ukpga/2016/24 — Finance Act 2016

Finance Act 2016 2016 c. 24 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. [15th September 2016] Most Gracious Sovereign W E, 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 Income tax Charge and principal rates etc Income tax charge and rates for 2016-17 1 1 Income tax is charged for the tax year 2016-17. 2 For that tax year— a the basic rate is 20%, b the higher rate is 40%, and c the additional rate is 45%. Basic rate limit for 2017-18 2 1 In section 4(1)(b) of FA 2015 (basic rate limit for 2017-18) for “£32,400” substitute “ £33,500 ” . 2 Accordingly, omit section 6(b) of F(No.2)A 2015 (basic rate limit for 2017-18). Personal allowance for 2017-18 3 1 In section 5(1)(b) of FA 2015 (personal allowance for 2017-18) for “£11,200” substitute “ £11,500 ” . 2 Accordingly, omit section 5(b) of F(No.2)A 2015 (personal allowance for 2017-18). Rate structure Savings allowance, and savings nil rate etc 4 1 ITA 2007 is amended in accordance with subsections (2) to (12). 2 In section 6(3)(a) (other rates: savings), after “starting rate for savings” insert “ and savings nil rate ” . 3 In section 7 (starting rate for savings)— a the existing text becomes subsection (1), b after that subsection insert— 2 The savings nil rate is 0%. , and c in the heading, after “starting rate for savings” insert “ and savings nil rate ” . 4 In section 10(4) (provisions displacing charge at basic, higher and additional rates), before the entry relating to section 13 insert— “ section 12A (savings income charged at the savings nil rate), ” . 5 After section 12 insert— Savings income charged at the savings nil rate 12A 1 This section applies in relation to an individual if— a the amount of the individual's Step 3 income is greater than £L, where £L is the amount of the starting rate limit for savings, and b when the individual's Step 3 income is split into two parts— i one (“the individual's income up to the starting rate for savings”) consisting of the lowest £L of the individual's Step 3 income, and ii the other (“the individual's income above the starting rate limit for savings”) consisting of the rest of the individual's Step 3 income, some or all of the individual's income above the starting rate limit for savings consists of savings income (whether or not some or all of the individual's income up to the starting rate limit for savings consists of savings income). 2 In this section— £A is the amount of the individual's savings allowance (see section 12B), “the excess” is so much of the individual's income above the starting rate limit for savings as consists of savings income, and £X is the amount of the excess. 3 If £X is less than or equal to £A, income tax is charged at the savings nil rate (rather than the basic, higher or additional rate) on the excess. 4 If £X is more than £A, income tax is charged at the savings nil rate (rather than the basic, higher or additional rate) on the lowest £A of the excess. 5 Subsections (3) and (4) are subject to any provisions of the Income Tax Acts (apart from section 10) which provide for income to be charged at different rates of income tax in some circumstances. 6 Section 16 has effect for determining the extent to which the individual's income above the starting rate limit for savings consists of savings income. 7 For the purposes of this section, an individual's “Step 3 income” is the individual's net income less allowances deducted at Step 3 of the calculation in section 23. Individual's entitlement to a savings allowance 12B 1 Subsections (2) to (4) determine the amount of an individual's savings allowance for a tax year. 2 If any of the individual's income for the year is additional-rate income, the individual's savings allowance for the year is nil. 3 If— a any of the individual's income for the year is higher-rate income, and b none of the individual's income for the year is additional-rate income, the individual's savings allowance for the year is £500. 4 If none of the individual's income for the year is higher-rate income, the individual's savings allowance for the year is £1,000. 5 The Treasury may by regulations substitute a different amount for the amount for the time being specified in subsection (2), (3) or (4); and regulations under this subsection that have effect for a tax year may be made at any time before the end of that tax year. 6 If regulations under subsection (5) reduce any amount, the regulations may not be made unless a draft of the instrument containing them (whether alone or together with regulations under subsection (5) which increase any amount) has been laid before, and approved by a resolution of, the House of Commons. 7 Section 1014(4) (negative procedure) does not apply to regulations under subsection (5) which increase any amount if— a the instrument containing them also contains regulations under subsection (5) which reduce any amount, and b a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons. 8 For the purposes of this section— a each of the following is “additional-rate income”— i income on which income tax is charged at the additional rate or dividend additional rate, ii income on which income tax would be charged at the additional rate but for section 12A (income charged at savings nil rate), iii income on which income tax would be charged at the dividend additional rate but for section 13A (income charged at dividend nil rate), and iv income of an individual who is a Scottish taxpayer or Welsh taxpayer which would, if the individual were not a Scottish taxpayer or Welsh taxpayer (as the case may be), be income on which income tax is charged at the additional rate, and b each of the following is “higher-rate income”— i income on which income tax is charged at the higher rate or dividend upper rate, ii income on which income tax would be charged at the higher rate but for section 12A (income charged at savings nil rate), iii income on which income tax would be charged at the dividend upper rate but for section 13A (income charged at dividend nil rate), and iv income of an individual who is a Scottish taxpayer or Welsh taxpayer which would, if the individual were not a Scottish taxpayer or Welsh taxpayer (as the case may be), be income on which income tax is charged at the higher rate. 6 In section 16(1) (purposes of rules about highest part of income), before the “and” at the end of paragraph (a) insert— aa the extent to which a person's income above the starting rate limit for savings consists of savings income, . 7 In section 17 (repayment where tax paid at basic rate instead of starting rate for savings)— a after subsection (1) insert— 1A This section also applies if income tax at a rate greater than the savings nil rate has been paid on income on which income tax is chargeable at the savings nil rate. , and b in the heading— i for “basic” substitute “ greater ” , and ii after “savings” insert “ or savings nil rate ” . 8 In sections 55B(2)(b) and 55C(1)(c) (individual liable to tax only at certain rates), after “dividend ordinary rate” insert “ , the savings nil rate ” . 9 In section 745(1) (transfer of assets abroad: same rate of tax not to be charged twice), after “the starting rate for savings” insert “ when that rate is more than 0%, ” . 