ukpga/2009/10 — Finance Act 2009

Finance Act 2009 2009 c. 10 An Act to grant certain duties, to alter other duties, and to amend the law relating to the National Debt and the Public Revenue, and to make further provision in connection with finance. [21st July 2009] Most Gracious Sovereign We , Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom in Parliament assembled, towards raising the necessary supplies to defray Your Majesty's public expenses, and making an addition to the public revenue, have freely and voluntarily resolved to give and to grant unto Your Majesty the several duties hereinafter mentioned; and do therefore most humbly beseech Your Majesty that it may be enacted, and be it enacted by the Queen's most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:— Part 1 Charges, rates, allowances, etc Income tax Charge and main rates for 2009-10 1 1 Income tax is charged for the tax year 2009-10. 2 For that tax year— a the basic rate is 20%, and b the higher rate is 40%. Basic rate limit for 2009-10 2 1 For the tax year 2009-10 the amount specified in section 10(5) of ITA 2007 (basic rate limit) is replaced with “£37,400”. 2 Accordingly, section 21 of that Act (indexation of limits), so far as relating to the basic rate limit, does not apply for that tax year. Personal allowance for 2009-10 for those aged under 65 3 1 For the tax year 2009-10 the amount specified in— a section 35 of ITA 2007, ... b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (personal allowance for those aged under 65) is replaced with “£6,475”. 2 Accordingly— a section 57 of ITA 2007, so far as relating to the amount specified in section 35 of that Act, ... b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (indexation) do not apply for the tax year 2009-10. Reduction of personal allowance for those with income exceeding £100,000 4 1 In section 35 of ITA 2007 (personal allowances for those aged under 65), the existing provision becomes subsection (1) of that section; and after that subsection insert— 2 For an individual whose adjusted net income exceeds £100,000, the allowance under subsection (1) is reduced by one-half of the excess. 3 If the amount of any allowance that remains after the operation of subsection (2) would otherwise not be a multiple of £1, it is to be rounded up to the nearest amount which is a multiple of £1. 4 For the meaning of “adjusted net income” see section 58. 2 In sections 36(2)(b) and 37(2)(b) of ITA 2007 (limit on reduction of personal allowances for those aged 65 to 74 or 75 and over), for “the amount of a personal allowance under section 35” substitute “ the amount of any allowance to which the individual would be entitled under section 35 if under the age of 65 throughout the tax year ” . 3 In section 57(1)(a) and (3)(a) of ITA 2007 (indexation of allowances), for “35” substitute “ 35(1) ” . 4 The amendments made by subsections (1) and (2) have effect for the tax year 2010-11 and subsequent tax years. 5 The amendment made by subsection (3) has effect for finding allowances for the tax year 2011-12 and subsequent tax years. Abolition of personal reliefs for non-residents 5 Schedule 1 contains provision abolishing personal reliefs for non-residents. Additional rate, dividend additional rate, trust rates and pension tax rates 6 1 Section 6 of ITA 2007 (rates of income tax) is amended as follows. 2 In subsection (1), omit the “and” at the end of paragraph (b) and insert at the end , and d the additional rate. 3 In subsection (3)(b), for “and dividend upper rate” substitute “ , dividend upper rate and dividend additional rate ” . 4 In section 9 (trust rate and dividend trust rate)— a in subsection (1), for “40%” substitute “ 50% ” , and b in subsection (2), for “32.5%” substitute “ 42.5% ” . 5 Schedule 2 contains provision supplementing this section (including provision about rates under Part 4 of FA 2004). 6 The amendments made by this section have effect for the tax year 2010-11 and subsequent tax years. Corporation tax Charge and main rates for financial year 2010 7 1 Corporation tax is charged for the financial year 2010. 2 For that year the rate of corporation tax is— a 28% on profits of companies other than ring fence profits, and b 30% on ring fence profits of companies. 3 In subsection (2) “ ring fence profits ” has the meaning given by section 276 of CTA 2010 . Small companies' rates and fractions for financial year 2009 8 1 For the financial year 2009 the small companies' rate is— a 21% on profits of companies other than ring fence profits, and b 19% on ring fence profits of companies. 2 For the financial year 2009 the fraction mentioned in section 13(2) of ICTA is— a 7/400ths in relation to profits of companies other than ring fence profits (“the standard fraction”), and b 11/400ths in relation to ring fence profits of companies (“the ring fence fraction”). 3 See section 7(3) of FA 2008 for provision applying section 3(3) to (7) of FA 2007 in relation to profits for an accounting period any part of which falls in the financial year 2009. 4 In this section “ ring fence profits ” has the meaning given by section 276 of CTA 2010 . Value added tax Extension of reduced standard rate and anti-avoidance provision 9 1 The Value Added Tax (Change of Rate) Order 2008 ( S.I. 2008/3020) (reducing standard rate of value added tax to 15 per cent) is to cease to be in force on 1 January 2010 (rather than ceasing to be in force on 1 December 2009 in accordance with section 2(2) of VATA 1994). 2 Schedule 3 contains— a provision for a supplementary charge to value added tax on supplies spanning the date of the VAT change (see Parts 1 to 5), and b minor amendments of provisions about orders changing the standard rate of value added tax (see Part 6). Stamp duty land tax Thresholds for residential property 10 1 Part 4 of FA 2003 (stamp duty land tax) has effect in relation to transactions with an effective date on or after 22 April 2009 but before 1 January 2010 as if— a in section 55(2) (amount of tax chargeable: general), in Table A (bands and percentages for residential property), for “£125,000” (in both places) there were substituted “ £175,000 ” , and b in paragraph 2(3) of Schedule 5 (amount of tax chargeable: rent), in Table A (bands and percentages for residential property), for “£125,000” (in both places) there were substituted “ £175,000 ” . 2 The following are revoked— a the Stamp Duty Land Tax (Variation of Part 4 of the Finance Act 2003) Regulations 2008 (S.I. 2008/2338), and b the Stamp Duty Land Tax (Exemption of Certain Acquisitions of Residential Property) Regulations 2008 (S.I. 2008/2339). 3 The revocations made by subsection (2) have effect in relation to transactions with an effective date on or after 22 April 2009. Alcohol and tobacco duties Rates of alcoholic liquor duty 11 1 ALDA 1979 is amended as follows. 2 In section 5 (rate of duty on spirits), for “£21.35” substitute “ £22.64 ” . 3 In section 36(1AA)(a) (standard rate of duty on beer), for “£14.96” substitute “ £16.47 ” . 4 In section 62(1A) (rates of duty on cider)— a in paragraph (a) (rate of duty per hectolitre in the case of sparkling cider of a strength exceeding 5.5 per cent), for “£188.10” substitute “ £207.20 ” , b in paragraph (b) (rate of duty per hectolitre in the case of cider of a strength exceeding 7.5 per cent which is not sparkling cider), for “£43.37” substitute “ £47.77 ” , and c in paragraph (c) (rate of duty per hectolitre in any other case), for “£28.90” substitute “ £31.83 ” . 