Citation and commencement

1. This Order may be cited as the Enactment of Extra-Statutory Concessions Order 2011 and comes into force on 1st April 2011.

Recovery of overpaid tax: special relief

2. —(1)Schedule 1AB to the Taxes Management Act 1970( 2 ) (recovery of overpaid tax etc ) is amended as follows.

(2) In paragraph 2(1), for “paragraph 4(5)” substitute “paragraphs 3A and 4(5)”.

(3) In paragraph 3, at the end insert—

“ (5) Sub-paragraph (1) is subject to paragraph 3A. ” .

(4) After paragraph 3 insert—

“ Determinations under section 28C: special rules

3A. —(1) This paragraph applies where—

(a) a determination has been made under section 28C of an amount that a person is liable to pay by way of income tax or capital gains tax, but the person believes the tax is not due or, if it has been paid, was not due,

(b) relief would be available under this Schedule but for the fact that—

(i) the claim falls within Case C (see paragraph 2(4)),

(ii) the claim falls within Case F(a) (see paragraph 2(7)(a)), or

(iii) more than 4 years have elapsed since the end of the relevant tax year (see paragraph 3(1)), and

(c) if the claim falls within Case F(a), the person was neither present nor legally represented during the enforcement proceedings in question.

(2) A claim under this Schedule for repayment or discharge of the amount may be made, and effect given to it, despite paragraph 2(4), paragraph 2(7)(a) or paragraph 3(1), as the case may be.

(3) But the Commissioners are not liable to give effect to a claim made in reliance on this paragraph unless conditions A, B and C are met.

(4) Condition A is that in the opinion of the Commissioners it would be unconscionable for the Commissioners to seek to recover the amount (or to withhold repayment of it, if it has already been paid).

(5) Condition B is that the person’s affairs (as respects matters concerning the Commissioners) are otherwise up to date or arrangements have been put in place, to the satisfaction of the Commissioners, to bring them up to date so far as possible.

(6) Condition C is that either—

(a) the person has not relied on this paragraph on a previous occasion (whether in respect of the same or a different determination or tax), or

(b) the person has done so, but in the exceptional circumstances of the case should be allowed to do so again on the present occasion.

(7) For the purposes of sub-paragraph (6)—

(a) a person has relied on this paragraph on a previous occasion if the person has made a claim (or a composite set of claims involving one or more determinations, taxes and tax years) in reliance on this paragraph on a previous occasion, and

(b) it does not matter whether that claim (or set of claims) succeeded.

(8) A claim made in reliance on this paragraph must include (in addition to anything required by Schedule 1A) such information and documentation as is reasonably required for the purpose of determining whether conditions A, B and C are met. ” .

3. —(1)Part 6 of Schedule 18 to the Finance Act 1998( 3 ) (excessive assessments or repayments etc) is amended as follows.

(2) In paragraph 51A(1), for “paragraph 51C(5)” substitute “paragraphs 51BA and 51C(5)”.

(3) In paragraph 51B, at the end insert—

“ (5) Sub-paragraph (1) is subject to paragraph 51BA. ” .

(4) After paragraph 51B insert—

“ Determinations under paragraphs 36 and 37: special rules

51BA. —(1) This paragraph applies where—

(a) a determination has been made under paragraph 36 or 37 of an amount that a person is liable to pay by way of tax, but the person believes the tax is not due or, if it has been paid, was not due,

(b) relief would be available under paragraph 51 but for the fact that—

(i) the claim falls within Case C (see paragraph 51A(4)),

(ii) the claim falls within Case F(a) (see paragraph 51A(7)(a)), or

(iii) more than 4 years have elapsed since the end of the relevant accounting period (see paragraph 51B(1)), and

(c) if the claim falls within Case F(a), the person was neither present nor legally represented during the enforcement proceedings in question.

(2) A claim under paragraph 51 for repayment or discharge of the amount may be made, and effect given to it, despite paragraph 51A(4), paragraph 51A(7)(a) or paragraph 51B(1), as the case may be.

(3) But the Commissioners for Her Majesty’s Revenue and Customs are not liable to give effect to a claim made in reliance on this paragraph unless conditions A, B and C are met.