10 In section 828B(5) (individual liable to tax only at certain rates), after “basic rate” insert “ , the savings nil rate ” . 11 In section 989 (definitions for the purposes of the Income Tax Acts)— a at the appropriate places insert— “ savings allowance ” has the meaning given by section 12B, , and “ savings nil rate ” means the rate of income tax specified in section 7(2), , and b in the entry for “starting rate of savings”, for “has the meaning given by section 7” substitute “ means the rate of income tax specified in section 7(1) ” . 12 In Schedule 4 (index of defined expressions), at the appropriate places insert— savings allowance section 12B , and savings nil rate section 7 13 In section 669(3) of ITTOIA 2005 (preventing charge to both income and inheritance tax: meaning of “extra liability”), for paragraphs (a) and (b) substitute— a income charged at the additional rate or the higher rate were charged at the basic rate, and b income charged at the dividend additional rate or the dividend upper rate were charged at the dividend ordinary rate. 14 In consequence of the amendment made by subsection (13)— a in Schedule 1 to ITA 2007 omit paragraph 561, b in Schedule 1 to FA 2008 omit paragraph 59, and c in Schedule 2 to FA 2009 omit paragraph 21. 15 In section 7(6) of TMA 1970 (cases where person not required to give notice of being chargeable to income tax), after “dividend ordinary rate” insert “ , the savings nil rate ” . 16 In section 91(3)(c) of TMA 1970 (interest adjustments where reliefs given: when to ignore relief from higher rates on income paid subject to deduction of tax) after “basic rate” insert “ , the savings nil rate ” . 17 Subject to subsection (18), the amendments made by this section have effect for the tax year 2016-17 and subsequent tax years. 18 The amendments in section 669 of ITTOIA 2005, and the repeals made by subsection (14), have effect where the tax year mentioned in section 669(1)(b) of ITTOIA 2005 is the tax year 2016-17 or a later tax year. 19 The Treasury may, by regulations made by statutory instrument, make such provision amending, repealing or revoking any provision made by or under the Taxes Acts as the Treasury considers appropriate in consequence of the amendments made by this section; and regulations under this subsection that have effect for the tax year 2016-17 may be made at any time before the end of that tax year. 20 In subsection (19) “ the Taxes Acts ” means— a the Tax Acts, b TMA 1970, and c TCGA 1992 and all other enactments relating to capital gains tax. 21 A statutory instrument containing regulations under subsection (19) is subject to annulment in pursuance of a resolution of the House of Commons. Rates of tax on dividend income, and abolition of dividend tax credits etc 5 1 ITA 2007 is amended in accordance with subsections (2) to (8). 2 In section 6(3)(b) (other rates: dividends), before “dividend ordinary rate,” insert “ dividend nil rate, ” . 3 In section 8 (dividend ordinary, upper and additional rates)— a in the heading, after “The” insert “ dividend nil rate, ” , b before subsection (1) insert— A1 The dividend nil rate is 0%. , c in subsection (1) (dividend ordinary rate), for “10%” substitute “ 7.5% ” , and d in subsection (3) (dividend additional rate), for “37.5%” substitute “ 38.1% ” . 4 In section 9(2) (dividend trust rate), for “37.5%” substitute “ 38.1% ” . 5 After section 13 insert— Income charged at the dividend nil rate 13A 1 Subsection (2) applies if, ignoring this section, at least some of an individual's income would be charged to income tax at the dividend ordinary rate, the dividend upper rate or the dividend additional rate. 2 Income tax is charged at the dividend nil rate (rather than the dividend ordinary rate, dividend upper rate or dividend additional rate) on one or more amounts of the individual's income as follows— Step 1 Identify the amount (“D”) of the individual's income which would, ignoring this section, be charged at the dividend ordinary rate. Rule 1A: If D is more than £5,000, the first £5,000 of D is charged at the dividend nil rate (rather than the dividend ordinary rate), and is the only amount charged at the dividend nil rate. Rule 1B: If D is equal to £5,000, D is charged at the dividend nil rate (rather than the dividend ordinary rate), and is the only amount charged at the dividend nil rate. Rule 1C: If D is less than £5,000 but more than nil, D is charged at the dividend nil rate (rather than the dividend ordinary rate). Step 2 If D is less than £5,000, identify the amount (“U”) of the individual's income which would, ignoring this section, be charged at the dividend upper rate. Rule 2A: If the total of D and U is more than £5,000— the first £M of U is charged at the dividend nil rate (rather than the dividend upper rate), where £M is the difference between £5,000 and D, and the amounts charged under this Rule and Rule 1C are the only amounts charged at the dividend nil rate. Rule 2B: If the total of D and U is equal to £5,000, U is charged at the dividend nil rate (rather than the dividend upper rate), and the amounts charged under this Rule and Rule 1C are the only amounts charged at the dividend nil rate. Rule 2C: If the total of D and U is less than £5,000 but more than nil, U is charged at the dividend nil rate (rather than the dividend upper rate). Step 3 If the total of D and U is less than £5,000, identify the amount (“A”) of the individual's income which would, ignoring this section, be charged at the dividend additional rate. Rule 3A: If the total of D, U and A is more than £5,000, the first £X of A is charged at the dividend nil rate (rather than the dividend additional rate), where £X is the difference between— £5,000, and the total of D and U, and the amounts charged under this Rule, and Rules 1C and 2C, are the amounts charged at the dividend nil rate. Rule 3B: If the total of D, U and A is less than or equal to £5,000, A is charged at the dividend nil rate (rather than the dividend additional rate), and the amounts charged under this Rule, and Rules 1C and 2C, are the amounts charged at the dividend nil rate. 6 In section 55B(2) (transferable allowance: conditions for entitlement to tax reduction)— a in paragraph (b) (individual liable to tax only at certain rates), after “the basic rate,” insert “ the dividend nil rate, ” , and b after paragraph (b) insert— ba if for the tax year the individual is liable to tax at the dividend nil rate, the individual would for that year neither be liable to tax at the dividend upper rate, nor be liable to tax at the dividend additional rate, if section 13A (dividend nil rate) were omitted, . 7 In section 55C(1) (transferable allowance: conditions for entitlement to elect for reduced personal allowance)— a in paragraph (c) (individual would be liable to tax only at certain rates), after “the basic rate,” insert “ the dividend nil rate, ” , and b before the “and” at the end of paragraph (c) insert— ca where on that assumption the individual would for the tax year be liable to tax at the dividend nil rate, the individual on that assumption would for that year neither be liable to tax at the dividend upper rate, nor be liable to tax at the dividend additional rate, if section 13A (dividend nil rate) were omitted, . 