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New Finance Bill published

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26th May 2005
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Houses of ParliamentA Finance Bill published today reintroduces legislation announced in the 2005 Budget that was not enacted in Finance Act 2005 because of the general election.

The title of the Bill may cause some confusion. Although it is the third finance bill to be introduced this year it will be known as Finance Bill 2005 because it is the first such bill in the new Parliament.

The Government said it has responded to representations made since 24 March by making a number of changes to legislation as introduced in the original Bill.

The Bill will be known as Finance (No 2) Act 2005 when enacted. It has 72 clauses and 11 schedules.

Explanatory notes, running to 248 pages, are available.

HM Revenue and Customs has published further information on the Bill and provided links to related documents.

Paymaster general Dawn Primarolo said: "The Government believes that the measures introduced by the original Finance Bill presented to the House are essential for an effective, principled, targeted and fair tax system, that maintains the UK's competitiveness, but acts where there is a loss to the UK Exchequer. This new Finance Bill fulfils our commitment to reintroduce these clauses."

Changes
The Government has made amendments in the following areas, it said, in response to representations. Further details have been published by HM Revenue and Customs.

  • Avoidance involving Tax Arbitrage. "The legislation will allow companies to amend their returns to adjust the amount of deduction claimed, and extends the 'grandfathering period', which gives transitional protection to some companies, to 31 August 2005".

  • Avoidance involving Financial Arrangements. "The legislation has been amended to ensure that it doesn't affect routine arrangements concerning preference shares and other common corporate structures not set up for the purposes of tax avoidance. The regulation-making power has also been amended so that it can only be exercised prospectively."

  • Insurance Companies. "A regulation-making power that provides that the Treasury may amend a number of life assurance company tax provisions relating to apportionment of income and gains has been time-limited. Other minor changes deal with deemed returns on certain transfers of business, the taxation of certain income at special rates of corporation tax, regulation making powers in relation to overseas life insurance companies and the definition of pension business."

  • Miscellaneous amendments to stamp duty land tax. "Changes have been made to ensure the legislation works as intended for home reversion plans, for loans or deposit schemes and to ensure that group-relief clawback cannot be avoided by the use of leases."

  • European Company Statute. "The legislation has been extended to ensure that the UK intangible assets regime is fully compliant with the EU Mergers Directive."

Employee securities: anti-avoidance
A list of minor changes includes two "small consequential changes to Clause 12, Sch 2 "to ensure that the interaction between this legislation and Part 7 ITEPA works correctly".

International Accounting Standards
The Finance Bill also contains a new clause and schedule (clause 37, schedule 6), which amend the International Accounting Standards legislation in Finance Act 2005.

The Treasury said: "This responds to representations that the legislation was inhibiting commercial restructuring, and makes a number of other minor technical changes."

Andrew Goodall
Editor, TaxZone

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Andrew Goodall
By Andrew Goodall
27th May 2005 16:58

Second reading
The Second Reading of the Bill is scheduled for 7 June.

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