill.

3. For Members of Parliament, copies of the Explanatory Notes will be made available through the Vote Office and the Libraries of the House.

4. The public may purchase the Explanatory Notes from the Public Enquiry Unit, HM Treasury, Parliament Street, London, SW1P 3AG on 020 7270 4558, price £20 per set. As HM Treasury Public Enquiry Unit does not have invoicing or credit card facilities, payment should be cash (exact sum only) or by cheque made payable to HM Treasury Votes Cash Account.

5. Alternatively, the Notes will also be available, along with material on other Treasury matters, on this site .

6. Press copies of Explanatory Notes are available from 020 7270 5238.   

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FINANCE BILL 2000

LOBBY NOTES

EXCISE DUTIES

ALCOHOLIC LIQUOR DUTIES

Clause 1 increases the rate of excise duty on beer with effect from 1 April 2000. (C&E 2)

Clause 2 increases the rates of excise duty on cider with effect from 1 April 2000. (C&E 2)

Clause 3 increases the rates of excise duty on wine and made-wine not exceeding 22 per cent alcohol by volume with effect from 1 April 2000. (C&E 2)

HYDROCARBON OIL DUTIES

Clause 4 and Repeal Schedule 40, Part 1(1) increases the rates of duty on hydrocarbon oil by the rate of inflation. The changes took effect from 6 pm on 21 March 2000.

Clause 5 provides for a rate of duty for ultra low sulphur petrol and defines the product. The clause will take effect from a day to be appointed by statutory instrument.

Clause 6 and Schedule 1 amend Schedule 2A (mixing of rebated oils) to the Hydrocarbon Oil Duties Act 1979 to include provision relating to the mixing of petrols. The clause shall take effect from a day to be appointed by statutory instrument.

Clause 7 gives the Treasury the power to amend, by Order made by statutory instrument, those provisions in the Hydrocarbon Oil Duties Act 1979 which define the specifications of various hydrocarbon oils. This clause will take effect from Royal Assent.

Clause 8 extends the civil penalty provisions which Customs can apply when they detect the misuse of rebated heavy oil as road fuel. These provisions are effective from 1 May 2000.

Clause 9 deletes the 'off-road tractor' category from the list of vehicles legitimately able to use rebated heavy oil as fuel whilst travelling on the public road. This change will take effect from 1 May 2000.

Clause 10 provides that the Commissioners may allow a rebate (lower rate of duty) on oil delivered for home use without the full amount of marker present. The clause also provides appeal provisions for decisions made for the purposes of regulations made under section 20AA of the Hydrocarbon Oil Duties Act 1979. The clause will take effect from Royal Assent.

Clause 11 exempts the water content of an emulsion of water in gas oil from the excise duty charged on fuel substitutes. This change will come into effect on Royal Assent.

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TOBACCO PRODUCTS DUTY

Clause 12 increases the rates of excise duties on tobacco products (cigarettes, cigars, hand-rolling tobacco, other smoking tobacco and chewing tobacco) with effect from 6 pm on 21 March 2000. (C&E 3)

Clause 13 changes the basis for the calculation of the ad valorem element of duty on cigarettes from the date of Royal Assent. (C&E 3)

Clause 14 and Repeal Schedule 40, Part 1(2) inserts new sections 8A to 8J after section 8 of the Tobacco Products Duty Act 1979 to provide for the introduction of compulsory fiscal marking for specified tobacco products (cigarettes and hand-rolling tobacco). It introduces associated criminal offences for possessing, selling, dealing etc. in unmarked tobacco. (C&E 3)

Clause 15 and Repeal Schedule 40, Part 1(2) amends sections 2 of the Tobacco Products Duty Act 1979 to provide that, where tobacco products are exported, shipped as stores or used for research or experiment, duty shall only be remitted or repaid if any fiscal marks carried by the products have been obliterated. The amendments section 7 of the Tobacco Products Duty Act 1979 will also provide vires that can be used to support the fiscal marks scheme and which also provide for changes to the regulatory framework for tobacco products. (C&E 3)

GAMING DUTY

Clause 16 revises the duty bands for gaming duty for all accounting periods beginning on or after 1 April 2000. (C&E 1)

AMUSEMENT MACHINE LICENCE DUTY

Clause 17 and Schedule 2 make provision for the introduction of new rates of Amusement Machine Licence Duty, amendment of the duration for seasonal licences, and the introduction of provisions which allow for the recovery of amusement machine licence duty in relation to unlawfully unlicensed machines. The consequential repeals are listed in Schedule 2. (C&E 1)

AIR PASSENGER DUTY

Clause 18 introduces reduced rates of duty for passengers travelling in the lowest class on a flight of £5 for flights to destinations within the UK and EEA and £20 for flights to destinations elsewhere. In addition this clause increases the standard rate of duty for flights to destinations outside the EEA to £40. These changes will come into effect from 1 April 2001. (C&E 4)

Clause 19 and Repeal Schedule 40, Part 1(4) abolishes the domestic return leg exemption from air passenger duty. This is necessary for the UK to comply with its EU Treaty obligations. It also introduces an exemption from air passenger duty for flights departing from airports in those regions with a population density of 12.5 persons per square kilometre or less which are designated by Treasury Order. This is in recognition of the reliance on air transport by people in remote regions. These changes will come into effect from 1 April 2001. (C&E 4)

Clause 20 provides for the current reduced rate of VED for smaller-engined cars to be extended to all cars with engines up to 1,200cc from March 1, 2001, and for rebates of up to £55 to be paid to newly-qualifying owners who take out licences at the standard rate between March 1, 2000 and February 28, 2001. (HMT/DETR 1)

Clause 21 provides for an increase of £5 in the reduced and standard rates of VED for cars, taxis and vans to £105 and £160 respectively, to take effect from March 1, 2001. Changes in the standard rate will have a consequential effect on the VED rates for motorcycles, trade licences and other vehicles whose rates are linked to it in legislation. (HMT/DETR 1)

Clause 22 and Schedule 3 provide for the introduction of a four-banded system of VED for new cars first registered from March 1, 2001, graduated by their carbon dioxide emissions and the type of fuel they use, and set a VED rate of £160 for new vans and other light goods vehicles for which carbon dioxide emissions data are not currently available. (HMT/DETR 1)

Clause 23 and Schedule 4 provide powers to ensure that - where different rates of VED are payable by vehicles according to their characteristics - the correct rate is enforced.