8 In section 989 (definitions for the purposes of the Income Tax Acts), after the entry for “dividend income” insert— “ dividend nil rate ” means the rate of income tax specified in section 8(A1), . 9 In section 7 of TMA 1970 (duty to notify HMRC of liability to tax)— a in subsection (6) (exception for net payments etc)— i after paragraph (a) insert “ or ” , ii at the end of paragraph (b), for “; or” substitute a comma, iii omit paragraph (c), and iv in the words after paragraph (c), after “the basic rate” insert “ , the dividend nil rate ” , and b after subsection (6) insert— 6A A source of income falls within this subsection in relation to any person and any year of assessment if for that year— a all income from the source is dividend income (see section 19 of ITA 2007), and b the person— i is UK-resident, ii is not liable to tax at the dividend ordinary rate, iii is not liable to tax at the dividend upper rate, iv is not liable to tax at the dividend additional rate, and v is not charged to tax under section 832 of ITTOIA 2005 (relevant foreign income charged on remittance basis) on any dividend income. 10 The amendments made by the preceding provisions of this section have effect for the tax year 2016-17 and subsequent tax years. 11 Schedule 1 contains provision for, and connected with, the abolition of dividend tax credits etc. Structure of income tax rates 6 1 ITA 2007 is amended in accordance with subsections (2) to (22). 2 Before section 10 insert— Overview of sections 10 to 15 9A The general effect of sections 10 to 15 is outlined in the following table— Type of taxpayer Rates payable on savings income Rates payable on most dividend income Rates payable on other income UK resident individual who is neither a Scottish taxpayer nor a Welsh taxpayer Savings rates Dividend rates Main rates Scottish taxpayer Savings rates Dividend rates Scottish rates Welsh taxpayer Savings rates Dividend rates Main rates while section 11B is not in force; Welsh rates if that section is in force Non-UK resident individual Savings rates Dividend rates Default rates Non-individual, except that some trustees in some circumstances are subject instead to the trust rate or the dividend trust rate Default basic rate Dividend ordinary rate Default basic rate Note: the table does not address the effect of some exceptions referred to in sections 10 to 15. 3 Before section 7 insert— The default basic, higher and additional rates 6C The default basic rate, default higher rate and default additional rate for a tax year are the rates determined as such by Parliament for the tax year. 4 After section 7 insert— The savings basic, higher and additional rates 7A The savings basic rate, savings higher rate and savings additional rate for a tax year are the rates determined as such by Parliament for the tax year. 5 In section 6(3) (other rates)— a before paragraph (a) insert— zc section 6C (default basic, higher and additional rates), , and b after paragraph (a) insert— aa section 7A (savings basic, higher and additional rates), . 6 In section 10(2) (income charged at basic rate) omit the words after “at the basic rate”. 7 In section 10(4) (provisions displacing charge at basic, higher and additional rates), before the entry (inserted by this Act) relating to section 12A insert— section 11C (income charged at the default basic, higher and additional rates: non-UK resident individuals), section 11D (savings income charged at the savings basic, higher and additional rates: individuals), section 12 (savings income charged at the starting rate for savings), . 8 In section 11 (income charged at the basic rate: other persons)— a in the heading, for “basic rate: other persons” substitute “ default basic rate: non-individuals ” , and b in subsection (1), before “basic” insert “ default ” . 9 After section 11B insert— Income charged at the default basic, higher and additional rates: non-UK resident individuals 11C 1 Income tax on a non-UK resident individual's income up to the basic rate limit is charged at the default basic rate. 2 Income tax is charged at the default higher rate on a non-UK resident individual's income above the basic rate limit and up to the higher rate limit. 3 Income tax is charged at the default additional rate on a non-UK resident individual's income above the higher rate limit. 4 Subsections (1) to (3) are subject to— section 11D (savings income charged at the savings basic, higher and additional rates), section 12 (savings income charged at the starting rate for savings), section 12A (savings income charged at the savings nil rate), section 13 (income charged at the dividend ordinary, upper and additional rates: individuals), and any other provisions of the Income Tax Acts (apart from section 10) which provide for income to be charged at different rates of income tax in some circumstances. Income charged at the savings basic, higher and additional rates 11D 1 Income tax is charged at the savings basic rate on an individual's income which— a is saving income, and b would otherwise be charged at the basic rate or the default basic rate. 2 Income tax is charged at the savings higher rate on an individual's income which— a is savings income, and b would otherwise be charged at the higher rate or the default higher rate. 3 Income tax is charged at the savings additional rate on an individual's income which— a is savings income, and b would otherwise be charged at the additional rate or the default additional rate. 4 Subsections (1) to (3)— a have effect after sections 12 and 12A have been applied (so that any reference in subsections (1) to (3) to income which would otherwise be charged at a particular rate does not include income charged at the starting rate for savings or at the savings nil rate), and b are subject to any other provisions of the Income Tax Acts (apart from sections 10 and 11C) which provide for income to be charged at different rates of income tax in some circumstances. 5 Section 16 has effect for determining the extent to which an individual's savings income above the starting rate limit for savings would otherwise be charged at the basic, higher or additional rate or the default basic, default higher or default additional rate. 6 In relation to an individual who is a Scottish taxpayer, references in this section to income which would otherwise be charged at a particular rate are to be read as references to income that would, if the individual were not a Scottish taxpayer (but were UK resident), be charged at that rate (and subsection (5) is to be read accordingly). 10 In section 12(1) (income charged at the starting rate for savings)— a omit “(rather than the basic rate)”, and b for “as is savings income” substitute as— a is savings income, and b would otherwise be charged at the basic rate or the default basic rate . 11 In section 12A (inserted by this Act)— a in each of subsections (3) and (4), after “rather than the basic, higher or additional rate” insert “ or the default basic, default higher or default additional rate ” , and b in subsection (5), for “section 10” substitute “ sections 10 and 11C ” . 