5 For the table in Schedule 1 substitute— Table of rates of duty on wine and made-wine Part 1 Wine or made-wine of a strength not exceeding 22 per cent Description of wine or made-wine Rates of duty per hectolitre £ Wine or made-wine of a strength not exceeding 4 per cent 65.94 Wine or made-wine of a strength exceeding 4 per cent but not exceeding 5.5 per cent 90.68 Wine or made-wine of a strength exceeding 5.5 per cent but not exceeding 15 per cent and not being sparkling 214.02 Sparkling wine or sparkling made-wine of a strength exceeding 5.5 per cent but less than 8.5 per cent 207.20 Sparkling wine or sparkling made-wine of a strength of 8.5 per cent or of a strength exceeding 8.5 per cent but not exceeding 15 per cent 274.13 Wine or made-wine of a strength exceeding 15 per cent but not exceeding 22 per cent 285.33 Part 2 Wine or made-wine of a strength exceeding 22 per cent Description of wine or made-wine Rates of duty per litre of alcohol in wine or made-wine £ Wine or made-wine of a strength exceeding 22 per cent 22.64. 6 The following are revoked— a the Alcoholic Liquor Duties (Surcharges) and Tobacco Products Duty Order 2008 (S.I. 2008/3026), so far as relating to excise duty on alcoholic liquors, and b the Alcoholic Liquor (Surcharge on Spirits Duty) Order 2008 (S.I. 2008/3062). 7 The amendments made by this section are treated as having come into force on 23 April 2009. Rates of tobacco products duty 12 1 For the table in Schedule 1 to TPDA 1979 substitute— Table 1. Cigarettes An amount equal to 24 per cent of the retail price plus £114.31 per thousand cigarettes 2. Cigars £173.13 per kilogram 3. Hand-rolling tobacco £124.45 per kilogram 4. Other smoking tobacco and chewing tobacco £76.12 per kilogram. 2 The Alcoholic Liquor Duties (Surcharges) and Tobacco Products Duty Order 2008 (S.I. 2008/3026), so far as relating to excise duty on tobacco products, is revoked. 3 The amendments made by this section are treated as having come into force at 6 pm on 22 April 2009. Vehicle excise duty Rates for 2009-10 13 1 Schedule 1 to VERA 1994 (annual rates of duty) is amended as follows. 2 In paragraph 1 (general)— a in sub-paragraph (2) (vehicle not covered elsewhere in Schedule otherwise than with engine cylinder capacity not exceeding 1,549cc), for “£185” substitute “ £190 ” , and b in sub-paragraph (2A) (vehicle not covered elsewhere in Schedule with engine cylinder capacity not exceeding 1,549cc), for “£120” substitute “ £125 ” . 3 In paragraph 1B (graduated rates for light passenger vehicles), for the table substitute— Table CO 2 emissions figure Rate (1) (2) (3) (4) Exceeding Not exceeding Reduced rate Standard rate g/km g/km £ £ 100 120 15 35 120 140 100 120 140 150 105 125 150 165 130 150 165 185 155 175 185 225 200 215 225 390 405 The table has effect in relation to vehicles first registered under this Act before 23 March 2006 as if— a in column (3), in the last row, “200” were substituted for “ 390 ” , and b in column (4), in the last row, “215” were substituted for “ 405 ” . 4 In paragraph 1J (light goods vehicles)— a in sub-paragraph (a) (vehicle which is not lower-emission van), for “£180” substitute “ £185 ” , and b in sub-paragraph (b) (lower-emission van), for “£120” substitute “ £125 ” . 5 The amendments made by this section have effect in relation to licences taken out on or after 1 May 2009. Rates from April 2010 14 1 Schedule 1 to VERA 1994 (annual rates of duty) is amended as follows. 2 In paragraph 1(2) (vehicle not covered elsewhere in Schedule otherwise than with engine cylinder capacity not exceeding 1,549cc), for “£190” substitute “ £205 ” . 3 Paragraph 1B (graduated rates for light passenger vehicles) is amended as follows. 4 For “table” substitute “ tables ” . 5 Omit the “and” at the end of paragraph (a). 6 Insert at the end of paragraph (b) and c whether or not the duty is payable on the first vehicle licence for the vehicle. 7 For the table substitute— Table 1 Rates payable on first vehicle licence for vehicle CO 2 emissions figure Rate (1) (2) (3) (4) Exceeding Not exceeding Reduced rate Standard rate g/km g/km £ £ 130 140 100 110 140 150 115 125 150 165 145 155 165 175 240 250 175 185 290 300 185 200 415 425 200 225 540 550 225 255 740 750 255 940 950 Table 2 Rates payable on any other vehicle licence for vehicle CO 2 emissions figure Rate (1) (2) (3) (4) Exceeding Not exceeding Reduced rate Standard rate g/km g/km £ £ 100 110 10 20 110 120 20 30 120 130 80 90 130 140 100 110 140 150 115 125 150 165 145 155 165 175 170 180 175 185 190 200 185 200 225 235 200 225 235 245 225 255 415 425 255 425 435 Table 2 has effect in relation to vehicles first registered, under this Act or under the law of a country or territory outside the United Kingdom, before 23 March 2006 as if— a in column (3), in the last two rows, “235” were substituted for “ 415 ” and “425”, and b in column (4), in the last two rows, “245” were substituted for “ 425 ” and “435”. 8 In paragraph 1J(a) (light goods vehicle which is not lower-emission van), for “£185” substitute “ £200 ” . 9 Schedule 4 contains further provision about rates of vehicle excise duty etc. 10 The amendments made by this section have effect in relation to licences taken out on or after 1 April 2010. Fuel duties Rates and rebates from Spring 2009 15 1 HODA 1979 is amended as follows. 2 In section 6(1A) (main rates)— a in paragraph (a) (unleaded petrol), for “£0.5235” substitute “ £0.5419 ” , b in paragraph (aa) (aviation gasoline), for “£0.3103” substitute “ £0.3334 ” , c in paragraph (b) (light oil other than unleaded petrol or aviation gasoline), for “£0.6207” substitute “ £0.6391 ” , and d in paragraph (c) (heavy oil), for “£0.5235” substitute “ £0.5419 ” . 3 In section 6AA(3) (rate of duty on biodiesel), for “£0.3235” substitute “ £0.3419 ” . 4 In section 6AD(3) (rate of duty on bioethanol), for “£0.3235” substitute “ £0.3419 ” . 5 In section 8(3) (road fuel gas)— a in paragraph (a) (natural road fuel gas), for “£0.1660” substitute “ £0.1926 ” , and b in paragraph (b) (other road fuel gas), for “£0.2077” substitute “ £0.2482 ” . 6 In section 11(1) (rebate on heavy oil)— a in paragraph (a) (fuel oil), for “£0.0966” substitute “ £0.1 ” , and b in paragraph (b) (gas oil), for “£0.1007” substitute “ £0.1042 ” . 7 In section 14(1) (rebate on light oil for use as furnace fuel), for “£0.0966” substitute “ £0.1 ” . 8 In section 14A(2) (rebate on certain biodiesel), for “£0.1007” substitute “ £0.1042 ” . 9 The amendments made by subsection (2)(b) and (c) are treated as having come into force on 1 May 2009. 10 The other amendments made by this section are treated as having come into force on 1 April 2009. Rates and rebates from September 2009 16 1 HODA 1979 is amended as follows. 2 In section 6(1A) (main rates)— a in paragraph (a) (unleaded petrol), for “£0.5419” substitute “ £0.5619 ” , b in paragraph (aa) (aviation gasoline), for “£0.3334” substitute “ £0.3457 ” , c in paragraph (b) (light oil other than unleaded petrol or aviation gasoline), for “£0.6391” substitute “ £0.6591 ” , and d in paragraph (c) (heavy oil), for “£0.5419” substitute “ £0.5619 ” . 3 In section 6AA(3) (rate of duty on biodiesel), for “£0.3419” substitute “ £0.3619 ” . 