Mileage allowances

197AD Mileage allowance payments

1

There is no charge to tax under Schedule E in respect of approved mileage allowance payments for a qualifying vehicle.

2

Mileage allowance payments are amounts (other than passenger payments within the meaning of section 197AE(2)) paid to an employee in respect of expenses in connection with the use by him for business travel of a qualifying vehicle.

3

Mileage allowance payments are approved only if, or to the extent that, for a tax year, the total amount of all the mileage allowance payments made to the employee for the kind of vehicle in question does not exceed the approved amount for mileage allowance payments applicable to that kind of vehicle.

4

Subsection (1) above does not apply if—

a

the employee is a passenger in the vehicle, or

b

the vehicle is a company vehicle.

197AE Passenger payments

1

There is no charge to tax under Schedule E in respect of approved passenger payments made to an employee for a car or van (whether or not it is a company vehicle) if—

a

mileage allowance payments (within the meaning of section 197AD(2)) are made to the employee for the car or van, and

b

if the car or van is made available to the employee by reason of his employment, he is chargeable to tax in respect of it under section 157 or 159AA (cars and vans made available for private use).

2

Passenger payments are amounts paid to an employee because, while using a car or van for business travel, he carries one or more qualifying passengers in it.

“Qualifying passenger” means a passenger who is also an employee for whom the travel is business travel.

3

Passenger payments are approved only if, or to the extent that, for a tax year, the total amount of all the passenger payments made to the employee does not exceed the approved amount for passenger payments.

4

Section 168(6) (when cars and vans are made available by reason of employment) applies for the purposes of subsection (1)(b) above.

197AF Mileage allowance relief

1

An employee is entitled to mileage allowance relief for a tax year if the employee uses a qualifying vehicle for business travel and—

a

no mileage allowance payments are made to him for the kind of vehicle in question for the tax year, or

b

the total amount of all the mileage allowance payments made to him for the kind of vehicle in question for the tax year is less than the approved amount for mileage allowance payments applicable to that kind of vehicle.

2

Subsection (1) above does not apply if—

a

the employee is a passenger in the vehicle, or

b

the vehicle is a company vehicle.

3

The amount of mileage allowance relief to which an employee is entitled for a tax year is—

a

if subsection (1)(a) above applies, the approved amount for mileage allowance payments applicable to the kind of vehicle in question;

b

if subsection (1)(b) above applies, the difference between the total amount of all the mileage allowance payments made to the employee for the kind of vehicle in question and the approved amount for mileage allowance payments applicable to that kind of vehicle.

4

In this section “mileage allowance payments” has the meaning given by section 197AD(2).

197AG Giving effect to mileage allowance relief

1

Mileage allowance relief to which an employee is entitled for a tax year is given effect as follows.

2

Where any emoluments of the employment fall within Case I or IIof Schedule E, the relief is allowed as a deduction from those emoluments in calculating the amount chargeable to tax for that tax year.

3

In the case of emoluments chargeable under Case III of Schedule E for a tax year there may be deducted from those emoluments the amount of any mileage allowance relief—

a

for that tax year, and

b

for any earlier tax year in which the employee was resident in the United Kingdom,

which might have been deducted from the emoluments of the employment for the tax year for which the employee is entitled to the relief if those emoluments had been chargeable under Case I of Schedule E.

4

Subsection (3) above applies only to the extent that the mileage allowance relief cannot be deducted under subsection (2) above.

5

A deduction shall not be made twice, whether under subsection (2) or (3) above, in respect of the same mileage allowance relief.

197AH Interpretation of sections 197AD to 197AG

Schedule 12AA to this Act defines terms used in sections 197AD to 197AG.

36 Restriction on qualifying expenditure in case of employment or office

1

Where the qualifying activity consists of an employment or office—

a

expenditure on the provision of a mechanically propelled road vehicle, or a cycle, is not qualifying expenditure, and

b

other expenditure is qualifying expenditure only if the plant or machinery is necessarily provided for use in the performance of the duties of the employment or office.

2

In this section “cycle” has the meaning given by section 192(1) of the Road Traffic Act 1988.

“minibus” means a vehicle constructed or adapted for the carriage of passengers which has a seating capacity of 9 or more, but less than 12;

9

In determining whether a vehicle is a minibus for the purposes of this section, no account shall be taken of seats in relation to which relevant construction and use requirements are not met.

