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FINANCE ACT, 2008
18 of 2008
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 2008]
PART 1: CHARGES, RATES, ALLOWANCES, RELIEFS ETC:
Section 1: Charge and main rates for 2008-2009:
(1) Income tax is charged for the tax year 2008-09.
(2) For that tax year- (a) the basic rate is 20%, and (b) the higher rate is 40%.
SECTION 2: Personal Allowance for those aged under 65:
(1) For the tax year 2008-09 the amount specified in- (a) section 35 of ITA 2007, and (b) section 257(1) of ICTA, (personal allowance for those aged under 65) is replaced with "£6,035".
(2) Accordingly- (a) section 57 of ITA 2007, so far as relating to the amount specified in section 35 of that Act, and (b) section 257C of ICTA, so far as relating to the amount specified in section 257(1) of that Act, (indexation) do not apply for the tax year 2008-09.
(3) This section does not require a change to be made in the amounts deductible or repayable under PAYE regulations before 7 September 2008.
SECTION 3: Personal allowances for those aged 65 and over:
(1) For the tax year 2008-09- (a) the amount specified in section 36(1) of ITA 2007 and section 257(2) of ICTA (personal allowance for those aged 65 to 74) is replaced with "£9,030", and (b) the amount specified in section 37(1) of ITA 2007 and section 257(3) of ICTA (personal allowance for those aged 75 and over) is replaced with "£9,180".
(2) Accordingly- (a) section 57 of ITA 2007, so far as relating to the amounts specified in sections 36(1) and 37(1) of that Act, and (b) section 257C of ICTA, so far as relating to the amounts specified in section 257(2) and (3) of that Act, (indexation) do not apply for the tax year 2008-09.
SECTION 4: Basic rate limit:
(1) In section 10 of ITA 2007 (income charged at main rates: individuals), for subsection (5) substitute- "(5) The basic rate limit is £34,800."
(2) The amendment made by subsection (1) has effect for the tax year 2008-09 and subsequent tax years.
(3) But until 7 September 2008 for the purpose of ascertaining the amounts deductible or repayable under PAYE regulations it may be assumed that the figure specified in section 10(5) of ITA 2007 for the tax year 2008-09 is £36,000.
SECTION 5: Abolition of starting and savings rates and creation of starting rate for savings:
(1) Section 6 of ITA 2007 (rates at which income tax is charged) is amended as follows.
(2) In subsection (1), omit paragraph (a).
(3) In subsection (2), omit "starting rate,".
(4) In subsection (3), for paragraph (a) substitute- "(a) section 7 (starting rate for savings),".
(5) Accordingly, in the heading omit "starting rate,".
(6) The amendments made by this section have effect for the tax year 2008-09 and subsequent tax years.
(7) Schedule 1 contains provision in connection with- (a) the abolition of the starting rate and the savings rate, and (b) the creation of the starting rate for savings.
SECTION 6: Charge and main rates for financial year 2009:
(1) Corporation tax is charged for the financial year 2009.
(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 same meaning as in Chapter 5 of Part 12 of ICTA (see section 502(1) and (1A)).
SECTION 7: Small companies’ rates and fractions for financial year 2008 etc:
(1) For the financial year 2008 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 2008 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) Subsections (3) to (7) of section 3 of FA 2007 (operation of section 13(2) of ICTA in relation to company profits consisting of both ring fence profits and other profits) apply in relation to profits of a company for an accounting period any part of which falls in the financial year 2008, or any subsequent financial year, as in relation to those for an accounting period any part of which falls in the financial year 2007.
(4) In this section "ring fence profits" has the same meaning as in Chapter 5 of Part 12 of ICTA (see section 502(1) and (1A)).
SECTION 8: Rate etc:
(1) In TCGA 1992, for section 4 substitute- "4 Rate of capital gains tax The rate of capital gains tax is 18%."
(2) Schedule 2 contains further provision for and in connection with the reform of capital gains tax.
(3) The amendment made by subsection (1) has effect for the tax year 2008-09 and subsequent tax years.
SECTION 9: Entrepreneurs’ relief:
Schedule 3 contains provision for and in connection with entrepreneurs' relief.
SECTION 10: Transfer of unused nil-rate band etc:
Schedule 4 contains provisions about the transfer of unused nil-rate band between spouses and civil partners for the purposes of the charge to inheritance tax etc. Alcohol and tobacco
SECTION 11: Rates of alcoholic liquor duty:
(1) ALDA 1979 is amended as follows.
(2) In section 5 (rate of duty on spirits), for "£19.56" substitute "£21.35".