4 In section 6AD(3) (rate of duty on bioethanol), for “£0.3419” substitute “ £0.3619 ” . 5 In section 8(3) (road fuel gas)— a in paragraph (a) (natural road fuel gas), for “£0.1926” substitute “ £0.2216 ” , and b in paragraph (b) (other road fuel gas), for “£0.2482” substitute “ £0.2767 ” . 6 In section 11(1) (rebate on heavy oil)— a in paragraph (a) (fuel oil), for “£0.1” substitute “ £0.1037 ” , and b in paragraph (b) (gas oil), for “£0.1042” substitute “ £0.1080 ” . 7 In section 14(1) (rebate on light oil for use as furnace fuel), for “£0.1” substitute “ £0.1037 ” . 8 In section 14A(2) (rebate on certain biodiesel), for “£0.1042” substitute “ £0.1080 ” . 9 The amendments made by this section come into force on 1 September 2009. Other environmental taxes and duties Rates of air passenger duty 17 1 In section 30 of FA 1994 (air passenger duty: rates), for subsections (1) to (4) substitute— 1 Air passenger duty is chargeable on the carriage of each chargeable passenger at the rate determined as follows. 2 If the passenger's journey ends at a place in the United Kingdom or a territory specified in Part 1 of Schedule 5A— a if the passenger's agreement for carriage provides for standard class travel in relation to every flight on the passenger's journey, the rate is £11, and b in any other case, the rate is £22. 3 If the passenger's journey ends at a place in a territory specified in Part 2 of Schedule 5A— a if the passenger's agreement for carriage provides for standard class travel in relation to every flight on the passenger's journey, the rate is £45, and b in any other case, the rate is £90. 4 If the passenger's journey ends at a place in a territory specified in Part 3 of Schedule 5A— a if the passenger's agreement for carriage provides for standard class travel in relation to every flight on the passenger's journey, the rate is £50, and b in any other case, the rate is £100. 4A If the passenger's journey ends at any other place— a if the passenger's agreement for carriage provides for standard class travel in relation to every flight on the passenger's journey, the rate is £55, and b in any other case, the rate is £110. 2 Schedule 5 contains further provision about air passenger duty. 3 The amendment made by subsection (1) has effect in relation to the carriage of passengers beginning on or after 1 November 2009. Standard rate of landfill tax 18 1 In section 42(1)(a) and (2) of FA 1996 (amount of landfill tax), for “£40” substitute “ £48 ” . 2 The amendments made by subsection (1) have effect in relation to disposals made (or treated as made) on or after 1 April 2010. Gambling duties Rates of gaming duty 19 1 In section 11(2) of FA 1997 (rates of gaming duty), for the table substitute— Table Part of gross gaming yield Rate The first £1,929,000 15 per cent The next £1,329,500 20 per cent The next £2,329,000 30 per cent The next £4,915,500 40 per cent The remainder 50 per cent. 2 The amendment made by subsection (1) has effect in relation to accounting periods beginning on or after 1 April 2009. Bingo duty 20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amounts of duty on amusement machine licences 21 1 In section 23(2) of BGDA 1981 (amount of duty payable on amusement machine licence), for the table substitute— Table Months for which licence granted Category A Category B1 Category B2 Category B3 Category B4 Category C £ £ £ £ £ £ 1 500 255 200 200 180 80 2 985 490 385 385 350 45 3 1475 735 585 585 530 220 4 1965 985 775 775 705 290 5 2465 1230 970 970 875 365 6 2955 1475 1160 1160 1050 435 7 3445 1720 1355 1355 1225 505 8 3935 1965 1550 1550 1405 580 9 4430 2215 1745 1745 1580 655 10 4920 2465 1935 1935 1755 725 11 5410 2710 2130 2130 1930 795 12 5625 2815 2215 2215 2010 830. 2 The amendment made by subsection (1) has effect in relation to cases where the application for the amusement machine licence is received by the Commissioners for Her Majesty's Revenue and Customs after 4 pm on 22 April 2009. Provisions affecting amount of amusement machine licence duty 22 1 BGDA 1981 is amended as follows. 2 Section 21 (gaming machine licences) is amended as follows. 3 Subsection (5) (excepted machines) is amended as follows. 4 In paragraph (c) (machines in case of which cost of single game does not exceed 10p and maximum value of prize for winning single game does not exceed £5)— a in sub-paragraph (i), omit the “and” at the end, b in sub-paragraph (ii), for “£5” substitute “ £15 ” , and c after that sub-paragraph insert— iii the maximum cash component of the prize for winning a single game does not exceed £8, . 5 After that paragraph insert— ca a gaming machine in respect of which— i the cost of a single game does not exceed £1, ii the maximum value of the prize for winning a single game does not exceed £50, and iii any prize that can be won is neither money nor something that can be exchanged for or used in place of money or that can be exchanged for something other than money, and . 6 After that subsection insert— 6 To the extent that a prize consists of anything other than money, its value for the purposes of this section and sections 22 and 23 below is— a in the case of a voucher or token that may be exchanged for, or used in place of, an amount of money, that amount, b in the case of a voucher or token that does not fall within paragraph (a) and that may be exchanged for something other than money, the cost that the person providing the machine would incur in obtaining that thing from a person who is not a connected person, and c in any other case, the cost that the person providing the machine would incur in obtaining the prize from a person who is not a connected person. 7 Section 839 of the Income and Corporation Taxes Act 1988 (connected persons) applies for the purposes of subsection (6). 7 In section 22(2) (machine in respect of which benefits for winning single game do not exceed £8 to be “small-prize machine”), for “£8” substitute “ £10 ” . 8 Section 23 (amount of duty) is amended as follows. 9 In subsection (3) (categories of machines), in the definition of Category C gaming machine, in paragraph (ii)— a for “50p” substitute “ £1 ” , and b for “£35” substitute “ £70 ” . 10 Omit subsection (5) (which is superseded by the amendment made by subsection (6)). 11 In consequence of the amendments made by the preceding provisions of this section, omit— a in FA 2000, in Schedule 2, paragraph 3(1)(b), and b in FA 2007, section 9(2) and (4). 12 The amendments made by this section are treated as having come into force on 1 June 2009. Part 2 Income tax, corporation tax and capital gains tax Support for business Temporary extension of loss carry back provisions 23 Schedule 6 contains provision for a temporary extension of provisions allowing the carrying back of losses. First-year capital allowances for expenditure in 2009-2010 24 1 Part 2 of CAA 2001 (plant and machinery allowances) has effect as if— a in section 39 (first-year qualifying expenditure), a reference to this section were included in the list of provisions describing first-year qualifying expenditure, and b in the Table in section 52(3) (amount of first-year allowances), there were inserted at the end— Expenditure qualifying under section 24 of FA 2009 (expenditure in 2009-2010) 40% . 