12 In section 12B (inserted by this Act), in subsection (8) (income charged at savings nil-rate: meaning of “additional-rate income” and “higher-rate income”)— a in paragraph (a)(i), after “at the additional rate” insert “ , default additional rate ” , b in paragraph (a)(ii), after “additional rate” insert “ , or default additional rate, ” , c in paragraph (a)(iv), after “additional rate” insert “ or default additional rate ” , d in paragraph (b)(i), after “at the higher rate” insert “ , default higher rate ” , e in paragraph (b)(ii), after “higher rate” insert “ , or default higher rate, ” , and f in paragraph (b)(iv), after “higher rate” insert “ or default higher rate ” . 13 In section 16(1) (purposes of rules about highest part of income), before the “and” at the end of the paragraph (aa) (inserted by this Act) insert— ab the rate at which income tax would be charged on a person's savings income above the starting rate limit for savings apart from sections 11D and 12A, . 14 In section 17(1) (repayment where tax paid at basic rate instead of starting rate for savings), for “at the basic rate” substitute “ at a rate greater than the starting rate for savings ” . 15 In section 55B (entitlement to transferable tax allowances for married couples and civil partners)— a in subsection (2)(b) as amended by section 5 of this Act, after “other than the basic rate,” insert “ the default basic rate, the savings basic rate, ” , and b in subsection (3), after “is the basic rate” insert “ or default basic rate ” . 16 In section 55C(1)(c) (election to reduce personal allowance conditional on not becoming subject to higher rates) as amended by section 5 of this Act, after “other than the basic rate,” insert “ the default basic rate, the savings basic rate, ” . 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 In section 828B(5) (exemption for non-domiciled UK residents conditional on not being subject to higher rates) as amended by section 4 of this Act, after “other than the basic rate” insert “ , the savings basic rate ” . 21 In section 989 (definitions for the purposes of the Income Tax Acts), at the appropriate places insert— “ default additional rate ” means the rate of income tax of that name determined pursuant to section 6C, “ default basic rate ” means the rate of income tax of that name determined pursuant to section 6C, “ default higher rate ” means the rate of income tax of that name determined pursuant to section 6C, and— “ savings additional rate ” means the rate of income tax of that name determined pursuant to section 7A, and— “ savings basic rate ” means the rate of income tax of that name determined pursuant to section 7A, “ savings higher rate ” means the rate of income tax of that name determined pursuant to section 7A, . 22 In Schedule 4 (index of defined expressions), at the appropriate places insert— default additional rate section 6C (as applied by section 989) default basic rate section 6C (as applied by section 989) default higher rate section 6C (as applied by section 989) savings additional rate section 7A (as applied by section 989) savings basic rate section 7A (as applied by section 989) savings higher rate section 7A (as applied by section 989) 23 In sections 4(4) and (5) and 4BA(1) of TCGA 1992 (rate of capital gains tax depends on individual's liability to higher rates of income tax), after “at the higher rate” insert “ , the default higher rate, the savings higher rate ” . 24 Subject to any provision made by virtue of subsection (25)(b), the amendments made by this section come into force on the day appointed by the Treasury under section 13(14) of the Scotland Act 2016 and have effect— a for the tax year appointed by the Treasury under section 13(15) of the Scotland Act 2016, and b for subsequent tax years. 25 The Treasury may by regulations make— a such consequential provision as they consider appropriate in connection with any preceding provision of this section; b such transitional or saving provision as they consider appropriate in connection with the coming into force of any provision of the preceding subsections of this section. 26 Regulations under this section may amend, repeal or revoke an enactment, whenever passed or made (including this Act). 27 Regulations under this section must be made by statutory instrument. 28 A statutory instrument containing regulations under this section which includes provision amending or repealing a provision of an Act may not be made unless a draft of the instrument has been laid before and approved by a resolution of the House of Commons. 29 Any other statutory instrument containing regulations under this section, if made without a draft having been approved by a resolution of the House of Commons, is subject to annulment in pursuance of a resolution of the House of Commons. 30 In subsection (26) “ enactment ” includes an enactment contained in subordinate legislation (within the meaning of the Interpretation Act 1978). Employment income: taxable benefits Taxable benefits: application of Chapters 5 to 7 of Part 3 of ITEPA 2003 7 1 Part 3 of ITEPA 2003 (employment income: earnings and benefits etc treated as earnings) is amended as follows. 2 In section 97 (living accommodation to which Chapter 5 applies), after subsection (1) insert— 1A Where this Chapter applies to any living accommodation— a the living accommodation is a benefit for the purposes of this Chapter (and accordingly it is immaterial whether the terms on which it is provided to any of those persons constitute a fair bargain), and b sections 102 to 108 provide for the cash equivalent of the benefit of the living accommodation to be treated as earnings. 3 In section 109 (priority of Chapter 5 over Chapter 1), after subsection (3) insert— 4 In a case where the cash equivalent of the benefit of the living accommodation is nil— a subsections (2) and (3) do not apply, and b the full amount mentioned in subsection (1)(b) constitutes earnings from the employment for the year under Chapter 1. 4 In section 114 (cars, vans and related benefits to which Chapter 6 applies), after subsection (1) insert— 1A Where this Chapter applies to a car or van, the car or van is a benefit for the purposes of this Chapter (and accordingly it is immaterial whether the terms on which it is made available to the employee or member constitute a fair bargain). 5 For section 117 substitute— Meaning of car or van made available by reason of employment 117 1 For the purposes of this Chapter a car or van made available by an employer to an employee or member of an employee's family or household is to be regarded as made available by reason of the employment unless subsection (2) or (3) excludes the application of this subsection. 2 Subsection (1) does not apply where— a the employer is an individual, and b the car or van in question is made available in the normal course of the employer's domestic, family or personal relationships. 3 Subsection (1) does not apply where— a the employer carries on a vehicle hire business under which cars or vans of the same kind are made available to members of the public for hire, b the car or van in question is hired to the employee or member in the normal course of that business, and c in hiring that car or van the employee or member is acting as an ordinary member of the public. 