(3) In section 36(1AA)(a) (standard rate of duty on beer), for "£13.71" substitute "£14.96".
(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 "£172.33" substitute "£188.10", (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 "£39.73" substitute "£43.37", and (c) in paragraph (c) (rate of duty per hectolitre in any other case), for "£26.48" substitute "£28.90".
(5) For the table in Schedule 1 substitute-
Section 11 TABLE
(6) The amendments made by this section are treated as having come into force on 17 March 2008.
SECTION 12: Rates of tobacco products duty:
(1) For the table in Schedule 1 to TPDA 1979 substitute-
(2) The amendment made by subsection (1) is treated as having come into force at 6pm on 12 March 2008.
SECTION 13: Rates and rebates simplification:
(1) HODA 1979 is amended as follows.
(2) In section 1 (hydrocarbon oil), omit- (a) subsections (3A) and (3B), (b) in subsection (3C), "; and petrol is "leaded petrol" if it is not unleaded petrol", and (c) subsections (6) and (7).
(3) In section 6 (hydrocarbon oil: rates of duty), for subsection (1A) substitute- "(1A) The rates are- (a) £0.5035 a litre in the case of unleaded petrol, (b) £0.6007 a litre in the case of light oil other than unleaded petrol, and (c) £0.5035 a litre in the case of heavy oil."
(4) In section 6AB(5) (duty on bioblend), omit the words from "of the description" to the end.
(5) In section 11(1) (rebate on heavy oil), omit- (a) in paragraph (b), "which is not ultra low sulphur diesel", and (b) paragraph (ba).
(6) In section 13AA(6) (restrictions on use of rebated kerosene), omit "which is not ultra low sulphur diesel or sulphur-free diesel".
(7) Omit section 13A (rebate on unleaded petrol).
(8) In section 20AAA(4)(a) (mixing of rebated oil), for "section 6(1A)(d)" substitute "section 6A(1A)(c)".
(9) In section 27(1) (interpretation)- (a) in the definition of "rebate", omit "13A,", (b) omit the definitions of "sulphur-free diesel", "sulphur-free petrol", "ultra low sulphur diesel" and "ultra low sulphur petrol", and (c) for "and "leaded petrol" have" substitute "has".
(10) In Article 21(7) of the Renewable Transport Fuel Obligations Order 2007 (S.I.2007/3072), for "sulphur-free petrol" substitute "unleaded petrol".
(11) In consequence of this section, omit- (a) in FA 1987, section 1(2) and (3), (b) in FA 1997, section 7(5)(a) and (b) and (8)(b), (c) in FA 2000, section 5(3), (d) in FA 2001, section 2(1), and (e) in FA 2004, section 7(2), (5) to (7) and (8)(a).
(12) The amendments made by this section are treated as having come into force on 1 April 2008.
SECTION 14: Biodiesel and bioblend:
Schedule 5 contains provision about biodiesel and bioblend.
SECTION 15: Rates and rebates: increase from 1 October 2008:
(1) HODA 1979 is amended as follows.
(2) In section 6(1A) (main rates)- (a) in paragraph (a) (unleaded petrol), for "£0.5035" substitute "£0.5235", (b) in paragraph (b) (light oil other than unleaded petrol), for "£0.6007" substitute "£0.6207", and (c) in paragraph (c), (heavy oil), for "£0.5035" substitute "£0.5235".
(3) In section 6AA(3) (rate of duty on biodiesel), for "£0.3035" substitute "£0.3235".
(4) In section 6AD(3) (rate of duty on bioethanol), for "£0.3035" substitute "£0.3235".
(5) In section 8(3) (road fuel gas)- (a) in paragraph (a) (natural road fuel gas), for "£0.1370" substitute "£0.1660", and (b) in paragraph (b) (other road fuel gas), for "£0.1649" substitute "£0.2077".
(6) In section 11(1) (rebate on heavy oil)- (a) in paragraph (a) (fuel oil), for "£0.0929" substitute "£0.0966", and (b) in paragraph (b) (gas oil), for "£0.0969" substitute "£0.1007".
(7) In section 14(1) (rebate on light oil for use as furnace fuel), for "£0.0929" substitute "£0.0966".
(8) In section 14A(2) (rebate on certain biodiesel), for "£0.0969" substitute "£0.1007".
(9) The amendments made by this section come into force on 1 October 2008.
SECTION 16: Fuel for aircraft and boats, heating oil and fuel for certain engines:
(1) In section 6(1A) of HODA 1979 (main rates)- (a) after paragraph (a) insert- "(aa) £0.3103 a litre in the case of aviation gasoline,", and (b) in paragraph (b), after "petrol" insert "or aviation gasoline".