Clause 24 and Schedule 5 provide for changes in the rates of VED for lorries to take effect from March 22, 2000, and set a rate for 6-axle lorries travelling up to new 44-tonne weight limits, due to be allowed for general use on UK roads on 1 January, 2001. Changes in these rates will have a consequential effect on the VED rates for buses and special vehicles whose rates are linked in legislation to the general goods vehicle rate. (HMT/DETR 1)

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GENERAL AND MISCELLANEOUS

POWER TO SEARCH PREMISES

Clause 25 modifies some of Customs' powers to enter and search premises for things which are liable to forfeiture. The aim is to ensure that Customs have effective powers to tackle smuggling and that human rights are safeguarded.

POWER TO SEARCH ARTICLES

Clause 26 empowers Customs officers to detain and search articles a person has with them where there are reasonably grounds to suspect they have alcohol and tobacco products on which duty is due. This will enable Customs to more effectively tackle the growth in people carrying smuggled goods on foot and hawking them from pub to club.

SECURITY FOR CUSTOMS & EXCISE DUTIES

Clause 27 extends the requirement for security to cover liabilities which may become due to tax authorities in other Member States. This fully implements a requirement in Directive 62/12/EEC. The change takes effect after Royal Assent.

CIVIL PENALTIES FOR BREACH OF EXCISE DUTY REQUIREMENTS

Clause 28 amends section 9(2)(a) of the Finance Act 1994 so that a civil penalty that is geared may be applied by subordinate legislation, not just by another enactment.

CORRECTION OF REFERENCE

Clause 29 corrects an error in a reference to European Community legislation in Section 127 subsection 1(b) of the Finance Act 1999.

OTHER TAXES

CLIMATE CHANGE LEVY

Clause 30 and Schedules 6 and 7 introduce a new tax on supplies of electricity, gas and certain other commodities capable of being used as a fuel. The new tax will be known as climate change levy and will be introduced on the business use of energy from April 2001. Its aim is to encourage energy efficiency, and help meet the UK's legally binding target for reducing greenhouse gas emissions set under the Kyoto Protocol. (REV/ C&E 4)

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INCOME TAX

Clause 31 imposes the income tax charge for 2000-01, and sets the starting, basic and higher rates of tax at 10 per cent, 22 per cent, and 40 per cent respectively. (*REV2)

Clause 32 extends the starting rate of income tax to income from savings with effect from 6 April 1999. As a result the first £1,500 of income received by an individual in 1999-2000 (£1,520 in 2000-01) will be taxed at the starting rate of 10 per cent whether that income is from earnings, a pension or savings.

Clause 33 reduces the rate of income tax to be deducted from foreign dividends by paying and collecting agents to 10 per cent for 2000-01. It also deems that rate to have applied for 1999-00.

Clause 34 specifies that when the children's tax credit is introduced in 2001-02 the amount will be set at £4,420, given at the rate of 10 per cent, instead of £4,160. (*REV2)

CORPORATION TAX

Clause 35 charges corporation tax for the financial year beginning 1 April 2001 and sets the main rate at 30 per cent (the same as for the previous year). (*REV1)

Clause 36 provides for the small companies' rate of corporation tax for the financial year beginning 1 April 2000 to be 20 per cent, and for the fraction used in calculating marginal relief for small companies to be one fortieth (the same as for the previous year). (*REV 1)

CAPITAL GAINS TAX

Clause 37 provides for the whole or an appropriate part of the capital gains of individuals to be taxed at the 10% starting rate when their taxable income is lower than the starting rate limit. This brings the capital gains tax rates for individuals into line with income tax rates on savings income. The capital gains tax rate for trusts is unchanged at 34%. The clause will have effect for gains arising on or after 6 April 2000. (REV 1)

GIVING TO CHARITY

Clause 38 provides for the payment of a ten per cent supplement on donations to charity through payroll deduction schemes for three years from 6 April 2000. It also removes the maximum limit on the amount of donations which may be made through such schemes from 6 April 2000.

Clause 39 improves the tax incentives for giving to charity and makes them easier to use. The Clause:

  • removes the present £250 minimum limit for Gift Aid donations
  • brings donations made under a Deed of Covenant within the Gift Aid scheme
  • extends the scheme to Crown servants and members of the UK armed
  • forces serving overseas and to foreign donors
  • extends the scheme to donors who pay capital gains tax and to donors who
  • pay tax at below the basic rate
  • replaces the requirement for a written certificate with each donation with a simpler, more flexible requirement for a Gift Aid declaration.. (REV/C&E3)

Clause 40 amends the provisions relating to Gift Aid donations to charity by companies. It brings donations made under a Deed of Covenant within the Gift Aid scheme. It also removes the requirement for companies to deduct and account for income tax on their donations and to give a certificate in respect of their donations. (REV/C&E3)

Clause 41 ends the separate regime of tax relief for donations to charity by individuals and companies under a Deed of Covenant. Such payments will in future come within the Gift Aid scheme. (REV/C&E3)

Clause 42 makes consequential changes to the Millennium Gift Aid scheme to reflect the changes in clause 39.

Clause 43 provides for a new tax relief for gifts of qualifying investments to a charity by an individual or a company. The donor will get an income tax or corporation tax deduction for the full market value of the qualifying investment at the date of the gift, plus incidental expenses of transfer, less any consideration or benefit received. The new relief will be in addition to the existing relief for gifts of shares, securities and other assets to charity when calculating capital gains.

Clause 44 introduces new legislation which disapplies the provisions of Chapter 1A of Part XV of the Income and Corporation Taxes Act 1988 where qualifying income arising to certain UK resident trusts is given to a charity.

Clause 45 introduces new legislation which disapplies the provisions of Chapter 1A of Part XV of the Income and Corporation Taxes Act 1988 where interest free, or low interest, loans of money are made by an individual to a charity.

