Finance Bill - continued        House of Lords
PART III, INCOME TAX, CORPORATION TAX AND CAPITAL GAINS TAX - continued

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  CHAPTER II
  OTHER PROVISIONS
 
Giving to charity
Payroll deduction scheme.     38. - (1) Where in accordance with a scheme approved under section 202 of the Taxes Act 1988 (donations to charity: payroll deduction scheme) an agent is to pay to a charity any sum which-
 
 
    (a) is withheld by an employer from a payment which an employee is entitled to receive; and
 
    (b) is paid by the employer to the agent,
       the agent shall, within a period prescribed by regulations made by the Treasury, pay a supplement equal to 10% of that sum to the charity.
 
      (2) On a claim made by an agent in such form as the Board may prescribe, the Board shall pay to the agent out of money provided by Parliament-
 
 
    (a) such amounts as are required-
 
      (i) to fund the payment of supplements falling to be paid by him; or
 
      (ii) to reimburse him for supplements paid by him the payment of which has not been so funded; and
 
    (b) in the case of an agent which is a charity, an amount which is equal to 10% of the aggregate of sums which-
 
      (i) are withheld and paid as mentioned in paragraphs (a) and (b) of subsection (1) above; and
 
      (ii) are sums to which the agent is itself entitled in its capacity as a charity.
      (3) The Treasury may by regulations make provision-
 
 
    (a) requiring agents to notify the Board of any failures of theirs to comply with subsection (1) above, and of the reasons for those failures;
 
    (b) requiring agents to keep records of supplements paid by them under that subsection; and
 
    (c) for the assessment and recovery under the Taxes Acts of amounts paid to agents under subsection (2) above which ought not to have been so paid.
  The regulations may contain such supplementary and incidental provision as appears to the Treasury necessary or expedient.
 
      (4) In this section-
 
 
    "agent" means any such person or charity as is mentioned in subsection (4) of section 202 of the Taxes Act 1988;
 
    "employee" and "employer" shall be construed in accordance with subsection (1) of that section;
 
    "charity" has the same meaning as in section 506 of that Act and includes each of the bodies mentioned in section 507 of that Act;
 
    "the Taxes Acts" has the same meaning as in the Taxes Management Act 1970.
      (5) In section 202 of the Taxes Act 1988-
 
 
    (a) in subsection (6), the words "must not be paid by the employee under a covenant" shall cease to have effect;
 
    (b) subsection (7) shall cease to have effect; and
 
    (c) in subsection (11), in the definition of "charity", after "section 506" there shall be inserted "and includes each of the bodies mentioned in section 507".
      (6) Subsections (1) to (4) above shall have effect in relation to supplements or other amounts payable in respect of sums withheld on or after 6th April 2000 and before 6th April 2003; and no claim under subsection (2) above shall be entertained if made on or after 6th April 2004.
 
      (7) Subsection (5) above shall have effect in relation to sums withheld on or after 6th April 2000.
 
Gift aid payments by individuals.     39. - (1) Section 25 of the Finance Act 1990 (donations to charity by individuals) shall be amended in accordance with subsections (2) to (7) below.
 
      (2) In subsection (1)(c), for "an appropriate certificate" there shall be substituted "an appropriate declaration".
 
      (3) In subsection (2)-
 
 
    (a) paragraphs (c) and (g) shall cease to have effect;
 
    (b) in paragraph (e), for "two and a half per cent of the amount of the gift" there shall be substituted "the limit imposed by subsection (5A) below"; and
 
    (c) for paragraph (i) there shall be substituted-
 
    "(i) either-
 
      (i) at the time the gift is made, the donor is resident in the United Kingdom or performs duties which by virtue of section 132(4)(a) of the Taxes Act 1988 (Crown employees serving overseas) are treated as being performed in the United Kingdom; or
 
      (ii) the grossed up amount of the gift would, if in fact made, be payable out of profits or gains brought into charge to income tax or capital gains tax.".
      (4) For subsection (3) there shall be substituted-
 
 
    "(3) The reference in subsection (1)(c) above to an appropriate declaration is a reference to a declaration which-
 
 
    (a) is given in such manner as may be prescribed by regulations made by the Board; and
 
    (b) contains such information and such statements as may be so prescribed.
      (3A) Regulations made for the purposes of subsection (3) above may-
 
 
    (a) provide for declarations to have effect, to cease to have effect or to be deemed never to have had effect in such circumstances and for such purposes as may be prescribed by the regulations;
 
