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Income Tax (Earnings and Pensions) Bill


Income Tax (Earnings and Pensions) Bill
Schedule 6 — Consequential Amendments
Part 1 — Income and Corporation Taxes Act 1988

    469

 

  21       Omit sections 145 to 147 (living accommodation)

  22       Omit sections 148 to 151A (payments on retirement, sick pay and certain

social security benefits).

  23       For the sidenote to section 152 (notification of amount taxable under section

151) substitute “Notification of taxable amount of certain benefits”.

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  24       Omit sections 153 to 159AC and sections 160 to 168G (employees earning

£8,500 or more and directors: expenses and benefits in kind).

  25       Omit section 185 (approved share option schemes).

  26      (1)      Amend section 186 (approved profit sharing schemes) as follows.

          (2)      In subsection (3)—

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              (a)             omit “the participant shall be chargeable to income tax under

Schedule E for the year of assessment in which the entitlement arises

on”, and

              (b)             at the end add “counts as employment income of the participant for

the year of assessment in which the entitlement arises”.

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          (3)      In subsection (4)—

              (a)             omit “the participant shall be chargeable to income tax under

Schedule E for the year of assessment in which the disposal takes

place on”, and

              (b)             at the end add “counts as employment income of the participant for

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the year of assessment in which the disposal takes place”.

          (4)      In subsection (5)(a), for the words from “chargeable to income tax” to “those

shares” substitute “entitled to a capital receipt (within the meaning of

subsection (3) above) which is referable to those shares and—

                           (i)                             an amount calculated by reference to that capital

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receipt counts as his employment income by virtue of

subsection (3) above, or

                           (ii)                             if the entitlement to the capital receipt arose before

6th April 2003, he was chargeable to income tax by

virtue of that subsection (as it had effect before that

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date) in respect of that capital receipt,”.

  27       In section 187 (interpretation of sections 185 and 186 and Schedules 9 and 10)

omit subsections (1) to (4), (6) and (7), except so far as relating to profit

sharing schemes.

  28       Omit the following provisions (which give relief from income tax on various

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kinds of income)—

              (a)             section 187A;

              (b)             sections 189 to 198;

              (c)             sections 199 to 202.

  29       Omit sections 202A and 202B (assessment on receipts basis).

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  30       Omit sections 203 to 204 (pay as you earn).

  31       Omit sections 205 and 206 (assessments).

  32       Omit section 206A (PAYE settlement agreements).

  33       Omit section 207 (disputes as to domicile or ordinary residence).

 

 

Income Tax (Earnings and Pensions) Bill
Schedule 6 — Consequential Amendments
Part 1 — Income and Corporation Taxes Act 1988

    470

 

  34       After section 251 insert—

“Approved share incentive plans

       251A                                                  Application of sections 251B and 251C

              (1)             Sections 251B and 251C apply for income tax purposes in connection

with shares awarded under an approved share incentive plan.

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              (2)             But those sections do not apply to an individual if, at the time of the

award of shares in question—

                    (a)                   the earnings from the eligible employment are not (or would

not be if there were any) general earnings to which any of the

charging provisions of Chapter 4 or 5 of Part 2 of ITEPA 2003

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apply, or

                    (b)                   in the case of an award made before 6th April 2003, he was

not chargeable to tax under Schedule E in respect of the

employment by reference to which he met the requirement of

paragraph 14 of Schedule 8 to the Finance Act 2000

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(employee share ownership plans: the employment

requirement) in relation to the plan.

              (3)             For the purposes of subsection (2)—

                    (a)                   “the eligible employment” means the employment which

results in the individual meeting the employment

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requirement in relation to the plan, and

                    (b)                   the reference to any of the charging provisions of Chapter 4

or 5 of Part 2 of ITEPA 2003 has the same meaning as it has in

the employment income Parts of that Act (see sections 14(3)

and 20(3) of that Act).

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       251B Treatment of cash dividend retained and then later paid out

              (1)             Where a cash dividend is paid over to a participant under paragraph

68(4) of Schedule 2 to ITEPA 2003 (cash dividend paid over if not

reinvested), the participant is chargeable to tax on the appropriate

amount under Schedule F for the year of assessment in which the

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dividend is paid over.

