Part 3Income tax, corporation tax and capital gains tax

Anti-avoidance

34Employee benefit contributions

(1)

Schedule 24 to FA 2003 (restriction on deductions for employee benefit contributions) is amended as follows.

(2)

In paragraph 1 (restriction of deductions), for sub-paragraphs (1) and (2) substitute—

“(1)

This Schedule applies if, in calculating for corporation tax purposes the profits of a person (“the employer”) for a period, a deduction would otherwise be allowable for the period in respect of employee benefit contributions made or to be made (but see paragraph 8).

(2)

For the purposes of this Schedule, an “employee benefit contribution” is made if, as a result of any act or omission—

(a)

property is held, or may be used, under an employee benefit scheme, or

(b)

there is an increase in the total value of property that is so held or may be so used (or a reduction in any liabilities under an employee benefit scheme).”

(3)

In paragraph 3, for “the third party” substitute “ a scheme manager ”.

(4)

In paragraph 4—

(a)

in sub-paragraphs (1) and (2), for “the third party” (in both places) substitute “ a scheme manager ”, and

(b)

in sub-paragraph (3), for “third party” substitute “ scheme manager ”.

(5)

In paragraph 5, for “the third party” (in both places) substitute “ a scheme manager ”.

(6)

In paragraph 9(1) (interpretation)—

(a)

after the definition of “relevant migrant member” insert—

““scheme manager” means a person who administers an employee benefit scheme (acting in that capacity);”, and

(b)

omit the definition of “the third party”.

(7)

Part 2 of ITTOIA 2005 (trading income) is amended as follows.

(8)

In section 38 (restriction of deductions for employee benefit contributions), for subsection (1) substitute—

“(1)

This section applies if, in calculating for income tax purposes the profits of a trade of a person (“the employer”) for a period, a deduction would otherwise be allowable for the period in respect of employee benefit contributions made or to be made (but see subsection (4)).”

(9)

In section 39 (making of “employee benefit contributions), for subsection (1) substitute—

“(1)

For the purposes of section 38, an “employee benefit contribution” is made if, as a result of any act or omission—

(a)

property is held, or may be used, under an employee benefit scheme, or

(b)

there is an increase in the total value of property that is so held or may be so used (or a reduction in any liabilities under an employee benefit scheme).”

(10)

In section 41 (timing and amount of certain benefits), for “the third party” (in both places) substitute “ a scheme manager ”.

(11)

In section 42 (provision or payment out of employee benefit contributions)—

(a)

in subsection (1), for “the third party”, in the first place, substitute “ a scheme manager ” and, in the second place, substitute “ the scheme manager ”,

(b)

in subsection (3), for “the third party”, in the first place, substitute “ a scheme manager ” and, in the second place, substitute “ the scheme manager ”, and

(c)

in subsection (5), for “third party” substitute “ scheme manager ”.

(12)

In section 44(1) (interpretation), for the definition of “the third party” substitute—

““scheme manager” means a person who administers an employee benefit scheme (acting in that capacity).”

(13)

The amendments made by this section have effect in relation to employee benefit contributions made on or after 21st March 2007.