    (b) require charities to keep records with respect to declarations given to them by donors; and
 
    (c) make different provision for declarations made in a different manner.".
      (5) After subsection (5) there shall be inserted-
 
 
    "(5A) The limit imposed by this subsection is-
 
 
    (a) where the amount of the gift does not exceed £100, 25 per cent of the amount of the gift;
 
    (b) where the amount of the gift exceeds £100 but does not exceed £1,000, £25;
 
    (c) where the amount of the gift exceeds £1,000, 2.5 per cent of the amount of the gift.
      (5B) Where a benefit received in consequence of making a gift-
 
 
    (a) consists of the right to receive benefits at intervals over a period of less than twelve months;
 
    (b) relates to a period of less than twelve months; or
 
    (c) is one of a series of benefits received at intervals in consequence of making a series of gifts at intervals of less than twelve months,
       the value of the benefit shall be adjusted for the purposes of subsection (4) above and the amount of the gift shall be adjusted for the purposes of subsection (5A) above.
 
      (5C) Where a benefit, other than a benefit which is one of a series of benefits received at intervals, is received in consequence of making a gift which is one of a series of gifts made at intervals of less than twelve months, the amount of the gift shall be adjusted for the purposes of subsection (5A) above.
 
      (5D) Where the value of a benefit, or the amount of a gift, falls to be adjusted under subsection (5B) or (5C) above, the value or amount shall be multiplied by 365 and the result shall be divided by-
 
 
    (a) in a case falling within subsection (5B)(a) or (b) above, the number of days in the period of less than twelve months;
 
    (b) in a case falling within subsection (5B)(c) or (5C) above, the average number of days in the intervals of less than twelve months;
       and the reference in subsection (5B) above to subsection (4) above is a reference to that subsection as it applies for the purposes of subsection (2)(e) above.
 
      (5E) In determining whether a gift to a charity falling within subsection (5F) below is a qualifying donation, there shall be disregarded the benefit of any right of admission received in consequence of the making of the gift-
 
 
    (a) to view property the preservation of which is the sole or main purpose of the charity; or
 
    (b) to observe wildlife the conservation of which is the sole or main purpose of the charity;
       but this subsection shall not apply unless the opportunity to make gifts which attract such a right is available to members of the public.
 
      (5F) A charity falls within this subsection if its sole or main purpose is the preservation of property, or the conservation of wildlife, for the public benefit.
 
      (5G) In subsection (5E) above "right of admission" refers to admission of the person making the gift (or any member of his family who may be admitted because of the gift) either free of the charges normally payable for admission by members of the public, or on payment of a reduced charge.".
 
      (6) For subsections (6) to (9) there shall be substituted-
 
 
    "(6) Where any gift made by the donor in a year of assessment is a qualifying donation, then, for that year-
 
 
    (a) the Income Tax Acts and the Taxation of Chargeable Gains Act 1992 shall have effect, in their application to him, as if-
 
      (i) the gift had been made after deduction of income tax at the basic rate; and
 
      (ii) the basic rate limit were increased by an amount equal to the grossed up amount of the gift;
 
    (b) the provisions mentioned in subsection (7) below shall have effect, in their application to him, as if any reference to income tax which he is entitled to charge against any person included a reference to the tax treated as deducted from the gift; and
 
    (c) to the extent, if any, necessary to ensure that he is charged to an amount of income tax and capital gains tax equal to the tax treated as deducted from the gift, he shall not be entitled to relief under Chapter I of Part VII of the Taxes Act 1988;
       but paragraph (a)(ii) above shall not apply for the purposes of any computation under section 550(2)(a) or (b) of that Act (relief where gain charged at a higher rate).
 
      (7) The provisions referred to in subsection (6)(b) above are-
 
 
    (a) section 289A(5)(e) of the Taxes Act 1988 (relief under enterprise investment scheme);
 
    (b) section 796(3) of that Act (credit for foreign tax); and
 
    (c) paragraph 1(6)(f) of Schedule 15B to that Act (venture capital trusts).
      (8) Where the tax treated as deducted from a gift by virtue of subsection (6) above exceeds the amount of income tax and capital gains tax with which the donor is charged for the year of assessment, the donor shall be assessable and chargeable with income tax at the basic rate on so much of the gift as is necessary to recover an amount of tax equal to the excess.
 