2 Expenditure is first-year qualifying expenditure under this section if— a it is incurred in 2009-2010, b it is not within any of the general exclusions in section 46(2) of CAA 2001 (subject to subsection (4)), c it is not special rate expenditure (as defined by section 104A of CAA 2001), and d it is not first-year qualifying expenditure under a provision of Chapter 4 of Part 2 of CAA 2001. 3 For the purposes of this section expenditure is incurred in 2009-2010— a in the case of expenditure incurred by a person within the charge to corporation tax, if it is incurred on or after 1 April 2009 but before 1 April 2010, and b in the case of expenditure incurred by a person within the charge to income tax, if it is incurred on or after 6 April 2009 but before 6 April 2010. 4 General exclusion 6 in section 46(2) of CAA 2001 (expenditure on provision of plant or machinery for leasing) does not prevent expenditure being first-year qualifying expenditure under this section if the plant or machinery is provided for leasing under an excluded lease of background plant or machinery for a building (as defined by section 70R of that Act). 5 Expressions used in this section and in Part 2 of CAA 2001 have the same meaning here as in that Part of that Act, subject to subsection (6). 6 In determining whether expenditure is incurred in 2009-2010, any effect of section 12 of CAA 2001 (expenditure incurred before qualifying activity carried on) on the time at which it is to be treated as incurred is to be disregarded. Agreements to forgo tax reliefs 25 1 If— a a person (“P”) makes arrangements under which P agrees (in whatever terms) to forgo (to any extent) tax relief or a right to tax relief (whenever arising), and b the Treasury designates the arrangements for the purposes of this section, all relevant enactments are to have effect with such modifications as are necessary or expedient to give effect to the agreement. 2 The Treasury may not designate arrangements for the purposes of this section unless— a the arrangements have been made with the Treasury, another government department or another public body, and b under the arrangements, or under other arrangements, the Treasury, another government department or another public body— i guarantees or assumes a loss or other liability of P or another person, ii insures or indemnifies P or another person against a loss or other liability, iii agrees to make a payment to P or another person in respect of a loss or other liability of any person (whether or not the person to whom the payment is to be made), or iv gives other financial support or assistance to P or another person (whether in money or otherwise). 3 If P forgoes (to any extent) tax relief or a right to tax relief under subsection (1)— a no tax relief is to be given to P or any other person by virtue of what is forgone or anything resulting from or representing what is forgone, and b all relevant enactments are to have effect with such modifications as are necessary or expedient to give effect to paragraph (a). 4 In this section— “ relevant enactments ” means— the Corporation Tax Acts, and the enactments relating to petroleum revenue tax; “ tax relief ” means— a reduction (by any means) of P's liability to any tax, or a payable tax credit. 5 This section has effect in relation to arrangements made on or after 22 April 2009; but that does not prevent subsections (1) and (3) from having effect in relation to times before 22 April 2009. Contaminated and derelict land 26 Schedule 7 contains provision extending Part 14 of CTA 2009 (remediation of contaminated land) to derelict land and other provision amending that Part of that Act. Venture capital schemes 27 Schedule 8 contains provision about venture capital schemes. Group relief: preference shares 28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sale of lessor companies etc: reforms 29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax relief for business expenditure on cars and motor cycles 30 Schedule 11 contains provision about tax relief for business expenditure on cars and motor cycles. Reallocation of chargeable gain or loss within a group 31 Schedule 12 contains provision about the reallocation of chargeable gains and allowable losses between companies that are members of a group. Stock lending: chargeable gains in event of insolvency etc of borrower 32 Schedule 13 contains provision amending TCGA 1992 in respect of stock lending arrangements in the event of the insolvency of the borrower. FSCS payments representing interest 33 1 Chapter 2 of Part 4 of ITTOIA 2005 (interest) is amended as follows. 2 In section 369(2) (list of provisions extending what is treated as interest for certain purposes), after “bonds),” insert— “ section 380A (FSCS payments representing interest), ” . 3 After section 380 insert— FSCS payments representing interest 380A 1 Any payment representing interest which is made under the FSCS is treated as interest for the purposes of this Act. 2 “ Payment representing interest ” means a payment calculated in the same way as interest which would have been paid to the recipient but for the circumstances giving rise to the making of payments under the FSCS. 3 Where a payment representing interest is made net of an amount equal to a sum representing income tax that would have been deducted on the payment of interest, the amount treated as interest by this section is the aggregate of the payment representing interest and that sum. 4 This section applies to payments made under the FSCS whether or not they are made (in whole or in part) on behalf of the Treasury or any other person. 5 In this section “ the FSCS ” means the Financial Services Compensation Scheme (established under Part 15 of the Financial Services and Markets Act 2000). 4 In ITA 2007, after section 979 insert— FSCS payments representing interest 979A 1 This section applies where a payment is made under the FSCS representing interest net of an amount equal to a sum representing income tax that would have been deducted on the payment of interest but for the circumstances giving rise to the making of payments under the FSCS. 2 A payment of the relevant gross amount is treated as having been made under the FSCS after there has been deducted from it a sum representing income tax of that amount. 3 That sum is accordingly taken into account under section 59B of TMA 1970 in determining the income tax payable by, or repayable to, the recipient. 4 “ The relevant gross amount ” means the aggregate of the amount of the payment representing interest which is made and that sum. 5 If the recipient requests it in writing, the scheme manager of the FSCS must provide the recipient with a statement showing— a the relevant gross amount, b the amount of the sum treated as deducted, and c the amount of the payment representing interest. 6 The duty to comply with a request under subsection (5) is enforceable by the recipient. 7 In this section— “ the FSCS ” means the Financial Services Compensation Scheme (established under Part 15 of the Financial Services and Markets Act 2000); “ payment representing interest ” has the same meaning as in section 380A of ITTOIA 2005. 