(2) The amendments made by subsection (1) come into force on 1 November 2008.
(3) Schedule 6 contains- (a) in Part 1, provision consequential on subsection (1) and provision about fuel used for private pleasure-flying or private pleasure craft, and (b) in Part 2, provision about certain heavy oil used for heating or as fuel for certain engines.
SECTION 17: Rates of vehicle excise duty:
(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 "£180" substitute "£185", and (b) in sub-paragraph (2A) (vehicle not covered elsewhere in Schedule with engine cylinder capacity not exceeding 1,549cc), for "£115" substitute "£120".
(3) In paragraph 1B (graduated rates for light passenger vehicles), for the table substitute- The table has effect in relation to vehicles first registered before 23 March 2006 as if- (a) in column (3), in the last row, "195" were substituted for "385", and (b) in column (4), in the last row, "210" were substituted for "400"."
Section 17 TABLE
(4) In paragraph 1J (light goods vehicles)- (a) in sub-paragraph (a) (vehicle which is not lower-emission van), for "£175" substitute "£180", and (b) in sub-paragraph (b) (lower-emission van), for "£115" substitute "£120".
(5) In paragraph 2(1) (motorcycles)- (a) in paragraph (b) (motorbicycle and engine's cylinder capacity more than 150cc but not more than 400cc), for "£32" substitute "£33", (b) in paragraph (c) (motorbicycle and engine's cylinder capacity more than 400cc but not more than 600cc), for "£47" substitute "£48", and (c) in paragraph (d) (any other case), for "£64" substitute "£66".
(6) The amendments made by this section have effect in relation to licences taken out on or after 13 March 2008.
SECTION 18: Standard rate of landfill tax:
(1) In section 42(1)(a) and (2) of FA 1996 (amount of landfill tax), for "£32" substitute "£40".
(2) The amendments made by subsection (1) come into force on 1 April 2009 and have effect in relation to disposals made (or treated as made) on or after that date.
SECTION 19: Rates of climate change levy:
(1) In Schedule 6 to FA 2000 (climate change levy), for the table in paragraph 42(1) substitute-
Section 19 TABLE
(2) The amendment made by subsection (1) has effect in relation to supplies treated as taking place on or after 1 April 2009.
SECTION 20: Rate of aggregates levy:
(1) In section 16(4) of FA 2001 (rate of aggregates levy), for "£1.95" substitute "£2". Taxable commodity supplied Rate at which levy payable if supply is not a reduced-rate supply Electricity £0.00470 per kilowatt hour Gas supplied by a gas utility or any gas supplied in a gaseous state that is of a kind supplied by a gas utility £0.00164 per kilowatt hour Any petroleum gas, or other gaseous hydrocarbon, supplied in a liquid state £0.01050 per kilogram Any other taxable commodity £0.01281 per kilogram".
(2) The amendment made by subsection (1) has effect in relation to aggregate subjected to commercial exploitation on or after 1 April 2009.
SECTION 21: Carbon reduction trading scheme: charges for allocations:
(1) The Treasury may impose charges by providing for carbon reduction trading scheme allowances to be allocated in return for payment.
(2) The charges may only be imposed by regulations.
(3) The regulations may make any other provision about allocations of allowances which the Treasury consider appropriate, including (in particular)- (a) provision as to the imposition of fees, and as to the making and forfeiting of deposits, in connection with participation in the allocations, (b) provision as to the persons by whom allocations are to be conducted, (c) provision for allocations to be overseen by an independent person appointed by the Treasury, (d) provision for the imposition and recovery of penalties for failure to comply with the terms of a scheme made under subsection (4), (e) provision for and in connection with the recovery of payments due in respect of allowances allocated (including provision as to the imposition and recovery of interest and penalties), and (f) provision conferring rights of appeal against decisions made in allocations, the forfeiting of deposits and the imposition of penalties (including provision specifying the person, court or tribunal to hear and determine appeals).
(4) The Treasury may make schemes about the conduct and terms of allocations (to have effect subject to any regulations under this section); and schemes may in particular include provision about- (a) who may participate in allocations, (b) the allowances to be allocated, and (c) where and when allocations are to take place.