      (9) In determining for the purposes of subsection (8) above the total amount of income tax and capital gains tax with which the donor is charged for the year of assessment, there shall be disregarded-
 
 
    (a) any tax charged at the basic rate by virtue of-
 
      (i) section 348 of the Taxes Act 1988 (read with section 3 of that Act); or
 
      (ii) section 349 of that Act (read with section 350 of that Act);
 
    (b) any tax treated as having been paid under-
 
      (i) section 233(1)(a) of that Act (taxation of certain recipients of distributions);
 
      (ii) section 249(4)(a) of that Act (stock dividends treated as income); or
 
      (iii) section 547(5)(a) of that Act (method of charging life policy gain to tax);
 
    (c) any relief to which section 256(2) of that Act applies (relief by way of income tax reduction);
 
    (d) any relief under-
 
      (i) section 347B of that Act (relief for maintenance payments);
 
      (ii) section 788 of that Act (relief by agreement with other countries); or
 
      (iii) section 790(1) of that Act (unilateral relief);
 
    (e) any set off of tax deducted, or treated as deducted, from income other than-
 
      (i) tax treated as deducted from income by virtue of section 421(1)(a) of that Act (taxation of borrower when loan released etc); or
 
      (ii) tax treated as deducted from a relevant amount within the meaning of section 699A of that Act (untaxed sums comprised in the income of an estate) except to the extent that the relevant amount is or would be paid in respect of a distribution chargeable under Schedule F; and
 
    (f) any set off of tax credits.
      (9A) For the purposes of sections 257(5) and 257A(5) of the Taxes Act 1988 (age related allowances), the donor's total income shall be treated as reduced by the aggregate amount of gifts from which tax is treated as deducted by virtue of subsection (6) above.".
 
      (7) In subsection (12), paragraphs (b) and (e) and the word "and" immediately preceding paragraph (e) shall cease to have effect.
 
      (8) In subsections (1)(b) and (3)(b) of section 257BB of the Taxes Act 1988 (transfer of relief under section 257A where relief exceeds income), after "section 256(2)(b)" there shall be inserted "(read with section 25(6)(c) of the Finance Act 1990 where applicable)".
 
      (9) In paragraph 4(1)(b) of Schedule 13B to that Act (children's tax credit), after "section 256(2)(b)" there shall be inserted "(read with section 25(6)(c) of the Finance Act 1990 where applicable)".
 
      (10) This section has effect in relation to-
 
 
    (a) gifts made on or after 6th April 2000 which are not covenanted payments; and
 
    (b) covenanted payments falling to be made on or after that date;
       and any regulations made under subsection (3) of section 25 of the Finance Act 1990 (as substituted by subsection (4) above) within three months of the passing of this Act may be so made as to apply to any payments in relation to which this section has effect.
 
Gift aid payments by companies.     40. - (1) Section 339 of the Taxes Act 1988 (charges on income: donations to charity) shall be amended in accordance with subsections (2) to (8) below.
 
      (2) In subsection (1), for paragraph (a) there shall be substituted-
 
 
    "(a) a payment which, by reason of any provision of the Taxes Acts (within the meaning of the Management Act) except section 209(4), is to be regarded as a distribution; and".
      (3) Subsections (2), (3), (3A), (3F), (6), (7) and (8) shall cease to have effect.
 
      (4) In subsection (3B)(b), for "two and a half per cent. of the amount given after deducting tax under section 339(3)" there shall be substituted "the limit imposed by subsection (3DA) below".
 
      (5) After subsection (3D) there shall be inserted-
 
 
    "(3DA) The limit imposed by this subsection is-
 
 
    (a) where the amount of the payment does not exceed £100, 25 per cent of the amount of the payment;
 
    (b) where the amount of the payment exceeds £100 but does not exceed £1,000, £25;
 
    (c) where the amount of the payment exceeds £1,000, 2.5 per cent of the amount of the payment.
      (3DB) Where a benefit received in consequence of making a payment-
 
 
    (a) consists of the right to receive benefits at intervals over a period of less than twelve months;
 
    (b) relates to a period of less than twelve months; or
 
    (c) is one of a series of benefits received at intervals in consequence of making a series of payments at intervals of less than twelve months,
       the value of the benefit shall be adjusted for the purposes of subsection (3C) above and the amount of the payment shall be adjusted for the purposes of subsection (3DA) above.
 
      (3DC) Where a benefit, other than a benefit which is one of a series of benefits received at intervals, is received in consequence of making a payment which is one of a series of payments made at intervals of less than twelve months, the amount of the payment shall be adjusted for the purposes of subsection (3DA) above.
 