5 The amendments made by this section have effect in relation to payments made on or after 6 October 2008. Foreign profits etc Corporation tax treatment of company distributions received 34 Schedule 14 contains provision about the treatment for the purposes of corporation tax of dividends and other distributions. Tax treatment of financing costs and income 35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Controlled foreign companies 36 Schedule 16 contains provision about controlled foreign companies. International movement of capital 37 Schedule 17 contains provision— a removing the existing requirements in relation to the international movement of capital in sections 765 to 767 of ICTA, and b imposing new reporting requirements on certain bodies corporate in relation to the international movement of capital. Corporation tax: foreign currency accounting 38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Certain distributions of offshore funds taxed as interest 39 1 Chapter 2 of Part 4 of ITTOIA 2005 (interest) is amended as follows. 2 In section 369(2) (list of provisions extending what is treated as interest for certain purposes), after the entry relating to section 376 insert— “ section 378A (offshore fund distributions), ” . 3 After section 378 insert— Offshore fund distributions 378A 1 This section applies where— a a dividend is paid by an offshore fund, and b the offshore fund fails to meet the qualifying investments test at any time in the relevant period. 2 The dividend is treated as interest for income tax purposes. 3 For the purposes of this section, an offshore fund fails to meet the qualifying investments test if the market value of the fund's qualifying investments exceeds 60% of the market value of all of the assets of the fund (excluding cash awaiting investment). 4 “ The relevant period ” means— a the relevant period of account of the offshore fund, or b if longer, the period of 12 months ending on the last day of that period. 5 “ The relevant period of account ” means— a the last period of account ending before the dividend is paid, in a case in which the profits available for distribution at the end of that period (and not used since then by distribution or otherwise) equal or exceed the amount of the dividend (aggregated with any other distribution made by the offshore fund at the same time), and b the period of account in which the dividend is paid, in any other case. 6 This section applies to a manufactured overseas dividend if, and only if, it is representative of a distribution to which this section would apply. 7 In this section— “ dividend ” includes any distribution that (but for this section) would be treated as a dividend for income tax purposes; “ manufactured overseas dividend ” has the same meaning as in Chapter 2 of Part 11 of ITA 2007 (manufactured payments); “ offshore fund ” has the same meaning as in Chapter 5 of Part 17 of ICTA (see sections 756A to 756C of that Act); “ qualifying investments ” has the meaning given in section 494 of CTA 2009. 4 Accordingly, in section 367 of ITTOIA 2005 (priority between Chapters within Part 4), in subsection (3)— a in paragraph (a), after “dividends)” insert “ , 378A (offshore fund distributions) ” , and b in paragraph (b), insert at the end “or Chapter 4 (or both)”. 5 The amendments made by this section have effect in relation to— a distributions arising on or after 22 April 2009, and b manufactured overseas dividends that are representative of a distribution arising on or after that date. Income tax credits for foreign distributions 40 Schedule 19 contains provision about income tax credits for foreign distributions. Loan relationships and derivatives Loan relationships involving connected parties 41 Schedule 20 contains provision about loan relationships involving connected parties. Release of trade etc debts 42 1 CTA 2009 is amended as follows. 2 In section 353 (introduction to Chapter 6 of Part 5)— a omit subsection (3), and b in subsection (6), after “loss”” insert “ and release debit ” . 3 In section 476(1) (definitions for purposes of Parts 5 and 6), after the definition of “profit sharing arrangements” insert— “ release debit ”, in relation to a company, means a debit in respect of a release by the company of a liability under a creditor relationship of the company, . 4 Section 479 (relevant non-lending relationships not involving discounts) is amended as follows. 5 In subsection (2)— a omit the “and” at the end of paragraph (b), b in paragraph (c), after “loss)” insert “ or release debit ” , and c insert at the end , and d a debt in relation to which a relevant deduction has been allowed to the company and which is released. 6 In subsection (3), for “(2)” substitute “ (2)(c) ” . 7 After that subsection insert— 3A In subsection (2)(d) “ relevant deduction ” means a deduction allowed in calculating the profits of a trade, UK property business or overseas property business. 8 Section 481 (application of Part 5 to relevant non-lending relationships) is amended as follows 9 In subsection (3)— a in paragraph (d), after “loss” insert “ or release debit ” and for “impairment, and” substitute “ impairment or release, ” , and b insert at the end and f in the case of a debt in relation to which a relevant deduction has been allowed to the company and which is released, the release. 10 In subsection (4), for “(3)” substitute “ (3)(d) and (e) ” . 11 After that subsection insert— 4A In subsection (3)(f) “ relevant deduction ” has the meaning given in section 479(3A). 12 The amendments made by this section are treated as having come into force on 22 April 2009. Foreign exchange matching: anti-avoidance 43 Schedule 21 contains anti-avoidance provisions relating to exchange gains and losses arising from loan relationships and derivative contracts. Collective investment Tax treatment of participants in offshore funds 44 In Schedule 22— ... Part 2 contains provision about the treatment of participants in certain offshore funds under TCGA 1992. Power to enable dividends of investment trusts to be taxed as interest 45 1 The Treasury may by regulations make provision for and in connection with— a the designation by a company that is an investment trust or a prospective investment trust of dividends made by the company, and b the treatment of a designated dividend for the purposes of the Tax Acts, in specified circumstances and in the case of specified persons— i as a payment of yearly interest, or ii as interest under a loan relationship. 2 Regulations under this section may, in particular, make provision— a about the circumstances in which a dividend may, or may not, be designated, b about limits on the amounts that may be designated or treated as a payment of yearly interest or as interest under a loan relationship, c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d about the preparation of accounts and the keeping of records by investment trusts and prospective investment trusts, and e about the provision by investment trusts and prospective investment trusts of information, whether to recipients of designated dividends or to other persons, including provision imposing a penalty not exceeding £3,000. 3 Regulations under this section may, in particular— a make provision applying enactments and instruments (with or without modification), b make different provision for different cases or different purposes, and c make incidental, consequential, supplementary or transitional provision. 4 Regulations under this section are to be made by statutory instrument. 