(5) In this section- "carbon reduction trading scheme allowances" means tradeable allowances that- (a) are provided for in a relevant trading scheme, and (b) represent the right to carry on a specified amount of activities that consist of the emission of greenhouse gas or that cause or contribute, directly or indirectly, to such emissions; "relevant trading scheme" means a trading scheme that- (a) is made under Part 3 of the Climate Change Act 2008, (b) applies to persons by reference to their consumption of electricity (whether or not by reference to other matters as well), and (c) applies only to persons who consume electricity- (i) for business or charitable purposes, or (ii) for the performance of functions of a public nature, (whether or not they also consume electricity for other purposes); "specified" means specified in the relevant trading scheme.
(6) Regulations under this section are to be made by statutory instrument.
(7) A statutory instrument containing the first regulations under this section may not be made unless a draft of the regulations has been laid before, and approved by a resolution of, the House of Commons.
(8) Any other statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of the House of Commons unless a draft of the regulations has been laid before, and approved by a resolution of, that House. Gambling duties
Section 22: Rates of gaming duty:
(1) For the table in section 11(2) of FA 1997 substitute-
Section 22 TABLE
(2) The amendment made by subsection (1) has effect in relation to accounting periods beginning on or after 1 April 2008.
SECTION 23: Amusement machine licence duty:
(1) In section 23(2) of BGDA 1981 (amount of duty payable on amusement machine licence), for the table substitute-
Section 23 TABLE
(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 4pm on 14 March 2008.
PART 2: INCOME TAX, CORPORATION TAX AND CAPITAL GAINS TAX-GENERAL:
SECTION 24: Periods of residence:
(1) Section 831 of ITA 2007 (foreign income of individuals in United Kingdom for temporary purpose) is amended as follows.
(2) In subsection (1), for paragraph (b) substitute- "(b) during the tax year in question the individual spends (in total) less than 183 days in the United Kingdom."
(3) After that subsection insert- "(1A) In determining whether an individual is within subsection (1)(b) treat a day as a day spent by the individual in the United Kingdom if (and only if) the individual is present in the United Kingdom at the end of the day. (1B) But in determining that issue do not treat as a day spent by the individual in the United Kingdom any day on which the individual arrives in the United Kingdom as a passenger if- (a) the individual departs from the United Kingdom on the next day, and (b) during the time between arrival and departure the individual does not engage in activities that are to a substantial extent unrelated to the individual's passage through the United Kingdom."
(4) In section 832 of that Act (employment income of individuals in United Kingdom for temporary purpose), after subsection (1) insert- "(1A) In determining whether an individual is within subsection (1)(b) treat a day as a day spent by the individual in the United Kingdom if (and only if) the individual is present in the United Kingdom at the end of the day. (1B) But in determining that issue do not treat as a day spent by the individual in the United Kingdom any day on which the individual arrives in the United Kingdom as a passenger if- (a) the individual departs from the United Kingdom on the next day, and (b) during the time between arrival and departure the individual does not engage in activities that are to a substantial extent unrelated to the individual's passage through the United Kingdom."
(5) Section 9 of TCGA 1992 (residence, including temporary residence) is amended as follows.
(6) In subsection (3), for the words after "if and only if" substitute "the individual spends (in total) at least 183 days in the United Kingdom."
(7) Insert at the end- "(5) In determining for the purposes of subsection (3) above whether an individual spends (in total) at least 183 days in the United Kingdom treat a day as a day spent by the individual in the United Kingdom if (and only if) the individual is present in the United Kingdom at the end of the day. (6) But in determining that issue for those purposes do not treat as a day spent by the individual in the United Kingdom any day on which the individual arrives in the United Kingdom as a passenger if- (a) the individual departs from the United Kingdom on the next day, and (b) during the time between arrival and departure the individual does not engage in activities that are to a substantial extent unrelated to the individual's passage through the United Kingdom."
(8) The amendments made by this section have effect for the tax year 2008-09 and subsequent tax years.
SECTION 25: Remittance basis:
Schedule 7 contains provision for and in connection with the revision of the remittance basis.
SECTION 26: Rates of RandD relief and vaccine research relief:
Schedule 8 contains provision about the rates of research and development relief and vaccine research relief.
SECTION 27: Qualifying expenditure: RandD relief and vaccine research relief:
(1) Paragraph 5 of Schedule 20 to FA 2000 (RandD tax relief: staffing costs) is amended as follows.
(2) In sub-paragraph (1)(b), after "company;" insert- "(ba) the compulsory contributions paid by the company in respect of benefits for directors or employees of the company under the social security legislation of an EEA State (other than the United Kingdom) or Switzerland;".