Clause 46 provides for the exemption, within certain limits, of small amounts of income and gains of charities from trading and other miscellaneous sources. The changes are intended to free charities from the need to establish subsidiary companies, for tax purposes, to undertake small trading and fund-raising ventures. (REV/C&E3)

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EMPLOYEE SHARE OWNERSHIP

Clause 47 and Schedule 8 introduce a new all-employee share ownership plan. Companies can provide up to three different types of shares to their employees under a plan. There is no tax charge if shares are held in the plan for 5 years, and companies can also claim corporation tax reliefs. The schedule sets out the conditions which must be satisfied before the plan can be approved by the Inland Revenue. Plans can be approved after Royal Assent. (*REV3)

Clause 48 and Schedule 9 make provision for capital gains roll-over relief where shareholders transfer shares to a trust set up under an employee share ownership plan approved under Schedule 8. Schedule 9 outlines the rules for the relief, including rules for reinvesting the proceeds of the transfer. The relief can be claimed on transfers of shares to an approved employee share ownership plan from Royal Assent. (*REV3)

Clause 49 authorises the phasing out of the approved profit sharing scheme. No new schemes will be approved after 5 April 2001 unless the application for approval is received with full accompanying details on or before that date. Income tax relief will be withdrawn for shares appropriated to employees after 5 April 2002. (*REV3)

Clause 50 authorises the phasing out of corporation tax relief for payments made by companies to the trustees of approved profit sharing scheme trusts to acquire shares for appropriation and to meet running expenses. Where the sums are used by the trustees to acquire shares and appropriate them to employees, relief will continue for payments made between 21 March 2000 (Budget day) and 5 April 2002. Relief for administrative expenses will also continue where the payment is made within 3 years of the last appropriation of shares under the scheme and before 5 April 2002. (*REV3)

Clause 51 authorises the Board of Inland Revenue to withdraw approval from profit sharing schemes where appropriations are made under the scheme in the same year as free shares are appropriated under an all-employee share plan introduced by Clause 47.

Clause 52 prevents the use in approved profit sharing schemes of shares in a company which provides the services of its employees to businesses, including partnerships, which control that company. It also prevents the use in approved profit sharing schemes of shares carrying certain restrictions, unless those restrictions apply to all ordinary shares of the company. These two new rules apply from 21 March 2000 (Budget day) but shares already held by approved profit sharing scheme trustees on that date will continue to get the benefit of tax relief (*REV3).

Clause 53 prevents the approval of profit sharing schemes where loans are provided to employees in any of the arrangements for the scheme or its operation. It also provides for approval to be withdrawn from such schemes. It applies from 21 March 2000 (Budget day). (*REV3)

Clause 54 withdraws capital gains roll-over relief from all transfers of shares to qualifying employee share ownership trusts made on or after 6 April 2001.

Clause 55 allows the trustees of a qualifying employee share ownership trust to transfer shares to the trustees of an employee share ownership plan introduced by Clause 47 and Schedule 8 of the Finance Bill without triggering an income tax charge. The shares must have been held by the qualifying share ownership trust on 21 March 2000 (Budget day), or bought using funds held by the trustees on that date. (*REV3)

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OTHER PROVISIONS ABOUT EMPLOYMENT

Clause 56 and Schedule 10 bring in deregulatory relaxations from the tax charge on employee benefits in kind, notably to exempt small amounts of private use of assets and services which are mainly used by the employee for work purposes. A power is also being taken to exempt by regulation minor benefits available to employees generally. In addition, beneficial loans fully qualifying for tax relief will no longer have to be reported; and the exemption for beneficial loans which are made on ordinary commercial terms is being extended to cover loans whose terms are varied

Clause 57 introduces a new training relief for employees. Contributions by employers to education or training undertaken by their employees, or former employees, who are individual learning account holders, will be exempt from tax and National Insurance contributions if the education or training qualifies for a grant or discount from the Department for Education and Employment (or made under similar arrangements in Scotland and Northern Ireland) and the employer makes those contributions available to all employees on similar terms under fair opportunity arrangements.

Clause 58 and Schedule 11 provide for a fundamental reform of the taxation of company cars. From 6 April 2002, the existing charge will be abolished and replaced with a charge based on a percentage of the car's price graduated according to the level of the car's carbon dioxide (CO2) emissions. The new charge will build up from 15 per cent of the car's price, for cars emitting up to a specified rate of CO2 emissions measured in grams per kilometre (165g/km in 2002-03), in 1 per cent steps for every additional 5g/km over that level. The maximum charge will be on 35 per cent of the car's price. Diesel cars will face a 3 per cent supplement in recognition of their higher emissions of pollutants that damage local air quality, but this will not take the maximum charge above 35 per cent of the car's price. Regulation making powers have been taken so that, following consultation, provisions can be put in place to waive the diesel supplement for very low emission diesels and provide discounts for cars using fuels and technologies that are particularly environmentally friendly. The charge for cars registered before January 1998 will be based on price and engine size. (*REV6)

Clause 59 and Schedule 12 introduce new rules concerning the taxation of workers who provide their services to clients through intermediaries, such as personal service companies. Separate Social Security Regulations which introduce the same rules for National Insurance Contributions (NICs) purposes have already been laid before Parliament. The new rules use existing case law to define an employee and determine that, where workers meet that definition in relation to work done for their clients, they will pay broadly the same tax and NICs as an employee, even if they provide their services through an intermediary. The new rules came into effect on 6 April 2000.

(IR Press Releases of 9 March 1999, 23 September 1999 and 7 February 2000)

PENSION SCHEMES

Clause 60 and Schedule 13 make changes, with effect from April 2001, to rules for the approval of, and the tax relief on contributions to, pension schemes. They will create an integrated tax regime covering personal pensions and stakeholder pensions. Pension schemes run by employers where the pension is related only to the contributions made, not to length of service or final salary (occupational money purchase schemes), may apply to the Inland Revenue to be included in this new regime. These changes complement those made to social security legislation in the Welfare Reform and Pensions Act 1999.