In this subsection “construction and use requirements” has the same meaning as in Part 2 of the Road Traffic Act 1988 or, in Northern Ireland, Part III of the Road Traffic (Northern Ireland) Order 1995.

95A Creative artists: relief for fluctuating profits

Schedule 4A (which enables individuals to make an averaging claim in respect of profits derived wholly or mainly from creative works) shall have effect.

The provisions of that Schedule apply for the year 2000-01 and subsequent years of assessment (so that the first years which may be the subject of an averaging claim are 2000-01 and 2001-02).

8A

In subsection (8)(b) “relevant tax period” means—

a

for the purposes of corporation tax, an accounting period;

b

for the purposes of income tax—

i

for a year of assessment in relation to which sections 60 to 63 apply and give a basis period, that basis period;

ii

in any other case, a year of assessment.

2A

The relevant percentage is 35% or such other percentage (whether higher or lower) as may be prescribed.

118ZA Treatment of limited liability partnerships

1

For the purposes of the Tax Acts, where a limited liability partnership carries on a trade, profession or other business with a view to profit—

a

all the activities of the partnership are treated as carried on in partnership by its members (and not by the partnership as such),

b

anything done by, to or in relation to the partnership for the purposes of, or in connection with, any of its activities is treated as done by, to or in relation to the members as partners, and

c

the property of the partnership is treated as held by the members as partnership property.

References in this subsection to the activities of the limited liability partnership are to anything that it does, whether or not in the course of carrying on a trade, profession or other business with a view to profit.

2

For all purposes, except as otherwise provided, in the Tax Acts—

a

references to a partnership include a limited liability partnership in relation to which subsection (1) above applies,

b

references to members of a partnership include members of such a limited liability partnership,

c

references to a company do not include such a limited liability partnership, and

d

references to members of a company do not include members of such a limited liability partnership.

3

Subsection (1) above continues to apply in relation to a limited liability partnership which no longer carries on any trade, profession or other business with a view to profit—

a

if the cessation is only temporary, or

b

during a period of winding up following a permanent cessation, provided—

i

the winding up is not for reasons connected in whole or in part with the avoidance of tax, and

ii

the period of winding up is not unreasonably prolonged,

but subject to subsection (4) below.

4

Subsection (1) above ceases to apply in relation to a limited liability partnership—

a

on the appointment of a liquidator or (if earlier) the making of a winding-up order by the court, or

b

on the occurrence of any event under the law of a country or territory outside the United Kingdom corresponding to an event specified in paragraph (a) above.

59A Limited liability partnerships

1

Where a limited liability partnership carries on a trade or business with a view to profit—

a

assets held by the limited liability partnership are treated for the purposes of tax in respect of chargeable gains as held by its members as partners, and

b

any dealings by the limited liability partnership are treated for those purposes as dealings by its members in partnership (and not by the limited liability partnership as such);

and tax in respect of chargeable gains accruing to the members of the limited liability partnership on the disposal of any of its assets shall be assessed and charged on them separately.

2

For all purposes, except as otherwise provided, in the enactments relating to tax in respect of chargeable gains—

a

references to a partnership include a limited liability partnership in relation to which subsection (1) above applies,

b

references to members of a partnership include members of such a limited liability partnership,

c

references to a company do not include such a limited liability partnership, and

d

references to members of a company do not include members of such a limited liability partnership.

3

Subsection (1) above continues to apply in relation to a limited liability partnership which no longer carries on any trade or business with a view to profit—

a

if the cessation is only temporary, or

b

during a period of winding up following a permanent cessation, provided—

i

the winding up is not for reasons connected in whole or in part with the avoidance of tax, and

ii

the period of winding up is not unreasonably prolonged,

but subject to subsection (4) below.

4

Subsection (1) above ceases to apply in relation to a limited liability partnership—

a

on the appointment of a liquidator or (if earlier) the making of a winding-up order by the court, or

b

on the occurrence of any event under the law of a country or territory outside the United Kingdom corresponding to an event specified in paragraph (a) above.