6 In section 120 (benefit of car treated as earnings)— a in subsection (2) after “case” insert “ (including a case where the cash equivalent of the benefit of the car is nil) ” , and b after subsection (2) insert— 3 Any reference in this Act to a case where the cash equivalent of the benefit of a car is treated as the employee's earnings for a year by virtue of this section includes a case where the cash equivalent is nil. 7 In section 154 (benefit of van treated as earnings)— a the existing text becomes subsection (1) of that section, and b after that subsection insert— 2 In such a case (including a case where the cash equivalent of the benefit of the van is nil) the employee is referred to in this Chapter as being chargeable to tax in respect of the van for that year. 3 Any reference in this Act to a case where the cash equivalent of the benefit of a van is treated as the employee's earnings for a year by virtue of this section includes a case where the cash equivalent is nil. 8 In section 173 (loans to which Chapter 7 applies), after subsection (1) insert— 1A Where this Chapter applies to a loan— a the loan is a benefit for the purposes of this Chapter (and accordingly it is immaterial whether the terms of the loan constitute a fair bargain), and b sections 175 to 183 provide for the cash equivalent of the benefit of the loan (where it is a taxable cheap loan) to be treated as earnings in certain circumstances. 9 The amendments made by this section have effect for the tax year 2016-17 and subsequent tax years. Cars: appropriate percentage for 2019-20 and subsequent tax years 8 1 ITEPA 2003 is amended as follows. 2 Section 139 (car with a CO 2 figure: the appropriate percentage) is amended as set out in subsections (3) and (4). 3 In subsection (2)— a in paragraph (a), for “13%” substitute “ 16% ” , b in paragraph (aa), for “16%” substitute “ 19% ” , and c in paragraph (b), for “19%” substitute “ 22% ” . 4 In subsection (3), for “20%” substitute “ 23% ” . 5 Section 140 (car without a CO 2 figure: the appropriate percentage) is amended as set out in subsections (6) and (7). 6 In subsection (2), in the Table— a for “20%” substitute “ 23% ” , and b for “31%” substitute “ 34% ” . 7 In subsection (3)(a), for “13%” (as substituted by section 9(3)) substitute “ 16% ” . 8 In section 142(2) (car first registered before 1 January 1998: the appropriate percentage), in the Table— a for “20%” substitute “ 23% ” , and b for “31%” substitute “ 34% ” . 9 The amendments made by this section have effect for the tax year 2019-20 and subsequent tax years. Cars which cannot emit CO 2 : appropriate percentage for 2017-18 and 2018-19 9 1 In section 140(3)(a) of ITEPA 2003 (car which cannot emit CO 2 : the appropriate percentage), for “7%” substitute “ 9% ” . 2 The amendment made by subsection (1) has effect for the tax year 2017-18. 3 In section 140(3)(a) of ITEPA 2003, for “9%” substitute “ 13% ” . 4 The amendment made by subsection (3) has effect for the tax year 2018-19. Diesel cars: appropriate percentage 10 1 In section 24 of FA 2014 (cars: the appropriate percentage), omit the following (“ the repealing provisions ”)— a subsection (2), b subsection (6), c subsection (10), d subsection (11), and e subsection (15). 2 Any provision of ITEPA 2003 amended or omitted by the repealing provisions has effect for the tax year 2016-17 and subsequent tax years as if the repealing provisions had not been enacted. Cash equivalent of benefit of a van 11 1 Section 155 of ITEPA 2003 (cash equivalent of the benefit of a van) is amended as follows. 2 In subsection (1B)(a), for “2019-20” substitute “ 2021-22 ” . 3 In subsection (1C), for paragraphs (b) to (e) substitute— b 20% for the tax year 2016-17; c 20% for the tax year 2017-18; d 40% for the tax year 2018-19; e 60% for the tax year 2019-20; f 80% for the tax year 2020-21; g 90% for the tax year 2021-22. 4 The amendments made by this section have effect for the tax year 2016-17 and subsequent tax years. Tax treatment of payments from sporting testimonials 12 Schedule 2 contains provision about the tax treatment of payments from sporting testimonials. Exemption for trivial benefits provided by employers 13 1 ITEPA 2003 is amended as follows. 2 After section 323 insert— Trivial benefits provided by employers 323A 1 No liability to income tax arises in respect of a benefit provided by, or on behalf of, an employer to an employee or a member of the employee's family or household if— a conditions A to D are met, or b in a case where subsection (2) applies, conditions A to E are met. 2 This subsection applies where— a the employer is a close company, and b the employee is— i a person who is a director or other office-holder of the employer, or ii a member of the family or household of such a person. 3 Condition A is that the benefit is not cash or a cash voucher within the meaning of section 75. 4 Condition B is that the benefit cost of the benefit does not exceed £50. 5 In this section “ benefit cost ”, in relation to a benefit, means— a the cost of providing the benefit, or b if the benefit is provided to more than one person and the nature of the benefit or the scale of its provision means it is impracticable to calculate the cost of providing it to each person to whom it is provided, the average cost per person of providing the benefit. 6 For the purposes of subsection (5)(b), the average cost per person of providing a benefit is found by dividing the total cost of providing the benefit by the number of persons to whom the benefit is provided. 7 Condition C is that the benefit is not provided pursuant to relevant salary sacrifice arrangements or any other contractual obligation. 8 “ Relevant salary sacrifice arrangements ”, in relation to the provision of a benefit to an employee or to a member of an employee's family or household, means arrangements (whenever made, whether before or after the employment began) under which the employee gives up the right to receive an amount of general earnings or specific employment income in return for the provision of the benefit. 9 Condition D is that the benefit is not provided in recognition of particular services performed by the employee in the course of the employment or in anticipation of such services. 10 Condition E is that— a the benefit cost of the benefit provided to the employee, or b in a case where the benefit is provided to a member of the employee's family or household who is not an employee of the employer, the amount of the benefit cost allocated to the employee in accordance with section 323B(4), does not exceed the employee's available exempt amount (see section 323B). Section 323A: calculation of available exempt amount 323B 1 The “ available exempt amount ”, in relation to an employee of an employer, is the amount found by deducting from the annual exempt amount the aggregate of— a the benefit cost of eligible benefits provided earlier in the tax year by, or on behalf of, the employer to the employee, and b any amounts allocated to the employee in accordance with subsection (4) in respect of eligible benefits provided earlier in the tax year by, or on behalf of, the employer to a member of the employee's family or household who was not at that time an employee of the employer. 2 The annual exempt amount is £300. 