      (3DD) Where the value of a benefit, or the amount of a payment, falls to be adjusted under subsection (3DB) or (3DC) above, the value or amount shall be multiplied by 365 and the result shall be divided by-
 
 
    (a) in a case falling within subsection (3DB)(a) or (b) above, the number of days in the period of less than twelve months;
 
    (b) in a case falling within subsection (3DB)(c) or (3DC) above, the average number of days in the intervals of less than twelve months;
       and the reference in subsection (3DB) to subsection (3C) above is a reference to that subsection as it applies for the purposes of subsection (3B) above.".
 
      (6) For subsection (4) there shall be substituted-
 
 
    "(4) Where a company gives a sum of money to a charity, the gift shall in the hands of the charity be treated for the purposes of this Act as if it were an annual payment.".
 
      (7) For subsection (7AA) there shall be substituted-
 
 
    "(7AA) Where-
 
 
    (a) a qualifying donation to a charity is made by a company which is wholly owned by a charity, and
 
    (b) the company makes a claim for the donation, or any part of it, to be deemed for the purposes of section 338 to be a charge on income paid in an accounting period falling wholly or partly within the period of nine months ending with the date of the making of the donation,
       the donation or part shall be deemed for those purposes to be a charge on income paid in that accounting period, and not in any later period.
 
  A claim under this subsection must be made within the period of two years immediately following the accounting period in which the donation is made, or such longer period as the Board may allow.".
 
      (8) In subsection (9), the words "in subsections (1) to (4) above includes" shall cease to have effect.
 
      (9) In subsection (1) of section 209 of the Taxes Act 1988 (meaning of "distribution"), for "section 339(6) and any other express exceptions" there shall be substituted "any express exceptions".
 
      (10) In subsection (2)(a) of section 338 of that Act (allowance of charges on income and capital), after "company" there shall be inserted "or payments falling within paragraph (b) below".
 
      (11) This section has effect in relation to payments made on or after 1st April 2000; and-
 
 
    (a) so much of an accounting period as falls before that date; and
 
    (b) so much of it as falls after 31st March 2000,
       shall be treated as separate accounting periods for the purposes of the amendment made by subsection (5) above.
 
Covenanted payments to charities.     41. - (1) In subsection (5)(b) of section 338 of the Taxes Act 1988 (allowances of charges on income and capital), for "a covenanted donation to charity" there shall be substituted "a qualifying donation".
 
      (2) In section 347A of that Act (annual payments and interest: general rule), subsections (2)(b), (7) and (8) shall cease to have effect.
 
      (3) In subsection (3) of section 348 of that Act (payments out of profits or gains brought into charge to income tax: deductions of tax), at the end there shall be inserted "or to any payment which is a qualifying donation for the purposes of section 25 of the Finance Act 1990".
 
      (4) In subsection (1) of section 349 of that Act (payments not out of profits or gains brought into charge to income tax, and annual interest), at the end there shall be inserted "or to any payment which is a qualifying donation (within the meaning of section 339) or a qualifying donation for the purposes of section 25 of the Finance Act 1990".
 
      (5) In subsection (6) of section 505 of that Act (charities: general), the words "and, for this purpose, all covenanted payments to charity (within the meaning of section 347A(7)) shall be treated as a single item" shall cease to have effect.
 
      (6) In subsection (9) of section 660A of that Act (income arising under a settlement where settlor retains an interest), for paragraph (b) there shall be substituted-
 
 
    "(b) qualifying donations for the purposes of section 25 of the Finance Act 1990.".
      (7) Section 59 of the Finance Act 1989 (covenanted subscriptions) shall cease to have effect.
 
      (8) Where a deed of covenant executed by an individual before 6th April 2000 provides for the payment of specified amounts, any amount payable under the deed on or after that date shall be determined as if the individual were entitled to deduct tax from that amount at the basic rate.
 
      (9) This section shall have effect in relation to covenanted payments-
 
 
    (a) falling to be made by individuals on or after 6th April 2000; or
 
    (b) made by companies on or after 1st April 2000.
Millennium gift aid.     42. - (1) In section 48 of the Finance Act 1998 (gifts of money for relief in poor countries), subsections (3), (6) and (7) shall cease to have effect.
 