(3) Before sub-paragraph (1A) insert- "(1ZB) In sub-paragraph (1)(ba) "social security legislation" means legislation relating to any of the branches of social security listed in Article 3(1) of Regulation (EC) No 883/2004 of the European Parliament and of the Council of 29 April 2004 on the co-ordination of social security systems (as amended from time to time)."
(4) Schedule 13 to FA 2002 (vaccine research relief) is amended as follows.
(5) In paragraph 2 (qualifying expenditure)- (a) in sub-paragraph (1)(a), at the end insert "or", (b) omit sub-paragraph (1)(c) (and the "or" before it), and (c) omit sub-paragraph (4).
(6) In paragraph 6 (qualifying expenditure on sub-contracted research and development), omit- (a) in sub-paragraph (1), the second sentence, and (b) sub-paragraph (3) (expenditure on research sub-contracted to a charity, a university or a scientific research organisation).
(7) Omit paragraph 12 (qualifying expenditure on contributions to independent research and development).
(8) Omit paragraph 25 (refunds of qualifying expenditure on contributions to independent research and development).
(9) Accordingly, in paragraph 3 of Schedule 8 to this Act (changes to rates of vaccine research relief), omit sub-paragraphs (2)(e) and (3)(d).
(10) The amendments made by this section have effect in relation to expenditure incurred on or after such day as the Treasury may by order appoint.
(11) Paragraph 10(4) of Schedule 13 to FA 2002 (time limit for giving notice of election for connected persons treatment) does not apply to a notice of an election under that paragraph in relation to sub-contractor payments if- (a) the sub-contractor falls within paragraph 6(3) of that Schedule (repealed by this section) (charity, university or scientific research organisation), and (b) the notice is given before the end of the period of 12 months beginning with the day appointed under subsection (10).
SECTION 28: Companies in difficulty: SME RandD relief and vaccine research relief:
Schedule 9 contains provision preventing a company from claiming research and development relief and vaccine research relief if it is not a going concern.
SECTION 29: Cap on RandD aid:
(1) A company is only entitled to RandD relief in respect of expenditure attributable to a research and development project if, or to the extent that, at that time, the total RandD aid in respect of expenditure by the company attributable to the project would not exceed 7.5 million euros.
(2) In subsection (1)- "RandD relief" means any relief or tax credit under- (a) Schedule 20 to FA 2000 (tax relief for expenditure by SMEs on research and development), or (b) Schedule 13 to FA 2002 (tax relief for expenditure on vaccine research etc), and "total RandD aid" means the total RandD aid calculated- (a) in accordance with Part 1 of Schedule 10, and (b) as if a claim or election had been made for the RandD relief mentioned in subsection (1).
(3) The Treasury may by regulations- (a) increase the amount specified in subsection (1), and (b) amend Part 1 of Schedule 10.
(4) Part 2 of Schedule 10 contains amendments consequential on this section.
(5) Subsections (1) to (4) and that Schedule come into force on such day as the Treasury may by order appoint.
SECTION 30: Vaccine research relief: declaration about effect of relief:
(1) In paragraph 21 of Schedule 13 to FA 2002 (tax relief for expenditure by large companies on vaccine research etc), after sub-paragraph (3) insert- "(3A) A claim under this paragraph must include a declaration that the availability of the relief claimed has resulted in an increase in- (a) the amount, scope or speed of the research and development undertaken by the company, or (b) the company's expenditure on research and development."
(2) The amendment made by subsection (1) has effect in relation to claims made on or after such day as the Treasury may by order appoint.
SECTION 31: Enterprise investment scheme: increase in amount of relief:
(1) In section 158(2)(b) of ITA 2007 (form and amount of EIS relief), for "£400,000" substitute "£500,000".
(2) The amendment made by subsection (1) has effect for- (a) such tax year as the Treasury may by order specify, and (b) all tax years subsequent to the specified tax year.
(3) An order under subsection (2) may specify the tax year in which it is made.
(4) Section 1014(4) of ITA 2007 (orders etc subject to annulment) does not apply in relation to an order under subsection (2).
SECTION 32: Venture capital schemes:
Schedule 11 contains provision about venture capital schemes.
SECTION 33: Enterprise management incentives: qualifying companies:
(1) Part 3 of Schedule 5 to ITEPA 2003 (enterprise management incentives: qualifying companies) is amended as follows.
(2) In paragraph 8 (qualifying companies: introduction), omit the "and" at the end of the entry relating to paragraph 12, and after that entry insert- "number of employees (see paragraph 12A), and".
(3) After paragraph 12 insert- "The number of employees requirement 12A (1) The number of employees requirement in the case of a single company is that the full-time equivalent employee number for
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