5 A statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of the House of Commons. 6 In this section— “ company ” has the same meaning as in Chapter 4 of Part 24 of CTA 2010 (see section 1165(1) of that Act) (investment trusts); “ investment trust ” means an investment trust within the meaning of section 1158 of CTA 2010 ; “ loan relationship ” has the same meaning as in the Corporation Tax Acts (see section 302(1) and (2) of CTA 2009); “ prospective investment trust ” means a company that— intends to seek approval under section 1158 of CTA 2010 (meaning of “investment trust”) , and has a reasonable belief that such approval will be obtained; “ specified ” means specified in regulations under this section. Insurance etc Insurance companies 46 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equalisation reserves for Lloyd's corporate and partnership members 47 1 The Treasury may by regulations provide for section 444BA of ICTA (equalisation reserves) to have effect, in such cases and subject to such modifications as may be specified in the regulations, in relation to equivalent Lloyd's reserves as it has effect in relation to equalisation reserves maintained by virtue of equalisation reserves rules. 2 For this purpose a reserve is an equivalent Lloyd's reserve if it is maintained by a corporate or partnership member for purposes, or in a manner, such as to make it equivalent to an equalisation reserve maintained by virtue of equalisation reserves rules. 3 The regulations may include— a provision having effect in relation to periods before they are made, and b supplementary, incidental, consequential and transitional provision. 4 In this section— “ corporate member ” means a body corporate which is a member of Lloyd's; “ equalisation reserves rules ” has the same meaning as in section 444BA of ICTA (see subsection (11) of that section); “ member ” means underwriting member; “ partnership member ” means a limited partnership formed under the law of Scotland, or a limited liability partnership formed under the law of any part of the United Kingdom, which is a member of Lloyd's. Simplification Disguised interest 48 Schedule 24 contains provision about the corporation tax treatment of disguised interest. Transfer of income streams 49 Schedule 25 contains provision about transfers of income streams. SAYE schemes 50 1 Schedule 26 contains provision amending Chapter 4 of Part 6 of ITTOIA 2005 (SAYE interest). 2 The amendments made by that Schedule are treated as having come into force on 29 April 2009. Residence and domicile Remittance basis 51 Schedule 27 contains amendments about the remittance basis. Exemption for certain non-domiciled persons 52 1 In Part 14 of ITA 2007 (income tax: miscellaneous rules), after Chapter 1 insert— Chapter 1A Exemption for persons not domiciled in United Kingdom Introduction 828A This Chapter provides for an exemption from liability to income tax for an individual for a tax year if— a the individual is UK resident in the tax year but not domiciled in the United Kingdom in the tax year, b section 809B does not apply to the individual for the tax year, and c conditions A to F in section 828B are met. Conditions to be met 828B 1 Condition A is that in the tax year the individual has income from an employment the duties of which are performed wholly or partly in the United Kingdom. 2 Condition B is that, if the individual's income for the tax year consists of or includes relevant foreign earnings— a the amount of the relevant foreign earnings does not exceed £10,000, and b all of that amount is subject to a foreign tax. 3 Condition C is that, if the individual's income for the tax year consists of or includes income that is relevant foreign income by virtue of section 830(2)(e) of ITTOIA 2005— a the amount of that income does not exceed £100, and b all of that amount is subject to a foreign tax. 4 Condition D is that the individual has no other foreign income and gains for the tax year. 5 Condition E is that the individual would not for the tax year be liable to income tax at a rate other than the basic rate or the starting rate for savings if this Chapter did not apply to the individual for the tax year. 6 Condition F is that the individual does not make a return under section 8 of TMA 1970 for the tax year. The exemption 828C 1 The exemption is given by deducting the relevant amount from what would otherwise be the amount of the individual's liability to income tax for the tax year under section 23. 2 “The relevant amount” is so much of the amount of the individual's liability to income tax as is attributable to the individual's foreign income or gains for the tax year. 3 But if for the tax year the individual's total income is reduced by any deductions which fall to be made at Step 3 of the calculation in section 23 from the individual's foreign income or gains for the tax year, subsection (2) has effect as if the individual's foreign income or gains for the tax year were reduced by the amount of the deductions. 4 And if the individual is entitled under— a section 788 of ICTA (double taxation arrangements: relief by agreement), or b section 790(1) of that Act (relief for foreign tax where no double taxation arrangements), to a tax reduction in respect of the individual's foreign income or gains for the tax year, what would otherwise be the relevant amount is reduced by the amount of that reduction. Interpretation of Chapter 828D 1 This section applies for the purposes of this Chapter. 2 “ Employed ” and “ employment ” have the same meaning as in the employment income Parts of ITEPA 2003: see Chapter 1 of Part 2 of that Act. 3 “ Foreign income and gains ”, in relation to an individual, means what would be the individual's foreign income and gains for the purposes of Chapter A1 of this Part if section 809B applied to the individual (see section 809Z7(2)). 4 “ Foreign tax ” means any tax chargeable under the law of a territory outside the United Kingdom. 5 “ Relevant foreign earnings ”, in relation to an individual, means what would be the individual's relevant foreign earnings for the purposes of Chapter A1 of this Part if section 809B applied to the individual (see section 809Z7(3)). 2 In section 2(14) of ITA 2007 (overview), after paragraph (a) insert— aa exemption for persons not domiciled in United Kingdom (Chapter 1A), . 3 The amendments made by this section have effect for the tax year 2008-09 and subsequent tax years. Employment income Taxable benefits: cars 53 Schedule 28 contains provision about taxable benefits arising from cars made available to employees etc by reason of employment. Taxable benefit of cars: price of automatic car for disabled employee 54 1 Chapter 6 of Part 3 of ITEPA 2003 (taxable benefits: cars etc) is amended as follows. 2 In section 116(3) (meaning of when car is available), after “to section” insert “ 124A or ” . 3 In section 121(1) (method of calculating cash equivalent of benefit of car), in step 1, for “124” substitute “ 124A ” . 4 In section 122 (price of car), the existing provision becomes subsection (1) of that section and after that subsection insert— 2 This is subject to section 124A (automatic car for a disabled employee). 