5

Where subsection (1) above ceases to apply in relation to a limited liability partnership with the effect that tax is assessed and charged—

a

on the limited liability partnership (as a company) in respect of chargeable gains accruing on the disposal of any of its assets, and

b

on the members in respect of chargeable gains accruing on the disposal of any of their capital interests in the limited liability partnership,

it shall be assessed and charged on the limited liability partnership as if subsection (1) above had never applied in relation to it.

6

Neither the commencement of the application of subsection (1) above nor the cessation of its application in relation to a limited liability partnership shall be taken as giving rise to the disposal of any assets by it or any of its members.

169A Cessation of trade by limited liability partnership

1

This section applies where section 59A(1) ceases to apply to a limited liability partnership.

2

A member of the partnership who immediately before the time at which section 59A(1) ceases to apply holds an asset, or an interest in an asset, acquired by him—

a

on a disposal to members of a partnership, and

b

for a consideration which is treated as reduced under section 165(4)(b) or 260(3)(b),

shall be treated as if a chargeable gain equal to the amount of the reduction accrued to him immediately before that time.

; and

d

any incidental costs to A of making the actual disposal to C shall be deemed to be incidental costs to B of making the deemed disposal to C.

b

a chargeable gain accruing on the disposal of an asset used, and used only—

i

for the purposes of a trade carried on by the company wholly outside the United Kingdom, or

ii

for the purposes of the part carried on outside the United Kingdom of a trade carried on by the company partly within and partly outside the United Kingdom,

5A

Where—

a

an amount of tax is paid by a person in pursuance of subsection (2) above, and

b

an amount in respect of the chargeable gain is distributed (either by way of dividend or distribution of capital or on the dissolution of the company) before the end of the period specified in subsection (5B) below,

the amount of tax (so far as neither reimbursed by the company nor applied as a deduction under subsection (7) below) shall be applied for reducing or extinguishing any liability of that person to income tax, capital gains tax or corporation tax in respect of the distribution.

5B

The period referred to in subsection (5A)(b) above is the period of three years from—

a

the end of the period of account of the company in which the chargeable gain accrued, or

b

the end of the period of twelve months beginning with the date on which the chargeable gain accrued,

whichever is earlier.

In paragraph (a) above a “period of account” means a period for which the company makes up its accounts.

10B

A chargeable gain that would be treated as accruing to a person under subsection (2) above shall not be so treated if—

a

it would be so treated only if assets that are assets of a pension scheme were taken into account in ascertaining that person’s interest as a participator in the company, and

b

at the time the gain accrues a gain arising on a disposal of those assets would be exempt from tax by virtue of section 271(1)(b), (c), (d), (g) or (h) or (2).

In paragraph (a) above “assets of a pension scheme” means assets held for the purposes of a fund or scheme to which any of the provisions mentioned in paragraph (b) above applies.

and—

a

it is chargeable neither under Case I of Schedule D nor under Case VI of that Schedule in circumstances where by virtue of section 436, 439B or 441 profits are computed in accordance with the provisions of this Act applicable to Case I; or

b

if it is chargeable under Case I, or under Case VI in the circumstances described in paragraph (a) above, it is not involved in a UK tax avoidance scheme;

and paragraph 2B below has effect for the purposes of paragraph (b) above.

2B

1

This paragraph has effect for the purposes of paragraph 2(1A)(b) above.

2

No payment of dividend by a controlled foreign company for an accounting period shall be regarded as involved in a UK tax avoidance scheme by reason only that there is no charge to tax under section 747(4)(a) if the controlled foreign company pursues an acceptable distribution policy for that accounting period.

3

“UK tax avoidance scheme” means a scheme or arrangement the purpose, or one of the main purposes, of which is to achieve a reduction in United Kingdom tax.

4

A scheme or arrangement achieves a reduction in United Kingdom tax if, apart from the scheme or arrangement, any company—

a

would have been liable for any such tax or for a greater amount of any such tax; or

b

would not have been entitled to a relief from or repayment of any such tax or would have been entitled to a smaller relief from or repayment of any such tax.

5

In this paragraph—

• “arrangement” means an arrangement of any kind, whether in writing or not;

• “United Kingdom tax” means corporation tax or any tax chargeable as if it were corporation tax.

and—

a

it is chargeable neither under Case I of Schedule D nor under Case VI of that Schedule in circumstances where by virtue of section 436, 439B or 441 profits are computed in accordance with the provisions of this Act applicable to Case I; or

b

if it is chargeable under Case I, or under Case VI in the circumstances described in paragraph (a) above, it is not involved in a UK tax avoidance scheme;

and paragraph 4A below has effect for the purposes of paragraph (b) above.