3 For the purposes of subsection (1) “ eligible benefits ” means benefits in respect of which conditions A to D in section 323A are met. 4 The amount allocated to an employee of an employer in respect of a benefit provided to a person (“P”) who— a is a member of the employee's family or household, and b is not an employee of the employer, is the benefit cost of that benefit divided by the number of persons who meet the condition in subsection (5) and are members of P's family or household. 5 This condition is met if the person is— a a director or other office-holder of the employer, b an employee of the employer who is a member of the family or household of a person within paragraph (a), or c a former employee of the employer who— i was a director or other office-holder at any time when the employer was a close company, or ii is a member of the family or household of such a person. 6 In this section “ benefit cost ” has the same meaning as in section 323A. Power to amend sections 323A and 323B 323C 1 The Treasury may by regulations amend section 323A so as to alter the conditions which must be met for the exemption conferred by section 323A(1) to apply. 2 Regulations under subsection (1) may include any amendment of section 323B that is appropriate in consequence of an amendment made under subsection (1). 3 The Treasury must not make regulations under subsection (1) unless a draft of the regulations has been laid before and approved by a resolution of the House of Commons. 3 In section 716 (alteration of amounts by Treasury order) in subsection (2), after paragraph (f) insert— fa section 323A(4) (trivial benefits provided by employers: cost of providing benefit), fb section 323B(2) (trivial benefits provided by employers: annual exempt amount), . 4 In section 717(4) (negative procedure not to apply to certain statutory instruments) after “other care: meaning of “eligible employee”),” insert “ section 323C(1) (trivial benefits provided by employers), ” . 5 The amendments made by this section have effect for the tax year 2016-17 and subsequent tax years. Travel expenses of workers providing services through intermediaries 14 1 In Chapter 2 of Part 5 of ITEPA 2003 (deductions for employee's expenses), after section 339 insert— Travel for necessary attendance: employment intermediaries 339A 1 This section applies where an individual (“the worker”)— a personally provides services (which are not excluded services) to another person (“ the client ”), and b the services are provided not under a contract directly between the client or a person connected with the client and the worker but under arrangements involving an employment intermediary. This is subject to the following provisions of this section. 2 Where this section applies, each engagement is for the purposes of sections 338 and 339 to be regarded as a separate employment. 3 This section does not apply if it is shown that the manner in which the worker provides the services is not subject to (or to the right of) supervision, direction or control by any person. 4 Subsection (3) does not apply in relation to an engagement if— a Chapter 8 of Part 2 applies in relation to the engagement, b the conditions in section 51, 52 or 53 are met in relation to the employment intermediary, and c the employment intermediary is not a managed service company. 5 This section does not apply in relation to an engagement if— a Chapter 8 of Part 2 does not apply in relation to the engagement merely because the circumstances in section 49(1)(c) are not met, b assuming those circumstances were met, the conditions in section 51, 52 or 53 would be met in relation to the employment intermediary, and c the employment intermediary is not a managed service company. 6 In determining for the purposes of subsection (4) or (5) whether the conditions in section 51, 52 or 53 are or would be met in relation to the employment intermediary— a in section 51(1)— i disregard “either” in the opening words, and ii disregard paragraph (b) (and the preceding or), and b read references to the intermediary as references to the employment intermediary. 7 Subsection (8) applies if— a the client or a relevant person provides the employment intermediary (whether before or after the worker begins to provide the services) with a fraudulent document which is intended to constitute evidence that, by virtue of subsection (3), this section does not or will not apply in relation to the services, b that section is taken not to apply in relation to the services, and c in consequence, the employment intermediary does not under PAYE regulations deduct and account for an amount that would have been deducted and accounted for under those regulations if this section had been taken to apply in relation to the services. 8 For the purpose of recovering the amount referred to in subsection (7)(c) (“the unpaid tax”)— a the worker is to be treated as having an employment with the client or relevant person who provided the document, the duties of which consist of the services, and b the client or relevant person is under PAYE regulations to account for the unpaid tax as if it arose in respect of earnings from that employment. 9 In subsections (7) and (8) “ relevant person ” means a person, other than the client, the worker or a person connected with the employment intermediary, who— a is resident, or has a place of business, in the United Kingdom, and b is party to a contract with the employment intermediary or a person connected with the employment intermediary under or in consequence of which— i the services are provided, or ii the employment intermediary, or a person connected with the employment intermediary, makes payments in respect of the services. 10 In determining whether this section applies, no regard is to be had to any arrangements the main purpose, or one of the main purposes, of which is to secure that this section does not to any extent apply. 11 In this section— “ arrangements ” includes any scheme, transaction or series of transactions, agreement or understanding, whether or not enforceable, and any associated operations; “ employment intermediary ” means a person, other than the worker or the client, who carries on a business (whether or not with a view to profit and whether or not in conjunction with any other business) of supplying labour; “ engagement ” means any such provision of service as is mentioned in subsection (1)(a); “ excluded services ” means services provided wholly in the client's home; “ managed service company ” means a company which— is a managed service company within the meaning given by section 61B, or would be such a company disregarding subsection (1)(c) of that section. 2 In section 688A of ITEPA 2003 (managed service companies: recovery from other persons), in subsection (5), in the definition of “managed service company”, after “section 61B” insert “ but for the purposes of section 339A has the meaning given by subsection (11) of that section ” . 3 After section 688A of ITEPA 2003 insert— Travel expenses of workers providing services through intermediaries: recovery of unpaid tax 688B 1 PAYE regulations may make provision for, or in connection with, the recovery from a director or officer of a company, in such circumstances as may be specified in the regulations, of amounts within any of subsections (2) to (5). 2 An amount within this subsection is an amount that the company is to account for in accordance with PAYE regulations by virtue of section 339A(7) to (9) (persons providing fraudulent documents). 