(Inland Revenue/DSS Press Release 22nd February 2000)

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ENTERPRISE INCENTIVES

Clause 61 and Schedule 14 introduce Enterprise Management Incentives which are tax-relieved share option incentives to help small higher risk trading companies recruit and retain people with the skills they need to help the companies grow. From the date of Royal Assent, options over shares worth up to £100,000 can be granted to up to 15 key employees. There is normally no income tax to pay when an option is exercised, and when the shares are sold capital gains taper relief will normally start from the date of grant of the option. (REV3, REV4, & REV/C&E1)

Clause 62 and Schedule 15 introduce a new tax incentive to encourage companies to invest in the same types of small higher-risk trading companies as those on which the Enterprise Investment (EIS) and Venture Capital Trust (VCT) Schemes are focussed, and to form wider corporate venturing relationships with those companies. The Clause and Schedule provide for an investing company to obtain investment relief - a reduction in corporation tax - at 20 per cent on amounts subscribed for full-risk ordinary shares held for at least 3 years. If any chargeable gains arise on disposals of those shares, the tax on those gains can be deferred if they are reinvested in another shareholding under the Scheme. If any allowable losses are incurred on such disposals, relief for the losses (net of investment relief) can be obtained against income if they are not deducted from chargeable gains. Schedule 16 makes some consequential changes to the EIS and to VCTs. The tax reliefs provided for by the Scheme are available in respect of shares issued on or after 1 April 2000 and before 1st April 2010.

Clause 63 and Schedule 17 amend the Enterprise Investment Scheme (EIS) to--

reduce the minimum period for which investors must hold their shares to qualify for income tax relief and capital gains tax disposal relief, so that the period is reduced from at least 5 years to at least 3 years;

  • preserve reliefs where a company in which an investment has been made goes into receivership;
  • modify the rules which determine whether a company is under the control of another person;
  • make it easier for companies whose trade consists in receiving royalties and licence fees to qualify under the Scheme; and
  • align the definition of research and development with that used for capital allowances and research and development tax credits. (*REVBN1B)

Clause 64 and Schedule 18 make changes to the Venture Capital Trust (VCT) Scheme to:

  • reduce the minimum period investors must hold VCT shares to qualify for income tax relief from 5 years to 3 years;
  • make it easier for companies whose trade consists in receiving royalties and licence fees to qualify under the Scheme;
  • align the definition of 'research and development' with that used for capital allowances and research and development tax credits;
  • preserve relief where a company in which a VCT has invested goes into receivership and;
  • provide a power to make regulations preserving relief in certain circumstances where new shares or securities are received by VCTs in exchange for shares or securities previously comprised in the VCT's "qualifying holdings". (*REVBN1B)

Clause 65 provides for the period over which taper relief reduces the gains of business assets to be decreased from ten years to four years. The clause also removes for business assets the additional year which was added into qualifying holding periods for assets that were acquired before 17 March 1998. The changes take effect for disposals on or after 6 April 2000. (*REV4)

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Clause 66 provides new definitions to be used to determine whether shareholdings are business assets at any time on or after 6 April 2000 for the purposes of Capital Gains Tax (CGT) taper relief. The clause broadens the definition of the shareholdings which will be treated as business assets so that the following will qualify:

  • all shares and securities in unlisted trading companies;
  • all shares and securities in a listed trading company where the individual is an employee or an officer (including those involved on a part-time basis); and
  • all shares and securities in a listed trading company where the individual is able to exercise at least 5% of the voting rights in the company. (*REV4)

RESEARCH AND DEVELOPMENT

Clause 67 and Schedule 19 introduce a new statutory definition of 'research and development' (R&D), which replaces "scientific research" in "scientific research allowance" (the existing special allowance for R&D), and transfer jurisdiction for appeals concerning R&D from the Secretary of State for Trade and Industry to the tax Commissioners and the Courts. The new definition also applies to other tax reliefs for R&D and the new R&D tax credits.

Clause 68 and Schedules 20 and 21 introduce R&D tax credits for spending on R&D from 1 April 2000 by small and medium-sized companies. The provisions increase the amount a company can deduct for qualifying R&D expenditure when computing its profits from 100% to 150%, and allow companies not in profit to take the relief up front as a cash payment. (*REV/C&E1)

CAPITAL ALLOWANCES

Clause 69 extends indefinitely at 40% the existing first year allowances that were introduced in 1997 for investments in machinery and plant by small and medium-sized businesses. Without the extension, they would have ended on 1 July 2000. (*REV/C&E1)

Clause 70 provides for 100% first year allowances for expenditure incurred by small businesses on information and communications technology (ICT) between 1 April 2000 and 31 March 2003. The main qualifying assets are computers and associated equipment, the next generation of internet-enabled mobile phones and computer software. (*REV/C&E1)

Clause 71 defines a small business in Clause 70 using the same criteria as in the definition of a small company under the Companies Act. (*REV/C&E1)

Clause 72 abolishes the requirement to notify expenditure on which machinery and plant capital allowances are claimed, with effect from 1 April 2000. (*REV12)

Clause 73 removes the requirement to put expenditure on cars costing less than £12,000 into a separate pool for calculating capital allowances, with effect from 1 April 2000 for corporation tax or 6 April 2000 for income tax. (*REV12)

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Clause 74 codifies the rules for giving machinery and plant capital allowances to non-residents and other persons with non-taxable activities, with effect from Budget Day. It confirms that capital allowances are restricted to the part of the activity that is taxable in the UK. It provides for a balancing adjustment to be made if the proportion of taxable use is reduced and the allowances that have been given are excessive. It provides for allowances to be given on the lower of current market value and original cost to the taxpayer, rather than on the current market value as previously, where equipment is transferred from non-taxable to taxable use. (*REV12)

Clause 75 legislates Extra Statutory Concession B37, which extends the special rules for taxing production animals ("the herd basis") to animals held on a shared basis, and confirms that capital allowances are not due on production animals. These changes are deemed always to have had effect. (*REV12)

Clause 76 provides for capital allowances to be given to the lessor on the lower of the cost prices to the lessor and to the lessee where new machinery or plant is sold and leased back provided certain conditions are met, with effect from Royal Assent. This removes the further restriction to the current market value or notional written down value that apply at present. (*REV12)