4A

1

This paragraph has effect for the purposes of paragraph 4(1A)(b) above.

2

No payment to a company resident in the United Kingdom which represents the whole or part of a dividend paid by a controlled foreign company for an accounting period shall be regarded as involved in a UK tax avoidance scheme by reason only that—

a

there is no charge to tax under section 747(4)(a) if the controlled foreign company pursues an acceptable distribution policy for that accounting period, and

b

so much of the dividend as is represented by that payment will (if paragraph 4(1) above has effect) fall to be brought into account in determining whether the controlled foreign company has done so.

3

“UK tax avoidance scheme” means a scheme or arrangement the purpose, or one of the main purposes, of which is to achieve a reduction in United Kingdom tax.

4

A scheme or arrangement achieves a reduction in United Kingdom tax if, apart from the scheme or arrangement, any company—

a

would have been liable for any such tax or for a greater amount of any such tax; or

b

would not have been entitled to a relief from or repayment of any such tax or would have been entitled to a smaller relief from or repayment of any such tax.

5

In this paragraph—

• “arrangement” means an arrangement of any kind, whether in writing or not;

• “United Kingdom tax” means corporation tax or any tax chargeable as if it were corporation tax.

2A

The borrower is not entitled, by virtue of anything in Schedule 23A or any provision of regulations under that Schedule, or otherwise—

a

to any deduction in computing profits or gains for the purposes of income tax or corporation tax, or

b

to any deduction against total income or, as the case may be, total profits,

in respect of any such deemed requirement or payment as is provided for by subsection (2) above.

Where the borrower is a company, an amount may not be surrendered by way of group relief if a deduction in respect of it is prohibited by this subsection.

349A Exceptions to section 349 for payments between companies etc

1

The provisions specified in subsection (3) below (which require tax to be deducted on making certain payments) do not apply to a payment made by a company if, at the time the payment is made, the company reasonably believes that one of the conditions specified in section 349B is satisfied.

2

Subsection (1) above has effect subject to any directions under section 349C.

3

The provisions are—

• section 349(1) (certain annuities and other annual payments, and royalties and other sums paid for use of UK patents),

• section 349(2)(a) and (b) (UK interest),

• section 349(3A) (dividend or interest on securities issued by building societies), and

• section 524(3)(b) (which provides for section 349(1) to apply to proceeds of sale of UK patent rights).

4

References in subsection (3) above to any provision of section 349 do not include that provision as applied—

a

under section 777(9) (directions applying section 349(1) to certain payments to non-residents), or

b

by paragraph 4(2) of Schedule 23A (manufactured overseas dividends to be treated as annual payments within section 349).

5

References in this section to the company by which a payment is made do not include a company acting as trustee or agent for another person.

6

For the purposes of this section, a payment by a partnership is treated as made by a company if any member of the partnership is a company.

349B The conditions mentioned in section 349A(1)

1

The first of the conditions mentioned in section 349A(1) is that the person beneficially entitled to the income in respect of which the payment is made is—

a

a company resident in the United Kingdom, or

b

a partnership each member of which is a company resident in the United Kingdom.

2

The second of those conditions is that—

a

the person beneficially entitled to the income in respect of which the payment is made is a company not resident in the United Kingdom (“the non-resident company”),

b

the non-resident company carries on a trade in the United Kingdom through a branch or agency, and

c

the payment falls to be brought into account in computing the chargeable profits (within the meaning given by section 11(2)) of the non-resident company.

349C Directions disapplying section 349A(1)

1

The Board may give a direction to a company directing that section 349A(1) is not to apply in relation to any payment that—

a

is made by the company after the giving of the direction, and

b

is specified in the direction or is of a description so specified.

2

Such a direction shall not be given unless the Board have reasonable grounds for believing as respects each payment to which the direction relates that it is likely that neither of the conditions specified in section 349B will be satisfied in relation to the payment at the time the payment is made.

3

A direction under this section may be varied or revoked by a subsequent such direction.

4

In this section “company” includes a partnership of which any member is a company.