3 An amount within this subsection is an amount which the company is to deduct and pay in accordance with PAYE regulations by virtue of section 339A in circumstances where— a the company is an employment intermediary, b on the basis that section 339A does not apply by virtue of subsection (3) of that section, the company has not deducted and paid the amount, but c the company has not been provided by any other person with evidence from which it would be reasonable in all the circumstances to conclude that subsection (3) of that section applied (and the mere assertion by a person that the manner in which the worker provided the services was not subject to (or to the right of) supervision, direction or control by any person is not such evidence). 4 An amount within this subsection is an amount that the company is to deduct and pay in accordance with PAYE regulations by virtue of section 339A in a case where subsection (4) of that section applies (services provided under arrangements made by intermediaries). 5 An amount within this subsection is any interest or penalty in respect of an amount within any of subsections (2) to (4) for which the company is liable. 6 In this section— “ company ” includes a limited liability partnership; “ director ” has the meaning given by section 67; “ employment intermediary ” has the same meaning as in section 339A; “ officer ”, in relation to a company, means any manager, secretary or other similar officer of the company, or any person acting or purporting to act as such 4 In Part 4 of the Income Tax (Pay As You Earn) Regulations 2003 ( S.I. 2003/2682) (payments, returns and information), after Chapter 3A insert— CHAPTER 3B Certain debts of companies under section 339A of ITEPA (travel expenses of workers providing services through employment intermediaries) Interpretation of Chapter 3B: “relevant PAYE debt” and “relevant date” 97ZG 1 In this Chapter “ relevant PAYE debt ”, in relation to a company means an amount within any of paragraphs (2) to (5). 2 An amount within this paragraph is an amount that the company is to account for in accordance with these Regulations by virtue of section 339A(7) to (9) of ITEPA (persons providing fraudulent documents). 3 An amount within this paragraph is an amount which a company is to deduct and pay in accordance with these Regulations by virtue of section 339A of ITEPA in circumstances where— a the company is an employment intermediary, b on the basis that section 339A of ITEPA does not apply by virtue of subsection (3) of that section the company has not deducted and paid the amount, but c the company has not been provided by any other person with evidence from which it would be reasonable in all the circumstances to conclude that subsection (3) of that section applied (and the mere assertion by a person that the manner in which the worker provided the services was not subject to (or to the right of) supervision, direction or control by any person is not such evidence). 4 An amount within this paragraph is an amount that the company is to deduct and pay in accordance with these Regulations by virtue of section 339A of ITEPA in a case where subsection (4) of that section applies (services provided under arrangements made by intermediaries). 5 An amount within this paragraph is any interest or penalty in respect of an amount within any of paragraphs (2) to (4) for which the company is liable. 6 In this Chapter “ the relevant date ” in relation to a relevant PAYE debt means the date on which the first payment is due on which PAYE is not accounted for. Interpretation of Chapter 3B: general 97ZH In this Chapter— “ company ” includes a limited liability partnership; “ director ” has the meaning given by section 67 of ITEPA; “ personal liability notice ” has the meaning given by regulation 97ZI(2); “ the specified amount ” has the meaning given by regulation 97ZI(2)(a). Liability of directors for relevant PAYE debts 97ZI 1 This regulation applies in relation to an amount of relevant PAYE debt of a company if the company does not deduct that amount by the time by which the company is required to do so. 2 HMRC may serve a notice (a “personal liability notice”) on any person who was, on the relevant date, a director of the company— a specifying the amount of relevant PAYE debt in relation to which this regulation applies (“ the specified amount ”), and b requiring the director to pay to HMRC— i the specified amount, and ii specified interest on that amount. 3 The interest specified in the personal liability notice— a is to be at the rate applicable under section 178 of the Finance Act 1989 for the purposes of section 86 of TMA, and b is to run from the date the notice is served. 4 A director who is served with a personal liability notice is liable to pay to HMRC the specified amount and the interest specified in the notice within 30 days beginning with the day the notice is served. 5 If HMRC serve personal liability notices on more than one director of the company in respect of the same amount of relevant PAYE debt, the directors are jointly and severally liable to pay to HMRC the specified amount and the interest specified in the notices. Appeals in relation to personal liability notices 97ZJ 1 A person who is served with a personal liability notice in relation to an amount of relevant PAYE debt of a company may appeal against the notice. 2 A notice of appeal must— a be given to HMRC within 30 days beginning with the day the personal liability notice is served, and b specify the grounds of the appeal. 3 The grounds of appeal are — a that all or part of the specified amount does not represent an amount of relevant PAYE debt, of the company, to which regulation 97ZI applies, or b that the person was not a director of the company on the relevant date. 4 But a person may not appeal on the ground mentioned in paragraph (3)(a) if it has already been determined, on an appeal by the company, that— a the specified amount is a relevant PAYE debt of the company, and b the company did not deduct, account for, or (as the case may be) pay the debt by the time by which the company was required to do so. 5 Subject to paragraph (6), on an appeal that is notified to the tribunal, the tribunal is to uphold or quash the personal liability notice. 6 In a case in which the ground of appeal mentioned in paragraph (3)(a) is raised, the tribunal may also reduce or increase the specified amount so that it does represent an amount of relevant PAYE debt, of the company, to which regulation 97ZI applies. Withdrawal of personal liability notices 97ZK 1 A personal liability notice is withdrawn if the tribunal quashes it. 2 An officer of Revenue and Customs may withdraw a personal liability notice if the officer considers it appropriate to do so. 3 If a personal liability notice is withdrawn, HMRC must give notice of that fact to the person upon whom the notice was served. Recovery of sums due under personal liability notice: application of Part 6 of TMA 97ZL 1 For the purposes of this Chapter, Part 6 of TMA (collection and recovery) applies as if— a the personal liability notice were an assessment, and b the specified amount, and any interest on that amount under regulation 97ZI(2)(b)(ii), were income tax charged on the director upon whom the notice is served, and that Part of that Act applies with the modification in paragraph (2) and any other necessary modifications. 