Clause 77 confirms that the special rules for giving machinery and plant capital allowances on fixtures apply to boilers and radiators installed in a building as part of a central heating or hot water system. (*REV8)

Clause 78 allows lessors to claim capital allowances on boilers, radiators, heat exchangers and heating controls installed under the Government's Affordable Warmth Programme. It applies to expenditure incurred by lessors after Royal Assent and before 1 January 2008. (*REV8)

Clause 79 clarifies the treatment of machinery and plant capital allowances where both the special rules for fixtures and for hire-purchase could apply, and provides for the special rules for fixtures to take precedence. (*REV8)

Clause 80 ensures that capital allowances will be available for companies incurring expenditure on plant and machinery for use under an oil production sharing contract. The measure will apply to expenditure incurred on or after 21 March 2000. (*REV12)

TONNAGE TAX

Clause 81 and Schedule 22 provide for an optional new ring-fenced regime for shipping companies known as "tonnage tax". Under a 10-year election into this regime, a shipping company would work out its taxable profits based on the tonnage of the ships it operates, rather than by reference to its actual business results. This favourable new regime is being introduced to help deliver the Government's aim of encouraging the British shipping industry.

OTHER RELIEVING PROVISIONS

Clause 82 changes the mortgage interest relief legislation in so far as it applies to life annuity loans (sometimes referred to as "home income plans"). For loans in existence on 9 March 1999 (and remortgages of such loans entered into after 27 July 1999) that still qualify for relief these changes will fix the rate of relief at 23 per cent and the limit at £30,000 with effect from 6 April 2000.

Clause 83 exempts from tax payments made under the New Deal 50plus programme from 25 October 1999 ­ the date the scheme commenced. It complements a NIC exemption made in October 1999 for these payments.

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Clause 84 exempts from income tax payments made under the Employment Zones programme from 6 April 2000. It complements an exemption from National Insurance Contributions for these payments which takes effect in April 2000.

Clause 85 ensures that, with effect from 21 March 2000, companies are able to obtain relief for interest on certain loans where the interest rate falls as business results improve or vice versa ('ratchet loans'). It also aligns the definition of these loans for the purposes of the group relief anti-avoidance rules. (REVBN2F)

Clause 86 and Schedule 23 enable tax relief to be given for the cost of buying certain telecommunication licences, in particular the third generation mobile telecommunication licences, and also for the cost of acquiring, on or after 21st March 2000, capacity on telecommunications cables, called IRUs (indefeasible rights of use). Receipts from the disposal of these rights will be taxable. (*REVBN2E)

Clause 87 extends indefinitely the current period for tax relief for contributions by companies and unincorporated businesses to Local Enterprise Agencies, Business Link organisations, Training and Enterprise Councils, and Local Enterprise Companies which is due to expire on 1 April 2000.

Clause 88 allows waste disposal firms taking over sites previously run by another waste disposal operator to claim tax relief for their predecessor's site preparation expenditure. It applies on or after 21st March 2000.

CAPITAL GAINS TAX: GIFTS AND TRUSTS

Clause 89 provides for the ending of capital gains tax relief for gifts of business assets on the transfer of shares or securities to companies. The relief is not available for transfers on or after 9 November 1999 (the date of the announcement to end the relief). (*REV15)

Clause 90 and Schedule 24 provide for a capital gains tax charge to arise in certain circumstances where a beneficiary of a trust sells his or her interest in it to someone else on or after 21st March 2000. The trusts principally concerned are UK trusts in which the settlor has an interest or where any of the trust property is derived from a trust which was a settlor-interested trust at any time in the previous two tax years. The effect of the provisions is to treat the underlying assets to which the interest relates as though they are disposed of by the trustees and immediately reacquired by them at market value. (*REV 15)

Clause 91 and Schedules 25 and 26 provide for a capital gains tax charge to arise in certain circumstances where trustees make a transfer of value to another person and the transfer is treated as linked with trustee borrowing. Schedule 25 provides for the whole or a proportion of each chargeable asset which remains part of the settled property after the transfer to be disposed of and reacquired by the trustees at market value. Schedule 26 provides for the attribution of gains to beneficiaries where gains accrue to offshore trustees under the rules set out in Schedule 25. Payments or benefits received by beneficiaries of that trust, or any transferee trust, may be taken into account in charging the beneficiaries in respect of gains arising on that transfer of value. These provisions will apply in relation to any transfer of value completed on or after 21 March 2000. (*REV15)

Clause 92 provides for a restriction on the set off of losses against capital gains arising on the disposal by trustees of assets transferred to them where gains arising on the transfer have been deferred under a claim for gifts relief. The restriction applies where the transferor of the asset or any connected person has purchased an interest in the trust or entered into any arrangement to purchase such an interest. The rules take effect for trust gains arising on or after 21 March 2000. (*REV15)

Clause 93 ensures that the current anti-avoidance legislation that enables gains of certain offshore companies to be charged on UK residents in circumstances where trustees are participators in those companies (either directly or indirectly through a chain of companies) is not prevented from applying by the provisions of double taxation arrangements. The new rules apply to gains accruing to offshore companies on or after 21 March 2000. (*REV15)

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Clause 94 provides an exception to the special rules giving an uplift in the acquisition cost for capital gains tax purposes of the value of a beneficiary's interest in a trust where a resident trust becomes non-resident. On or after 21 March 2000, there will be no uplift if, at the time of emigration, the trust had any stockpile of gains which has not been attributed to beneficiaries of the trust. Similarly, there will be no uplift where there is an amount of gains in relation to which, under Schedule 26, the trust is either a transferor or transferee settlement and those gains have not been attributed to beneficiaries. (*REV15)

Clause 95 ensures that special rules treating UK persons as receiving payments made by offshore trustees to offshore companies which they control cannot be circumvented by including non-resident persons within the group of people who control the company. The measure, which takes effect by amending the existing rules, applies for payments received on or after 21 March 2000. (*REV15)

GROUPS AND GROUP RELIEF

Clause 96 and Schedule 27 modernise the group relief rules to allow groups and consortia to be established through companies resident anywhere in the world. Group relief will also be extended to UK branches of non-resident companies, and the rules for overseas branches of UK companies will be brought into line. The changes take effect from 1 April 2000. (REVBN2A)

Clause 97 and Schedule 28 provide for tax payable by a non-resident company to be recovered from another company within the same group. These changes are being made as a consequence of the modernisation of the group relief rules and take effect for accounting periods ending on or after 1 April 2000.