5 After section 124 insert— Automatic car for a disabled employee 124A 1 This section applies where— a a car has automatic transmission (“the automatic car”), b at any time in the year when the automatic car is available to the employee (“E”), E holds a disabled person's badge, and c by reason of E's disability, E must, in the event of wanting to drive a car, drive a car which has automatic transmission. 2 If, under section 122 to 124, the price of the automatic car is more than it would have been if the automatic car had been an equivalent manual car, the price of the automatic car is to be the price of an equivalent manual car. 3 In subsection (2) “ an equivalent manual car ” means a car which— a is first registered at or about the same time as the automatic car, and b does not have automatic transmission, but otherwise is the closest variant available of the make and model of the automatic car. 4 For the purposes of this section a car has automatic transmission if— a the driver of the car is not provided with any means by which the driver may vary the gear ratio between the engine and the road wheels independently of the accelerator and the brakes, or b the driver is provided with such means, but they do not include— i a clutch pedal, or ii a lever which the driver may operate manually. 5 For the purposes of this section a car is available to an employee at a particular time if it is then made available, by reason of the employment and without any transfer of the property in it, to the employee. 6 The amendments made by this section have effect for the tax year 2009-10 and subsequent tax years. Exemption of benefit consisting of health-screening or medical check-up 55 1 Part 4 of ITEPA 2003 (employment income: exemptions) is amended as follows. 2 In section 266(3) (exemption of non-cash vouchers for exempt benefits), omit the “or” at the end of paragraph (e) and insert at the end or g section 320B (health screening and medical check-ups). 3 In section 267(2) (exemption of credit-tokens used for exempt benefits), omit the “and” at the end of paragraph (g) and insert at the end and i section 320B (health screening and medical check-ups). 4 After section 320A insert— Health-screening and medical check-ups Health-screening and medical check-ups 320B 1 No liability to income tax arises in respect of the provision for an employee, on behalf of an employer, of a health-screening assessment or a medical check-up. 2 Subsection (1) does not apply— a to more than one health-screening assessment provided in a tax year by any one employer or by any of a number of persons who are employers of the employee at the same time, or b to more than one medical check-up so provided. 3 In this section— “ health-screening assessment ” means an assessment to identify employees who might be at particular risk of ill-health, and “ medical check-up ” means a physical examination of the employee by a health professional for (and only for) determining the employee's state of health. 5 The amendments made by this section have effect for the tax year 2009-10 and subsequent tax years. MEPs ' pay, allowances and pensions under European Parliament Statute 56 1 Part 2 of TIOPA 2010 (double taxation relief) has effect as if tax for the benefit of the European Union payable in respect of any income under— a Articles 9.1 and 10 (salaries), b Article 13 (transitional allowances), or c Article 14, 15 or 17 (pensions for old-age, incapacity and survivors), of the Statute for Members of the European Parliament (2005/684/ EC , Euratom) were payable under the law of a territory outside the United Kingdom. 2 In section 291(2)(c) of ITEPA 2003 (termination payments under section 3 of European Parliament (Pay and Pensions) Act 1979), insert at the end “ or under Article 13 of the Statute for Members of the European Parliament (transitional allowances), ” . 3 This section has effect for the tax year 2009-10 and subsequent tax years. Double taxation Tax underlying dividends 57 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Manufactured overseas dividends 58 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payments by reference to foreign tax etc 59 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Anti-fragmentation 60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Miscellaneous anti-avoidance provisions Financial arrangements avoidance 61 Schedule 30 contains provision to counter avoidance involving financial arrangements. Transfers of trade to obtain terminal loss relief 62 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sale of lessor companies etc: anti-avoidance 63 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leases of plant or machinery 64 Schedule 32 contains provision about leases of plant or machinery. Long funding leases of films 65 Schedule 33 contains provision about long funding leases of films. Real Estate Investment Trusts 66 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deductions for employee liabilities 67 1 ITEPA 2003 is amended as follows. 2 In section 346 (deduction for employee liabilities), after subsection (2) insert— 2A Nor is a deduction allowed for a payment which falls within paragraph A, B or C if the payment is made in pursuance of arrangements the main purpose, or one of the main purposes, of which is the avoidance of tax. 3 After section 556 insert— Deductible payments made pursuant to tax avoidance arrangements 556A No deduction may be made under section 555 if the deductible payment is made in pursuance of arrangements the main purpose, or one of the main purposes, of which is the avoidance of tax. 4 The amendments made by this section have effect in relation to payments made on or after 12 January 2009 (irrespective of when the arrangements are made). Employment loss relief 68 1 In section 128 of ITA 2007 (employment loss relief against general income), after subsection (5) insert— 5A No claim may be made in respect of the loss if and to the extent that it is made as a result of anything done in pursuance of arrangements the main purpose, or one of the main purposes, of which is the avoidance of tax. 2 The amendment made by subsection (1)— a has effect in relation to a loss made in the tax year 2009-10 or a subsequent tax year, and b has effect in relation to a loss made in the tax year 2008-09 if or to the extent that it is occasioned by an act or omission occurring on or after 12 January 2009. 3 Where a person has made a claim under section 128 of ITA 2007 during the relevant period, no penalty is payable by the person on the ground that any return, statement or declaration made in connection with the claim contained an inaccuracy if it would not have done so but for the amendment made by subsection (1). For this purpose “the relevant period” is the period— a beginning with 12 January 2009, and b ending with 1 April 2009. 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . No loss relief for losses from contracts for life insurance etc 69 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intangible fixed assets and goodwill 70 1 Part 8 of CTA 2009 (intangible fixed assets) is amended as follows. 2 In section 712(1) (meaning of “intangible asset”), insert at the end “ (and includes an internally-generated intangible asset) ” . 3 In section 715 (application of Part 8 to goodwill)— a in subsection (3), insert at the end “(and includes internally-generated goodwill)”, and b insert at the end— 4 For the purposes of this Part, goodwill is treated as created in the course of carrying on the business in question. 