              (2)             In subsection (1), the “appropriate amount” means the amount of the

dividend paid over (except to the extent that it represents a foreign

cash dividend).

              (3)             For the purposes of determining the tax credit (if any) to which the

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participant is entitled under section 231, the reference in subsection

(1) of that section to the tax credit fraction in force when the

distribution is made shall be read as a reference to the fraction in

force when the dividend is paid over to the participant.

       251C Charge on dividend shares ceasing to be subject to plan

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              (1)             If dividend shares cease to be subject to the plan before the end of the

period of three years beginning with the date on which the shares

were acquired on the participant’s behalf, the participant is

 

 

Income Tax (Earnings and Pensions) Bill
Schedule 6 — Consequential Amendments
Part 1 — Income and Corporation Taxes Act 1988

    471

 

              (1)             chargeable to tax on the appropriate amount under Schedule F for

the year of assessment in which the shares cease to be subject to the

plan.

              (2)             In subsection (1) “the appropriate amount” means the amount of the

cash dividend applied to acquire the shares on the participant’s

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behalf (except to the extent that it represents a foreign cash

dividend).

              (3)             For the purposes of determining the tax credit (if any) to which the

participant is entitled under section 231, the reference in subsection

(1) of that section to the tax credit fraction in force when the

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distribution is made shall be read as a reference to the fraction in

force when the shares cease to be subject to the plan.

              (4)             Where the participant is charged to tax under this section the tax due

shall be reduced by the amount or aggregate amount of any tax paid

on any capital receipts under section 501 of ITEPA 2003 in respect of

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those shares.

              (5)             In subsection (4) “the tax due” means the amount of tax due after

deduction of the tax credit determined under subsection (3).

              (6)             This section has effect subject to section 498 of ITEPA 2003 (no charge

on shares ceasing to be subject to plan in certain circumstances).

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       251D             Interpretation of sections 251A to 251C

              (1)             Sections 251A to 251C and this section form part of the SIP code (see

section 488 of ITEPA 2003 (approved share incentive plans)).

              (2)             Accordingly, expressions used in those sections and contained in the

index at the end of Schedule 2 to that Act (approved share incentive

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plans) have the meaning indicated by that index.

              (3)             In sections 251B and 251C “foreign cash dividend” means a cash

dividend paid in respect of plan shares in a company not resident in

the United Kingdom.”

  35       In section 257C(2A) (indexation of amounts in sections 257 and 257A) for

30

“section 203” substitute “PAYE regulations”.

  36       After section 266 insert—

       “266A  Life assurance premiums paid by employer

              (1)             This section applies if—

                    (a)                   pursuant to a non-approved retirement benefits scheme, the

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employer in any year of assessment pays a sum with a view

to the provision of any relevant benefits for or in respect of

any employee of that employer, and

                    (b)                   the payment is made under such an insurance or contract as

is mentioned in section 266.

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                              This section applies whether or not the accrual of the relevant

benefits is dependent on any contingency.

 

 

Income Tax (Earnings and Pensions) Bill
Schedule 6 — Consequential Amendments
Part 1 — Income and Corporation Taxes Act 1988

    472

 

              (2)             Relief, if not otherwise allowable, shall be given to that employee

under section 266 in respect of the payment to the extent, if any, to

which such relief would have been allowable to him if—

                    (a)                   the payment had been made by him, and

                    (b)                   the insurance or contract under which the payment is made

5

had been made with him.

              (3)             For the purposes of subsection (1)(a)—

                    (a)                   a retirement benefits scheme is “non-approved” unless it is—

                           (i)                          an approved scheme,

                           (ii)                         a relevant statutory scheme, or

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                           (iii)                        a scheme set up by a government outside the United

Kingdom for the benefit of its employees or primarily

for their benefit, and

                    (b)                   benefits are provided in respect of an employee if they are

provided for the employee’s spouse, widow or widower,

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children, dependants or personal representatives.

              (4)             Sections 611, 611A and 612 apply for the purposes of this section as

they apply for the purposes of Chapter 1 of Part 14.