      (2) In subsection (4) of that section-
 
 
    (a) in paragraph (a), after "made" there shall be inserted "before 6th April 2000";
 
    (b) after paragraph (b) there shall be inserted-
 
    "(bb) the subsequent gift, or at least one of the subsequent gifts, is made on or after 6th April 2000;"; and
 
    (c) in paragraph (c), for "appropriate certificate" there shall be substituted "appropriate declaration".
      (3) In subsection (8) of that section, for the definition of "relevant gift" there shall be substituted-
 
 
    ""relevant gift" means a gift to which this section applies-
 
      (a) which satisfies the requirements of subsection (2) of section 25 of the Finance Act 1990 (as amended by section 39 of the Finance Act 2000); or
 
      (b) which would satisfy those requirements if paragraph (e) of that subsection were disregarded.".
Gifts of shares and securities to charities etc.     43. - (1) After section 587A of the Taxes Act 1988 there shall be inserted-
 
 
"Gifts of shares and securities to charities etc.     587B. - (1) Subsections (2) and (3) below apply where, otherwise than by way of a bargain made at arm's length, an individual, or a company which is not itself a charity, disposes of the whole of the beneficial interest in a qualifying investment to a charity.
 
    (2) On a claim made in that behalf to an officer of the Board-
 
 
    (a) the relevant amount shall be allowed-
 
      (i) in the case of a disposal by an individual, as a deduction in calculating his total income for the purposes of income tax for the year of assessment in which the disposal is made;
 
      (ii) in the case of a disposal by a company, as a charge on income for the purposes of corporation tax for the accounting period in which the disposal is made; and
 
    (b) no relief in respect of the disposal shall be given under section 83A or any other provision of the Income Tax Acts;
       but paragraph (a)(i) above shall not apply for the purposes of any computation under section 550(2)(a) or (b).
 
      (3) The consideration for which the charity's acquisition of the qualifying investment is treated by virtue of section 257(2) of the 1992 Act as having been made-
 
 
    (a) shall be reduced by the relevant amount; or
 
    (b) where that consideration is less than that amount, shall be reduced to nil.
      (4) Subject to subsections (5) to (7) below, the relevant amount is an amount equal to-
 
 
    (a) where the disposal is a gift, the market value of the qualifying investment at the time when the disposal is made;
 
    (b) where the disposal is at an undervalue, the difference between that market value and the amount or value of the consideration for the disposal.
      (5) Where there are one or more benefits received in consequence of making the disposal which are received by the person making the disposal or a person connected with him, the relevant amount shall be reduced by the value of that benefit or, as the case may be, the aggregate value of those benefits; and section 839 applies for the purposes of this subsection.
 
      (6) Where the disposal is a gift, the relevant amount shall be increased by the amount of the incidental costs of making the disposal to the person making it.
 
      (7) Where the disposal is at an undervalue-
 
 
    (a) to the extent that the consideration for the disposal is less than that for which the disposal is treated as made by virtue of section 257(2)(a) of the 1992 Act, the relevant amount shall be increased by the amount of the incidental costs of making the disposal to the person making it; and
 
    (b) section 48 of that Act (consideration due after time of disposal) shall apply in relation to the computation of the relevant amount as it applies in relation to the computation of a gain.
      (8) In the case of a disposal by a company which is carrying on life assurance business-
 
 
    (a) if the company is charged to tax under Case I of Schedule D in respect of such business, subsections (2) and (3) above shall not apply;
 
    (b) if the company is not so charged to tax in respect of such business-
 
      (i) subsection (2)(a)(ii) above shall have effect as if for "a charge on income" there were substituted "an expense of management"; and
 
      (ii) the relevant amount given by subsection (4) above shall be reduced by so much (if any) of that amount as is not referable to basic life assurance and general annuity business;
 
    and for the purpose of determining how much (if any) of that amount is not so referable, section 432A shall have effect as if that amount were a gain accruing on the disposal of the qualifying investment to the company.
      (9) In this section-
 
 
    "authorised unit trust" and "open-ended investment company" have the meanings given by section 468;
 
    "charity" has the same meaning as in section 506 and includes each of the bodies mentioned in section 507(1);
 
    "the incidental costs of making the disposal to the person making it" shall be construed in accordance with section 38(2) of the 1992 Act;
 
    "life assurance business" and related expressions have the same meaning as in Chapter I of Part XII;
 
    "offshore fund" means a collective investment scheme (within the meaning of the Financial Services Act 1986) which is constituted by any company, unit trust scheme or other arrangement falling within paragraph (a), (b) or (c) of section 759(1);
 
    "qualifying investment" means any of the following-
 
      (a) shares or securities which are listed or dealt in on a recognised stock exchange;
 
      (b) units in an authorised unit trust;
 
      (c) shares in an open-ended investment company; and
 
      (d) an interest in an offshore fund.
      (10) Subject to subsection (11) below, the market value of any qualifying investment shall be determined for the purposes of this section as for the purposes of the 1992 Act.
 