349D Section 349A(1): consequences of reasonable but incorrect belief

1

Where—

a

a payment is made by a company without an amount representing the income tax on the payment being deducted from the payment,

b

at the time the payment is made, the company reasonably believes that one of the conditions specified in section 349B is satisfied,

c

if the company did not so believe, tax would be deductible from the payment under section 349, and

d

neither of the conditions specified in section 349B is satisfied at the time the payment is made,

section 350 applies as if the payment were within section 349 (and Schedule 16 applies as if tax were deductible from the payment under section 349).

2

In this section “company” includes a partnership of which any member is a company.

4A

If—

a

a failure to comply with section 350(1) of, or Schedule 16 to, the principal Act arises from a person’s failure to deliver an account, or show the amount, of a payment, and

b

the payment is within subsection (4B) below,

subsection (1) above shall have effect as if for “£300” there were substituted “£3,000” and as if for “£60” there were substituted “£600”.

4B

A payment is within this subsection if—

a

the payment is made by a company without an amount representing the income tax on the payment being deducted from the payment,

b

at the time the payment is made, the company—

i

does not believe that either of the conditions specified in section 349B of the principal Act is satisfied, or

ii

where it believes that either of those conditions is satisfied, could not reasonably so believe,

c

the payment is one from which tax is deductible under section 349 of the principal Act unless the company reasonably believes that one of those conditions is satisfied, and

d

neither of those conditions is satisfied at the time the payment is made.

4C

In subsection (4B) above “company” includes a partnership of which any member is a company.

aa

the person beneficially entitled to the income in respect of which the payment is made is a company not resident in the United Kingdom (“the non-resident company”), the non-resident company carries on a trade in the United Kingdom through a branch or agency and the payment falls to be brought into account in computing the chargeable profits (within the meaning given by section 11(2)) of the non-resident company, or

7A

A company falls within this subsection if—

a

it is a 75 per cent subsidiary of any other company, or

b

arrangements of any kind (whether in writing or not) are in existence by virtue of which it could become such a subsidiary.

8AA

Section 13ZA applies for the interpretation of subsection (7) above.

13Z AInterpretation of section 13(7)

1

In determining for the purposes of section 13(7) whether one body corporate is a 51 per cent subsidiary of another, that other shall be treated as not being the owner of any share capital—

a

which it owns indirectly, and

b

which is owned directly by a body corporate for which a profit on the sale of the shares would be a trading receipt.

2

Notwithstanding that at any time a company (“the subsidiary company”) is a 51 per cent subsidiary of another company (“the parent company”) it shall not be treated at that time as such a subsidiary for the purposes of section 13(7) unless, additionally, at that time—

a

the parent company would be beneficially entitled to more than 50 per cent of any profits available for distribution to equity holders of the subsidiary company, and

b

the parent company would be beneficially entitled to more than 50 per cent of any assets of the subsidiary company available for distribution to its equity holders on a winding-up.

3

For the purposes of section 13(7) and this section—

a

“trading or holding company” means a trading company or a company the business of which consists wholly or mainly in the holding of shares or securities of trading companies that are its 90 per cent subsidiaries;

b

“trading company” means a company whose business consists wholly or mainly of the carrying on of a trade or trades;

c

a company is owned by a consortium if 75 per cent or more of the ordinary share capital of the company is beneficially owned between them by companies of which none—

i

beneficially owns less than 5 per cent of that capital,

ii

would be beneficially entitled to less than 5 per cent of any profits available for distribution to equity holders of the company, or

iii

would be beneficially entitled to less than 5 per cent of any assets of the company available for distribution to its equity holders on a winding up,

and those companies are called the members of the consortium.

4

Schedule 18 (equity holders and assets etc. available for distribution) applies for the purposes of subsections (2) and (3)(c) above as it applies for the purposes of section 413(7).

2C

Subsection (1) above shall apply to a repayment made by the Board as a result of a claim for relief under—

a

paragraph 2 of Schedule 1B to the Management Act (carry back of loss relief),

b

paragraph 3 of that Schedule (relief for fluctuating profits of farming etc.), or

c

Schedule 4A to this Act (relief for fluctuating profits of creative artists etc.),

as if it were a repayment falling within that subsection.

ab

if the repayment is a repayment as a result of a claim for relief under any of the provisions mentioned in subsection (2C) above, the relevant time is the 31st January next following the year that is the later year in relation to the claim;