              (5)             Section 388 of ITEPA 2003 (apportionment of payments in respect of

more than one employee) applies in relation to a sum within

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subsection (1) as it applies in relation to a sum within section 386 of

that Act (charge on payments to non-approved retirement benefits

schemes).

              (6)             This section does not apply in any case where either of the following

provisions of ITEPA 2003 provides for section 386 of that Act not to

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apply—

                    (a)                   section 389 (employments where earnings charged on

remittance basis), and

                    (b)                   section 390 (non-domiciled employees with foreign

employers).”

30

  37       In section 306(7) (claims) for “regulations made under section 203” substitute

“PAYE regulations”.

  38       In section 307(6)(a)(i) (withdrawal of relief) for “regulations under section

203” substitute “PAYE regulations”.

  39       Omit section 313 (taxation of consideration for certain restrictive

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undertakings).

  40       In section 314(1) (divers and diving supervisors) for the words from “and

accordingly” to the end of the subsection substitute “and accordingly any

employment income taken into account in computing the profits or gains of

that trade is not chargeable under Part 2 of ITEPA 2003.”

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  41       Omit sections 315 to 318 (pensions etc. paid in respect of military or war

service etc.).

  42       Omit section 319 (crown servants: foreign service allowance).

  43       Omit section 321 (consuls and other official agents).

  44      (1)      Amend section 322 (consular officers and employees) as follows.

45

 

 

Income Tax (Earnings and Pensions) Bill
Schedule 6 — Consequential Amendments
Part 1 — Income and Corporation Taxes Act 1988

    473

 

          (2)      In subsection (1) for “any income of his falling within Case IV or V of

Schedule D” substitute “any qualifying income of the consular officer or

employee”.

          (3)      After subsection (1) insert—

              “(1A)                In subsection (1) “qualifying income” means—

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                    (a)                   income falling within Case IV or V of Schedule D,

                    (b)                   income to which section 573 or 629 of ITEPA 2003 applies

(foreign pensions and pre-1973 pensions paid under the

Overseas Pensions Act 1973),

                    (c)                   income arising from a source outside the United Kingdom to

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which section 609, 610, 611 or 633 of ITEPA 2003 applies

(certain employment-related annuities and voluntary annual

payments), and

                    (d)                   a benefit to which section 678 of ITEPA applies (foreign

benefits).”

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          (4)      Omit subsection (2).

  45      (1)      Amend section 323 (visiting forces) as follows.

          (2)      Omit subsection (1).

          (3)      In subsection (2) for “subsection (1) above” substitute “section 303(1) of

ITEPA 2003 (exemption for earnings of visiting forces etc.)”.

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          (4)      In subsection (4)—

              (a)             for “subsections (1) and (2)” substitute “subsection (2)”;

              (b)             for “those subsections” substitute “that subsection”;

              (c)             before “the Visiting Forces Act 1952” insert “Part 1 of”.

          (5)      In subsection (5) for “subsections (1) and (2)” substitute “subsection (2)”.

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          (6)      Omit subsection (6)(b) and the word “and” preceding it.

          (7)      Omit subsection (7).

  46       Omit section 330 (compensation for National-Socialist persecution).

  47      (1)      Amend section 332 (expenditure and houses of ministers of religion) as

follows.

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          (2)      Omit subsections (1) and (2).

          (3)      In subsection (3)—

              (a)             for “(whether under Schedule E or any other Schedule)” substitute

“under Schedule D”,

              (b)             for “profits, fees or emoluments” substitute “profits or fees”, and

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              (c)             in paragraph (c), for the words from “in right of” to “that subsection”

substitute “an interest belongs to a charity or ecclesiastical

corporation and, in right of that interest, in which he has a residence

from which to perform his duties as a clergyman or minister”.

          (4)      Omit subsections (3A), (3B) and (4).

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  48      (1)      Amend section 336 (temporary residents in the United Kingdom) as follows.

          (2)      In subsection (1) for “Schedule D” substitute “a charge to which subsection

(1A) applies”.

          (3)      After subsection (1) insert—

 

 

 
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