      (11) In the case of an interest in an offshore fund for which there are separate published buying and selling prices, section 272(5) of the 1992 Act (meaning of "market value" in relation to rights of unit holders in a unit trust scheme) shall apply with any necessary modifications for determining the market value of the interest for the purposes of this section.".
 
      (2) In subsection (2) of section 338 of that Act (allowances of charges on income and capital), immediately before paragraph (a) there shall be inserted-
 
 
    "(za) amounts allowed as charges on income under section 587B(2)(a)(ii);".
      (3) This section has effect in relation to-
 
 
    (a) disposals made by individuals on or after 6th April 2000; and
 
    (b) disposals made by companies on or after 1st April 2000.
Gifts to charity from certain trusts.     44. - (1) Chapter IA of Part XV of the Taxes Act 1988 (liability of settlors) shall not apply to any qualifying income which arises under a trust the trustees of which are resident in the United Kingdom (a "UK trust") if-
 
 
    (a) it is given by the trustees to a charity in the year of assessment in which it arises; or
 
    (b) it is income to which a charity is entitled under the terms of the trust.
      (2) Subject to subsection (3) below, where in any year of assessment qualifying income arising under a UK trust from different sources exceeds the amount of that income falling within subsection (1) above, that amount shall be rateably apportioned between those sources.
 
      (3) Nothing in subsection (2) above shall affect the operation of any requirement that the whole, or any specified part, of the income from a particular source be given to a charity.
 
      (4) Where in any year of assessment qualifying income arising under a UK trust exceeds the amount of that income falling within subsection (1) above, any management expenses for that year shall be rateably apportioned between-
 
 
    (a) so much of that income as is equal to that amount; and
 
    (b) so much of that income as exceeds that amount.
      (5) In this section-
 
 
    "charity" has the same meaning as in section 506 of the Taxes Act 1988 and includes each of the bodies mentioned in section 507 of that Act;
 
    "qualifying income" means-
 
      (i) income which is to be accumulated;
 
      (ii) income which is payable at the discretion of the trustees or any other person (whether or not the trustees have power to accumulate it); or
 
      (iii) income which (before being distributed) is income of any person other than the trustees;
 
    "resident", in relation to the trustees of a trust, shall be construed in accordance with section 110 of the Finance Act 1989;
       and the reference to Chapter IA of Part XV of the Taxes Act 1988 includes a reference to that Chapter as it has effect by virtue of section 660E of that Act (application to settlements by two or more settlors).
 
      (6) This section has effect in relation to qualifying income arising to a UK trust on or after 6th April 2000.
 
Loans to charities.     45. - (1) In Chapter IA of Part XV of the Taxes Act 1988 "settlement" does not include any arrangement so far as it consists of a loan of money made by an individual to a charity either-
 
 
    (a) for no consideration; or
 
    (b) for a consideration which consists only of interest.
      (2) In this section "charity" has the same meaning as in section 44 above.
 
      (3) This section has effect in relation to income arising on or after 6th April 2000 on loans made before, as well as loans made on or after, that date.
 
Exemption for small trades etc.     46. - (1) Subject to subsection (2) below, exemption from tax under Case I or VI of Schedule D shall be granted, on a claim made in that behalf to the Board, in respect of any income of a charity if the requirements of subsection (3) below are satisfied with respect to the income.
 
      (2) Exemption shall not be granted under subsection (1) above in respect of income which is chargeable to tax under Case VI of Schedule D by virtue of any of the following-
 
 
    (a) section 30 of the Taxes Management Act 1970;
 
    (b) sections 214, 412, 547(1)(b) and (6), 553(6), 660C, 677, 703, 776, 788, 790 and 804 of the Taxes Act 1988;
 
    (c) paragraph 14 of Schedule 4 to the Finance (No. 2) Act 1997;
 
    (d) paragraph 52(4) of Schedule 18, and paragraph 13(7) of Schedule 19, to the Finance Act 1998; and
 
    (e) any other enactment specified in an order made by the Treasury.
      (3) The requirements of this subsection are satisfied with respect to any income for a chargeable period if it is applied solely for the purposes of the charity and either-
 
 
    (a) the charity's gross income for the chargeable period does not exceed the requisite limit; or
 
    (b) the charity had, at the beginning of the period, a reasonable expectation that its gross income for the period would not exceed that limit.
      (4) Subject to subsection (5) below, the requisite limit is whichever is the greater of-
 
 
    (a) £5,000; and
 
    (b) whichever is the lesser of £50,000 and 25% of all of the charity's incoming resources for the chargeable period.
      (5) For a chargeable period of less than twelve months, the amounts of £5,000 and £50,000 specified in subsection (4) above shall be proportionally reduced.
 