4 In section 883 (assets treated as created or acquired when expenditure incurred)— a in subsection (1), for paragraph (b) substitute— b has effect subject to the provisions specified in subsection (2). , b in subsection (2)(a), omit “internally-generated”, c in subsection (2)(b), for “certain other internally-generated assets” substitute “ assets representing non-qualifying expenditure ” , and d in subsection (3), omit “to which this section applies”. 5 In section 884 (internally-generated goodwill: time of creation)— a omit “internally-generated”, b for the words from “before” to the end substitute — a before (and not on or after) 1 April 2002 in a case in which the business in question was carried on at any time before that date by the company or a related party, and b on or after 1 April 2002 in any other case. , and c in the heading, omit “ Internally-generated ”. 6 In section 885 (certain other internally-generated assets: time of creation)— a in subsection (1)(b), omit “internally-generated”, b in subsection (7), for the words from “before” to the end substitute — a before (and not on or after) 1 April 2002 in a case in which the asset in question was held at any time before that date by the company or a related party, and b on or after 1 April 2002 in any other case. , and c in the heading, for “ Certain other internally-generated assets ” substitute “ Assets representing non-qualifying expenditure ” . 7 The amendments made by this section have effect in relation to accounting periods beginning on or after 22 April 2009 (and, in relation to those accounting periods, are to be treated as always having had effect). 8 For the purposes of subsection (7) an accounting period beginning before, and ending on or after, 22 April 2009 is to be treated as if so much of the period as falls before that date, and so much of the period as falls on or after that date, were separate accounting periods. Taxable benefit of living accommodation: lease premiums 71 1 Chapter 5 of Part 3 of ITEPA 2003 (taxable benefits: living accommodation) is amended as follows. 2 In section 105 (cash equivalent: cost of accommodation not over £75,000)— a in subsection (3), after “is” insert “ (subject to subsections (4) and (4A)) ” , and b for subsection (4) substitute— 4 Subsection (4A) applies where— a a rental amount is payable by the person (“P”) at whose cost the accommodation is provided in respect of the whole or part of the taxable period (“ the relevant period ”), and b the amount so payable is payable at an annual rate greater than the annual value. 4A Where this subsection applies— a subsection (3) does not apply to the relevant period, and b instead the “rental value of the accommodation” for the relevant period is the rental amount payable by P in respect of the relevant period. 4B A reference in subsection (4) or (4A) to a rental amount payable by P in respect of the relevant period is to the sum of— a any rent for the period payable by P, and b any amount attributed to the period in respect of a lease premium (see sections 105A and 105B). 3 After that section insert— Lease premiums 105A 1 For the purposes of section 105(4B)(b) an amount is attributed to the relevant period “in respect of a lease premium” if— a the property consists of premises, or a part of premises, that are subject to a lease, b the premises are not mainly used by P for a purpose other than the provision of living accommodation to which this Chapter applies, c the lease is for a term of 10 years or less, and d the net amount payable by P in relation to the lease by way of lease premium is greater than zero. 2 The amount so attributed is— A C × C where— A is the relevant period (in days), B is the term of the lease (in days), and C is the net amount payable by P in relation to the lease by way of lease premium. 3 For provision about the application of this section in relation to certain leases with break clauses, see section 105B. 4 For the purposes of this section the net amount payable by P in relation to a lease by way of lease premium is— a the total amount (if any) that has been paid, or is or will become payable, by P in relation to the lease by way of lease premium, less b any amount within paragraph (a) that has been repaid or is or will become repayable. 5 In this section and section 105B “ lease premium ” means any premium payable— a under a lease, or b otherwise under the terms on which a lease is granted. 6 In the application of this section to Scotland “ premium ” includes a grassum. Lease premiums in the case of leases with break clauses 105B 1 This section applies to a lease (“the original lease”) that contains one or more relevant break clauses. 2 For the purposes of this section— a “ break clause ” means a provision of a lease that gives a person a right to terminate it so that its term is shorter than it otherwise would be, and b a break clause contained in the original lease is “relevant” if the right to terminate the lease that it confers is capable of being exercised in such a way that the term of the original lease is 10 years or less. 3 For the purposes of section 105A— a the term of the original lease, and b the net amount payable by P in relation to the lease by way of lease premium, are to be determined on the assumption that any relevant break clause is exercised in such a way that the term of the lease is as short as possible. 4 If a relevant break clause is not in fact exercised in such a way that the term of the original lease is as short as possible, the parties to the lease are treated for the purposes of section 105A as if they were parties to another lease (a “notional lease”) the term of which— a begins immediately after the time at which the term of the original lease would have ended, if that break clause had been so exercised, and b ends at the time mentioned in subsection (5). 5 The term of a notional lease ends— a at the time the term of the original lease would end, on the assumption that any relevant break clause that is exercisable only after the beginning of the term of the notional lease is exercised in such a way that the term of the original lease is as short as possible, or b if earlier, the tenth anniversary of the beginning of the term of the original lease. 6 For the purposes of section 105A the net amount payable by P in relation to a notional lease by way of lease premium is, in the case of a notional lease the term of which ends under paragraph (a) of subsection (5)— a the net amount that would be payable by P in relation to the original lease by way of lease premium on the assumption mentioned in that paragraph, less b any part of that amount that has already been attributed to a period in respect of a lease premium under section 105(4B)(b). 7 For the purposes of section 105A the net amount payable by P in relation to a notional lease by way of lease premium is, in the case of a notional lease the term of which ends under paragraph (b) of subsection (5), the relevant proportion of— a the net amount that would be payable by P in relation to the original lease by way of lease premium, on the assumption that no break clause is exercised, less b any part of that amount that has already been attributed to a period in respect of a lease premium un