Clause 98 amends the regulation making power providing for simplified arrangements for claiming group relief. The change will allow provision to be made for a group company to claim relief without a copy notice of consent, provided that it has the agreement of the company dealing with the group's claims under the arrangements. This will apply to claims by companies within the simplified arrangements made after the amended regulations come into force (REVBN2A).

Clause 99 corrects a minor technical defect in the rules determining the maximum amount of a consortium claim to group relief. The amendment will be deemed always to have had effect. (REVBN2A)

Clause 100 enables two companies within a group to elect that an asset shall be treated as though it had been transferred between them immediately before being sold to a person outside the group. This will enable groups to bring together chargeable gains and allowable losses in a single company without the need to make an actual transfer of ownership of the asset within the group. The election has to be made within two years of the end of the accounting period of the company which made the actual disposal. (*REVBN2G)

Clause 101 and Schedule 29 modernise the rules for chargeable gains of companies. The changes will allow tax neutral transfers of assets between companies in a wider variety of circumstances than at present. The changes focus on assets remaining within the UK tax net and give companies more freedom in organising their UK businesses to take advantage of relieving rules. The new provisions take effect from 1 April 2000 except for changes to current anti-avoidance provisions which were effective from Budget day. (REV/C&E2 and REVBN2B)

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INTERNATIONAL MATTERS

Clause 102 and Schedule 30 bring into effect a number of changes to the rules concerning claims to relief in respect of foreign tax and repeal some obsolete provisions in Part XVIII ICTA 1988. Most of the revisions affect claims made by multinational companies, but some will also apply to individuals (*REVBN2D).

Clause 103 makes four changes to improve the fairness and effectiveness of the anti-avoidance rules for controlled foreign companies. The changes strengthen the legislation and update it to take account of developments in the ways multinationals are structured and do business. UK companies will continue to be exempt in respect of CFCs that are not involved in UK tax avoidance. The motive test in the CFC rules means that additional tax will only be payable in situations where companies are seeking to avoid UK tax.

Clause 104 provides for a set of comprehensive new rules that lay down how companies calculate their profits for tax purposes where they have transactions denominated in a currency other than sterling, or keep their books in such a currency. The new rules ensure that all companies will follow the currency of their accounts (or branch financial statements) in calculating their taxable profits and in determining their exchange gains and losses, so long as the use of that currency follows normal accounting practice.

Clause 105 provides supporting legislation for the changes introduced at clause 104. The clause extends the definitions at sections 149 and 163 Finance Act 1993 so that the local currency rules apply to non-trading exchange gains and losses, as well as trading gains and losses. It also makes other consequential amendments and introduces an anti-avoidance rule.

(See reference to this measure in *REV/C&E2 p2.)

INSURANCE

Clause 106 allows regulations to be made to recover the benefits of tax deferral that insurance companies and Lloyd's members get where they significantly overestimate their provisions for unpaid claims. The clause will not limit the size of the deductions for unpaid liabilities to policyholders, but if it later turns out that too much was deducted, insurers will have to pay what will amount to an interest charge on the tax deferred. A tax deduction will be deemed too large only if it actually exceeds a discounted value of the liabilities as they turn out. And insurers may choose not to take a full tax deduction for their provisions for unpaid claims. Regulations under the clause may allow for a margin of error in the estimation of provisions and exclude members of Lloyd's who participate in only a small part of a syndicate's business. (*REVBN2L)

Clause 107 provides for a change to the rules defining the scope of "overseas life assurance business" ­ broadly, business with policyholders residing outside the UK. The current definition is not sufficiently flexible to adjust to developments in overseas insurance markets. The clause introduces a regulation making power that will allow exclusions from the basic definition of overseas life assurance business to be set out in secondary legislation instead of as now, relying on the limiting definitions set out in primary legislation. (*REVBN2H)

Clause 108 introduces changes to the apportionment rules for life insurance companies. Existing rules provide for the apportionment of income and gains (including interest received on investments) between different categories of business so that the different tax treatments appropriate to the various categories can be applied. The Clause amends these rules so that they operate more straightforwardly where much or all of a company's business is linked business ­ that is, where the benefits accruing to policyholders depend on the performance of a specific portfolio of investments. It also introduces new rules to apportion between categories of business the debits and credits on debtor loan relationships (typically interest paid on loans) and to remove from the apportionment rules some distortions that the borrowing of money by life companies would otherwise create. (*REVBN2L)

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MISCELLANEOUS

Clause 109 applies to companies that participate in rent factoring schemes. In substance these schemes are equivalent to bank loans, but they aim to get a more advantageous tax result for the companies engaging in them. The Clause provides for amounts received in such schemes for giving up the right to future rental income in respect of land in the United Kingdom, whether by transferring the rights to receive rents or by granting a lease at a premium, to be charged to tax as income under Schedule A. Exceptions are made so as not to affect the taxation of genuine investment in property and capital allowances based finance leasing. The new rules apply to transactions entered into on or after 21 March 2000. (*REVBN2M)

Clause 110 abolishes the Paying and Collecting Agents schemes. From April 2001, UK paying and collecting agents (mainly banks and stockbrokers) will no longer be required to deduct income tax when paying or collecting interest on quoted UK Eurobonds or foreign dividends and interest. The arrangements under which paying agents currently deduct tax from payments of UK public revenue dividends will be replaced by new arrangements (provided for in clause 111). The clause ensures that for the future, all interest on quoted Eurobonds will be paid gross. And the definition of quoted Eurobond is being updated to ensure that bonds will no longer have to be issued in bearer form in order to fall within the definition and be free of withholding tax. The clause also introduces a minor modification to the Tax Deduction Scheme for Interest to ensure that interest is not paid gross to not ordinarily resident individuals unless the investor or other person applying for gross payment has first provided their principal residential address to the bank or other deposit-taker paying the interest. (*REVBN2J)

Clause 111 sets out the deduction mechanism which will be applied for UK public revenue dividends that are paid net of tax, once the current mechanism in the Paying and Collecting Agents (PACA) regime is abolished in April 2001. The clause gives the Inland Revenue power to determine alternative arrangements if these are needed.