      (6) In this section-
 
 
    "charity" means any body of persons or trust established for charitable purposes only;
 
    "gross income", in relation to a charity, means income before deduction of any expenses;
 
    "income", in relation to a charity, means any profits or gains or other income which is chargeable to tax under Case I or VI of Schedule D and which is not, apart this section, exempted from tax under that Case.
      (7) This section applies for the year 2000-01 and subsequent years of assessment or, in the case of charities which are companies, for accounting periods beginning on or after 1st April 2000.
 
 
Employee share ownership
Employee share ownership plans.     47. Schedule 8 to this Act (employee share ownership plans) shall have effect.
 
Relief for transfers to employee share ownership plans.     48. - (1) In the Taxation of Chargeable Gains Act 1992, after section 236 insert-
 
 

"Employee share ownership plans
Relief for transfers to employee share ownership plans     236A. Schedule 7C (which makes provision for roll-over relief where shares are transferred to an approved employee share ownership plan) shall have effect.".
 
      (2) After Schedule 7B to that Act insert the Schedule 7C set out in Schedule 9 to this Act.
 
Phasing out of approved profit sharing schemes.     49. - (1) The Board shall not approve a profit sharing scheme under Schedule 9 to the Taxes Act 1988 (approval of share option schemes and profit sharing schemes) unless the application for approval is received by the Board before 6th April 2001.
 
      (2) For the purposes of subsection (1) an application for approval which is not accompanied by the particulars and evidence referred to in paragraph 1(2) of that Schedule is not regarded as received by the Board until the required particulars and evidence have been received by them.
 
      (3) In section 186 of that Act (approved profit sharing schemes), in subsection (1) (under which the section applies to appropriations of shares made after 5th April 1979) after "5th April 1979" insert "and before 1st January 2003".
 
Phasing out of relief for payments to trustees of profit sharing schemes.     50. - (1) This section has effect to phase out deductions under section 85 of the Taxes Act 1988 (corporation tax relief for payments to trustees of approved profit sharing schemes).
 
      (2) In the case of sums paid to the trustees on or after 21st March 2000 and before 6th April 2002 no deduction may be made by virtue of subsection (2)(a) of that section (sums applied in acquiring shares for appropriation) unless the trustees appropriate the shares acquired, by the application of the sum, as mentioned in that provision-
 
 
    (a) before the end of the period of nine months beginning on the day following the end of the period of account in which payment to the trustees was made, and
 
    (b) before 1st January 2003.
      (3) No deduction may be made by virtue of subsection (2)(a) of that section in respect of any sum paid to the trustees on or after 6th April 2002.
 
      (4) No deduction may be made by virtue of subsection (2)(b) of that section (sums to meet expenses of trustees in administering the scheme) in respect of any sum paid to the trustees more than three years after the date of the last appropriation of shares to individuals which was made-
 
 
    (a) in accordance with the approved profit sharing scheme, and
 
    (b) before 1st January 2003.
      (5) For the purposes of this section references to a deduction under section 85 are to a deduction under subsection (1)(a) or by virtue of subsection (1)(b) of that section.
 
Approved profit sharing scheme: other awards of shares.     51. - (1) In Schedule 9 to the Taxes Act 1988 (approved share option schemes and profit sharing schemes), in paragraph 3(2) (grounds for withdrawing approval of profit sharing schemes), after "below" in paragraph (e) insert-
 
 
" ; or
 
 
    (f) the trustees appropriate shares to participants, one or more of whom have had free shares appropriated to them, at an earlier time in the same year of assessment, under a relevant share plan".
      (2) After paragraph 3(3) of that Schedule insert-
 
 
    "(4) For the purposes of sub-paragraph (2)(f) above the reference to persons having had free shares appropriated to them includes persons who would have had free shares appropriated to them but for their failure to obtain a performance allowance (within the meaning of paragraph 25 of Schedule 8 to the Finance Act 2000).
 