2 Summary proceedings for the recovery of the specified amount, and any interest on that amount under regulation 97ZI(2)(b)(ii), may be brought in England and Wales or Northern Ireland at any time before the end of the period of 12 months beginning with the day after the day on which the personal liability notice is served. Repayment of surplus amounts 97ZM 1 This regulation applies if— a one or more personal liability notices are served in respect of an amount of relevant PAYE debt of a company, and b the amounts paid to HMRC (whether by directors upon whom notices are served or the company) exceed the aggregate of the specified amount and any interest on it under regulation 97ZI(2)(b)(ii). 2 HMRC is to repay the difference on a just and equitable basis and without unreasonable delay. 3 HMRC is to pay interest on any sum repaid. 4 The interest— a is to be at the rate applicable under section 178 of the Finance Act 1989 for the purposes of section 824 of ICTA , and b is to run from the date the amounts paid to HMRC come to exceed the aggregate mentioned in subsection (1)(b). 5 The amendment made by subsection (4) is to be treated as having been made by the Commissioners for Her Majesty's Revenue and Customs in exercise of the power conferred by section 688B of ITEPA 2003 (inserted by subsection (3)). 6 The amendment made by subsection (1) has effect in relation to the tax year 2016-17 and subsequent tax years. 7 The amendment made by subsection (4) has effect in relation to relevant PAYE debts that are to be deducted, accounted for or paid on or after 6 April 2016. Taxable benefits: PAYE 15 In section 684 of ITEPA 2003 (PAYE regulations), in subsection (2), in item 1ZA(a), for “Chapters 3 and 5 to 10” substitute “ Chapters 3 to 10 ” . Employment income: other provision Employee share schemes 16 Schedule 3 contains miscellaneous minor amendments relating to employee share schemes. Securities options 17 1 In section 418 of ITEPA 2003 (provisions related to Part 7 of ITEPA 2003), in subsection (1), omit “(but not securities options)”. 2 In that section, after subsection (1) insert— 1A But Chapters 1 and 10 of Part 3 do not have effect in relation to— a the acquisition of employment-related securities options (within the meaning of Chapter 5 of Part 7), or b chargeable events (within the meaning given by section 477) occurring in relation to such options. 3 In section 227 of that Act (scope of Part 4), in subsection (4), before paragraph (a) insert— za section 418(1A) (acquisition of, and chargeable events occurring in relation to, employment-related securities options); . 4 The amendments made by this section come into force on 6 April 2016. Employment income provided through third parties 18 1 Part 7A of ITEPA 2003 (employment income provided through third parties) is amended in accordance with subsections (2) and (3). 2 In section 554Z2 (value of relevant step to count as employment income) after subsection (1) insert— 1A Where the value of a relevant step would (apart from this subsection) count as employment income of more than one person— a the value of the relevant step is to be apportioned between each of those persons on a just and reasonable basis, and b subsection (1) applies as if the reference to the value of the relevant step in relation to A were a reference to so much of the value of the relevant step that is apportioned to A. 3 In section 554Z8 (cases where consideration given for relevant step) in subsection (5), omit “and” at the end of paragraph (b) and after paragraph (c) insert , and d there is no connection (direct or indirect) between the payment and a tax avoidance arrangement. 4 Paragraph 59 of Schedule 2 to FA 2011 (transitional provision relating to Part 7A of ITEPA 2003) is amended in accordance with subsections (5) to (7). 5 In sub-paragraph (2) for the words from “the earnings” to the end substitute— a where sub-paragraph (2A) or (2B) applies, the earnings mentioned in sub-paragraph (1)(f)(i) or any return on those earnings mentioned in sub-paragraph (1)(f)(ii), and b in any other case, the earnings mentioned in sub-paragraph (1)(f)(i). 6 After sub-paragraph (2) insert— 2A This sub-paragraph applies where— a the agreement mentioned in sub-paragraph (1)(d)(i) is made before 1 April 2017, and b A or B pays, or otherwise accounts for, any tax as mentioned in sub-paragraph (1)(e) in accordance with that agreement. 2B This sub-paragraph applies where— a the decision mentioned in sub-paragraph (1)(d)(ii) is made before 1 April 2017, and b A or B pays, or otherwise accounts for, any tax as mentioned in sub-paragraph (1)(e) before 1 April 2017. 7 At the end insert— 5 For the purposes of sub-paragraph (1)(e), a person is not to be regarded as having paid, or otherwise accounted for, any tax by reason only of making— a a payment on account of income tax, b a payment that is treated as a payment on account under section 223(3) of FA 2014 (accelerated payments), or c a payment pending determination of an appeal made in accordance with section 55 of TMA 1970. 8 In Schedule 2 to FA 2011, omit paragraph 64 (power to make provision dealing with interactions etc.). 9 The amendment made by subsection (3) has effect in relation to payments made on or after 16 March 2016 by way of consideration for a relevant step (as defined in section 554A(2) of ITEPA 2003) taken on or after that date. 10 The amendment made by subsection (7) has effect in relation to chargeable steps (as defined in paragraph 59(1)(a) of Schedule 2 to FA 2011) taken on or after 16 March 2016. Pensions Standard lifetime allowance from 2016-17 19 1 Section 218 of FA 2004 (pension schemes etc: lifetime allowance) is amended in accordance with subsections (2) to (5). 2 For subsections (2) and (3) (standard lifetime allowance is £1,250,000 but may be increased by Treasury order) substitute— 2 The standard lifetime allowance for the tax years 2016-17 and 2017-18 is £1,000,000. 2A The standard lifetime allowance for any later tax year (“the subsequent tax year”) is the same as the standard lifetime allowance for the tax year immediately preceding the subsequent tax year, unless subsection (2C) provides for it to be higher. 2B Subsection (2C) applies if— a the consumer prices index for the month of September in any tax year (“the prior tax year”) is higher than it was for the previous September, and b the prior tax year is the tax year 2017-18 or a later tax year. 2C The standard lifetime allowance for the tax year following the prior tax year is the standard lifetime allowance for the prior tax year— a increased by the percentage increase in the index, and b if the result is not a multiple of £100, rounded up to the nearest amount which is such a multiple. 2D The Treasury must before the tax year 2018-19, and before each subsequent tax year, make regulations specifying the amount given by subsections (2A) to (2C) as the standard lifetime allowance for the tax year concerned. 3 After subsection (5BB) insert— 5BC Where the operation of a lifetime allowance enhancement factor is provided for by any of section