As a further consequence of the abolition of the PACA regime, the clause provides that from April 2001 withholding tax will no longer be applied to bearer gilts.

Clause 112 introduces a number of minor provisions which clarify the existing tax treatment of expenditure on the production or acquisition of films, tapes and discs. It outlines what expenditure is regarded as revenue for the purposes of tax relief and what rights are within the relief. It also makes clear that only films completed on or after 10th March 1992 are eligible for tax relief under S42 of the Finance (No2) Act 1992. The new definitions apply to films that started shooting on or after 21st March 2000. The person incurring the expenditure on films which started shooting before 21st March, but are completed afterwards can make an irrevocable election to be treated under either the old or the new definitions. For films, tapes or discs acquired after 6th April 2000 the new definitions apply notwithstanding when filming commenced.

STAMP DUTY

Clause 113 provides that the rates of stamp duty for transfers of land and buildings will be increased in cases where the price, or "consideration", exceeds £250,000. The new rates are 3% (up to £500,000) and 4% (above £500,000). They generally apply to transfers on or after 28 March 2000. But the old rates will apply where the document gives effect to a contract made on or before 21 March, unless the document results from the exercise of an option, a right of pre-emption, an assignment, or further contract made after 21 March. The charge also applies to transfers of certain other property, such as goodwill and some forms of debt. (*REV5)

Clause 114 increases from £500 to £5,000 the threshold for the stamp duty charge on the annual rent for new leases of up to seven years (or of indefinite term), with effect from 28 March 2000. (*REV5)

Clause 115 and Schedule 32 correct an omission in Schedule 13 to the Finance Act 1999, in which there is no reference to leases of exactly seven years in the statement of the stamp duty rates on the rental element of new leases. The clause applies the appropriate rate for seven year leases from 28 March 2000 and the schedule contains transitional provisions for leases executed between 1 October 1999 (the commencement date for the provisions of Schedule 13 to Finance Act 1999) and 27 March 2000. (*REV5)

Clause 116 and Schedule 33 provide a power to allow stamp duty avoidance devices to be countered as they arise. Under the power, regulations may be made to vary any existing stamp duty with immediate effect, subject to approval by a House of Commons vote. The power cannot be used to vary rates or thresholds and can only be used for cases involving land, stock or marketable securities. And any regulations will be temporary, as they will not stand unless included within a subsequent Finance Bill. (*REV5)

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Clause 117 provides for stamp duty to be charged at the relevant property rate when land or buildings are transferred in exchange for other property. The clause takes effect for documents executed after 28 March 2000. (*REV5)

Clause 118 provides for stamp duty to be charged at the relevant property rate when land or buildings are transferred into a company to which the transferor is connected. The clause takes effect for documents executed after 28 March 2000. (*REV5)

Clause 119 provides for stamp duty to be charged at the relevant property rate when a lease is granted to a company to which the grantor is connected. The clause takes effect for documents executed after 28 March 2000. (*REV5)

Clause 120 provides for stamp duty to be charged at the shares rate when marketable securities are transferred in exchange for property which is exempt from stamp duty reserve tax. The clause takes effect for documents executed after 28 March 2000. (*REV5)

Clause 121 provides for a revised definition of 'group' for the purposes of the stamp duty relief for transfers of property between associated companies in Great Britain. The revised definition is aligned with the definition of 'group' for Corporation Tax group relief. The clause takes effect for instruments executed on or after the date the Finance Bill receives Royal Assent. (*REV5)

Clause 122 provides for a revised definition of 'group' for the purposes of the stamp duty relief for transfers of property between associated companies in Northern Ireland. The revised definition is aligned with the definition of 'group' for Corporation Tax group relief. The clause takes effect for instruments executed on or after the date the Finance Bill receives Royal Assent. (*REV5)

Clause 123 provides for a revised definition of 'group' for the purposes of the stamp duty relief for leases which are granted between associated companies. The revised definition is aligned with the definition of 'group' for Corporation Tax. The clause takes effect for instruments executed on or after the date the Finance Bill receives Royal Assent. (*REV5)

Clause 124 introduces a stamp duty charge when the consideration received for a conveyance on sale is the right to a future issue of securities. The clause takes effect for instruments executed on or after the date the Finance Bill receives Royal Assent. (*REV5)

Clause 125 provides for the re-organisation reliefs under Sections 75 and 76 Finance Act 1986 to be disapplied if redeemable shares form part of the consideration for acquisition. The clause takes effect for instruments executed on or after the date the Finance Bill receives Royal Assent. (*REV5)

Clause 126 ensures that there is a stamp duty charge when a lease is surrendered, even if there is no deed of surrender. In such a case, the duty will be stamped on a document that is used to evidence the surrender, such as a statutory declaration provided to a land registry. The clause takes effect for leases surrendered on or after the date the Finance Bill receives Royal Assent. (*REV5)

Clause 127 and Schedule 34 abolish the stamp duty charges on transactions in intellectual property with effect from 28 March 2000. Intellectual property includes patents, trade marks, copyrights, design rights, and plant breeders' rights as well as licences in respect of them. (*REV5)

Clause 128 provides for a stamp duty relief for a range of purchases and leases of land and buildings by registered social landlords ( RSLs). The relief extends to all acquisitions by resident-controlled RSLs; acquisitions from local authorities, other RSLs and housing action trusts; and any other acquisitions with the benefit of public subsidy. It applies to conveyances and leases executed after Royal Assent. (*REV5)

Clause 129 relieves from stamp duty all transfers of assets to the Northern Ireland Assembly Commission, with effect from 28 March 2000. (*REV5)

Clause 130 brings 'ratchet loans', where the interest rate falls as business results improve (or, conversely, the interest rate increases as business results deteriorate), within the scope of the stamp duty loan capital exemption with effect from 21 March 2000. (*REV5)