      (5) In sub-paragraph (2)(f) and (4) above-
 
 
    "free shares" has the same meaning as in Schedule 8 to the Finance Act 2000;
 
    "relevant share plan", in relation to a profit sharing scheme, means an employee share ownership plan that-
 
      (a) was established by the grantor or a connected company, and
 
      (b) is approved under Schedule 8 to that Act.
      (6) For the purposes of sub-paragraph (5) above "connected company" means-
 
 
    (a) a company which controls or is controlled by the grantor or which is controlled by a company which also controls the grantor, or
 
    (b) a company which is a member of a consortium owning the grantor or which is owned in part by the grantor as a member of a consortium.".
Approved profit sharing schemes: restriction on type of shares.     52. - (1) Schedule 9 to the Taxes Act 1988 (share option schemes and profit sharing schemes) is amended in accordance with subsections (2) to (4).
 
      (2) In paragraph 9(1) (requirements to be satisfied by shares in share option schemes), after "below" insert "(disregarding paragraph 11A)".
 
      (3) After paragraph 11 (requirements as to listing etc.) insert-
 
 
"11A. - (1) In the case of a profit sharing scheme, scheme shares must not be shares-
 
 
    (a) in an employer company, or
 
    (b) in a company that-
 
      (i) has control of an employer company, and
 
      (ii) is under the control of a person or persons within sub-paragraph (2)(b)(i) below in relation to an employer company.
      (2) For the purposes of this paragraph a company is "an employer company" if-
 
 
    (a) the business carried on by it consists substantially in the provision of the services of the persons employed by it, and
 
    (b) the majority of those services are provided to-
 
      (i) a person who has, or two or more persons who together have, control of the company, or
 
      (ii) a company associated with the company.
      (3) For the purposes of sub-paragraph (2)(b)(ii) above a company shall be treated as associated with another company if both companies are under the control of the same person or persons.
 
      (4) For the purposes of sub-paragraphs (1) to (3) above-
 
 
    (a) references to a person include a partnership, and
 
    (b) where a partner, alone or together with others, has control of a company, the partnership shall be treated as having like control of that company.
      (5) For the purposes of this paragraph the question whether a person controls a company shall be determined in accordance with section 416(2) to (6).".
 
      (4) In paragraph 12-
 
 
    (a) in sub-paragraph (1), in paragraph (c) for "other than" to the end of that paragraph there shall be substituted "other than those permitted by sub-paragraph (1A) below.", and
 
    (b) after sub-paragraph (1) insert-
 
    "(1A) Subject to sub-paragraph (1B) below, scheme shares may be subject to-
 
 
    (a) restrictions which attach to all shares of the same class, or
 
    (b) a restriction authorised by sub-paragraph (2) below.
      (1B) In the case of a profit sharing scheme, scheme shares must not be subject to any restrictions affecting the rights attaching to those shares which relate to-
 
 
    (a) dividends, or
 
    (b) assets on a winding-up of the company,
       other than restrictions which attach to all other ordinary shares in the same company.".
 
      (5) Subsections (1) to (4) shall be deemed to have come into force on 21st March 2000.
 
      (6) Subsections (3) and (4) do not have effect in relation to shares acquired before 21st March 2000 by the trustees of a profit sharing scheme approved under Schedule 9 to the Taxes Act 1988.
 
Approved profit sharing schemes: loan arrangements.     53. - (1) In paragraph 2 of Schedule 9 to the Taxes Act 1988 (conditions for approval of share option schemes and profit sharing schemes), after sub-paragraph (2) insert-
 
 
    "(2A) The Board shall not approve a profit sharing scheme unless they are satisfied-
 
 
    (a) that the arrangements for the scheme do not make any provision, and are not in any way associated with any provision made, for loans to some or all of the employees of-
 
      (i) the company that established the scheme, or
 
      (ii) in the case of a group scheme, any participating company, and
 
    (b) that the operation of the scheme is not in any way associated with such loans.
      (2B) For the purposes of sub-paragraph (2A) above "arrangements" includes any scheme, agreement or understanding, whether or not legally enforceable.".
 
      (2) In paragraph 3(2) of that Schedule (withdrawal of approval of profit sharing schemes), before paragraph (d) insert-
 
 
    "(ca) the Board-
 
      (i) cease to be satisfied of the matters mentioned in paragraph 2(2A) above, or
 
      (ii) in the case of a scheme approved before 21st March 2000, are not satisfied of those matters; or".
      (3) This section shall be deemed to have come into force on 21st March 2000.
 
 
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