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VALUE ADDED TAXES

SUPPLIES TO WHICH A REDUCED RATE APPLIES

Clause 131, Schedule 35 and Repeal Schedule 40, Part 4 extend the reduced rate of Value Added Tax for the installation of energy saving materials to all homes. They also extend the reduced rate of Value Added Tax to the installation of central heating systems and home security goods provided under grants to less well off pensioners and grant funded heating measures in the homes of the less well off. The change took effect from 1 April 2000 (C&E 6)

DISPOSALS OF ASSETS FOR WHICH A VAT REPAYMENT IS CLAIMED

Clause 132 and Schedule 36 introduce a new requirement to register for VAT in order to prevent avoidance by overseas businesses. Its purpose is to prevent goods being sold VAT-free in the UK where the seller or a previous owner of the seller's business has claimed back the VAT paid on the goods under the provisions which allow unregistered overseas businesses to claim VAT refunds. (REV/C&E 2)

GOLD: FAILURE TO COMPLY WITH RECORD-KEEPING REQUIREMENTS ETC.

Clause 133 introduces penalties for traders who fail to comply with key record-keeping requirements of the special VAT scheme for exempt transactions in investment gold. The changes take effect on Royal Assent of the Finance Bill 2000. (REV/C&E 2)

INHERITANCE TAX

Clause134 extends effective exemption from inheritance tax to employee share ownership plans, set up under Clause 47 and Schedule 8, parallel to the existing exemption for approved profit sharing schemes.

PETROLEUM REVENUE TAX

Clause 135 prevents companies from securing a petroleum revenue tax (PRT) advantage by deferring their claims for relief for operating expenditure incurred while they are benefiting from safeguard relief. For operating expenditure incurred on or after 21 March 2000, such deferred claims will only be allowed to the extent necessary to ensure that a company's overall PRT liability is no greater than it would have been, had the claims been submitted at the normal time. (*REV16)

LANDFILL TAX

Clause 136 increases the standard rate of landfill tax from £10 per tonne to £11 per tonne. The change takes effect from 1 April 2000.

Clause 137 substitutes a new paragraph (a) and amends paragraph (b) of subsection (7) of section 62 of the Finance Act 1996. These subsections specify the cases in which regulations may treat material comprised in a disposal and held temporarily as not being a taxable disposal. The amendment to subsection (b) is a consequential one, to ensure consistency with the wording introduced by the amendment to the introductory words of paragraph (a). The change takes effect from the time of Royal Assent to the Finance Bill.

Clause 138 provides that Schedule 37 of this Bill (which makes provisions for introducing secondary liability for landfill tax) shall have effect. The change takes effect as regards taxable landfill disposals made on or after Royal Assent to the Finance Bill.

INCENTIVES FOR ELECTRONIC COMMUNICATIONS

Clause 139 and Schedule 38 allow the Inland Revenue and Customs and Excise to provide incentives to encourage people to use electronic communication with the tax authorities or in connection with taxation matters. (*REV/C&E1, *REV10)

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INFORMATION POWERS

Clause 140 extends the Inland Revenue's third party information powers relating to interest paid, credited or received. From 6 April 2001 these will apply to deposit-takers and building societies in respect of interest paid or credited to all individuals. Existing information powers which apply to all persons who pay or receive interest will be extended to cover all paying and collecting agents of interest (which for these purposes includes building society dividends and redemption proceeds of discounted securities) and foreign dividends. The clause also provides for the Inland Revenue to specify the form in which information is to be returned, and for the information required to include the name and address of the beneficial owner of amounts paid, credited, or received, in certain cases to be specified in Regulations. In addition, the clause provides for the Inland Revenue to be able to audit the information returns. (*REVBN2J)

Clause 141 provides for agreements with other countries to exchange information for Income Tax, Capital Gains Tax, and Corporation Tax purposes. It also allows the Inland Revenue to gather information for another country under such a Tax Information Exchange Agreement, or under a Double Taxation Agreement where it provides for information-gathering. (IR Press Release of 20 March 2000 and REVBN2J)

Clause 142 makes equivalent provision to clause 141 for the purposes of inheritance tax.

Clause 143 allows the Inland Revenue, which has been appointed to enforce the rates of National Minimum Wage (NMW), to use information obtained for that purpose for any of its other functions.

Clause 144 and Schedule 39 enable a judge to issue an order to a person, requiring him to deliver documents to the Inland Revenue. An Inland Revenue officer may apply for such an order in cases of suspected serious tax fraud. The documents specified are those that may be evidence of the suspected offence. There are detailed provisions setting out how the order is to be obtained and complied with, and regulation-making powers to cover procedural matters.

Clause 145 amends the Inland Revenue's existing search power. It prevents a search warrant from being issued where the new production power (Clause 144) could be used instead. It enables printouts to be obtained from computers during a search, extends the exemption for legally privileged material, and adjusts the territorial jurisdiction of Scottish sheriffs.

PAYMENTS FROM NATIONAL LOANS FUND TO DEBT MANAGEMENT ACCOUNT

Clause 146 enables the Treasury to make payments from the National Loans Fund to the Debt Management Account in order to reduce or extinguish any losses made by the Debt Management Account.

THE NATIONAL SAVINGS BANK

Clause 147 changes the Parliamentary procedure applicable to statutory instruments which change the limits on deposits into National Savings Bank, including Individual Savings Accounts.

NATIONAL SAVINGS CERTIFICATES

Clause 148 extends the Treasury's power to promulgate new extension terms for customers whose savings certificates reach the end of their five year term.

ANNUAL ACCOUNTS

Clause 149 obliges the Treasury to prepare annual accounts for the Exchange Equalisation Account, and the Comptroller and Auditor General to examine, certify and report on those accounts to each House of Parliament.

INTERPRETATION

Clause 150 provides for the use of "the Taxes Act 1988" as an abbreviation for the Income and Corporation Taxes Act 1988.

REPEALS

Clause 151 provides for the repeals contained in Schedule 40 of the Bill to have effect. It also gives effect to the Notes in the Schedule that set out the commencement provisions and savings applying to the repeals.

SHORT TITLE

Clause 152 provides for the Bill to be known as "the Finance Act 2000" on enactment.

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Press Notices 2000 January to June index