(4) Condition A is that in the opinion of the Commissioners for Her Majesty’s Revenue and Customs it would be unconscionable for the Commissioners for Her Majesty’s Revenue and Customs to seek to recover the amount (or to withhold repayment of it, if it has already been paid).

(5) Condition B is that the person’s affairs (as respects matters concerning the Commissioners for Her Majesty’s Revenue and Customs) are otherwise up to date or arrangements have been put in place, to the satisfaction of the Commissioners for Her Majesty’s Revenue and Customs, to bring them up to date so far as possible.

(6) Condition C is that either—

(a) the person has not relied on this paragraph on a previous occasion (whether or not in respect of the same determination), or

(b) the person has done so, but in the exceptional circumstances of the case should be allowed to do so again on the present occasion.

(7) For the purposes of sub-paragraph (6)—

(a) a person has relied on this paragraph on a previous occasion if the person has made a claim (or a composite set of claims involving one or more determinations and accounting periods) in reliance on this paragraph on a previous occasion, and

(b) it does not matter whether that claim (or set of claims) succeeded.

(8) A claim made in reliance on this paragraph must include (in addition to anything required by Schedule 1A to the Taxes Management Act 1970) such information and documentation as is reasonably required for the purpose of determining whether conditions A, B and C are met. ” .

4. —(1) In the following provisions (inserted by articles 2 and 3), references to reliance “on this paragraph” include reliance before the coming into force of this Order on the existing HMRC concession—

(a) paragraph 3A(6) and (7) of Schedule 1AB to the Taxes Management Act 1970, and

(b) paragraph 51BA(6) and (7) of Schedule 18 to the Finance Act 1998.

(2) “The existing HMRC concession” means the existing HMRC concession (within the meaning of section 160 of the Finance Act 2008) to which effect is given by articles 2 and 3.

5. —(1) The amendments made by articles 2 and 3 have effect in relation to determinations made before the date on which this Order comes into force (as in relation to determinations made on or after that date).

(2) But they do not apply to a determination made before that date if a claim for relief in respect of it has already been refused before that date.

(3) “Determination” means a determination under section 28C of the Taxes Management Act 1970( 4 ) or paragraph 36 or 37 of Schedule 18 to the Finance Act 1998.

Life assurance premium relief after divorce

6. —(1) In paragraph 1 of Schedule 14 to the Income and Corporation Taxes Act 1988( 5 ) (spouses and civil partners), for sub-paragraph (1) substitute—

“ (1) In section 266—

(a) references to an individual’s spouse include any person who—

(i) was that individual’s spouse at the time the insurance or contract was made, or

(ii) became that individual’s spouse after the insurance or contract was made,

unless the marriage was dissolved before 6th April 1979, and

(b) references to an individual’s civil partner include any person who—

(i) was that individual’s civil partner at the time the insurance or contract was made, or

(ii) became that individual’s civil partner after the insurance or contract was made. ” .

(2) After that sub-paragraph insert—

“ (1A) But an individual is entitled to relief by virtue of sub-paragraph (1)(a)(ii) or (b)(ii) only in respect of premiums payable after the date on which the person in question became that individual’s spouse or civil partner. ” .

(3) The amendments made by this article have effect in relation to any premium paid on or after 1st April 2011.

Life assurance premium relief: repayment supplements

7. —(1)Section 824 of the Income and Corporation Taxes Act 1988( 6 ) (repayment supplements: individuals and others) is amended as follows.

(2) After subsection (2C)( 7 ) insert—

“ (2D) Subsection (1) shall apply—

(a) to a repayment made as mentioned in section 270(4) (repayment of excess of life assurance premium relief clawed back over amount of liability) ( 8 ) as if the repayment were a repayment of income tax paid for the tax year in which the event concerned happened; and

(b) to a payment made under paragraph 6(1) of Schedule 14 (payment where entitlement to life assurance premium relief has not been given by deduction) as if the payment were a repayment of income tax paid for the tax year in which the entitlement to relief arose. ” .

(3) In subsection (3), after paragraph (ac)( 9 ) insert—

“ (ad) if the repayment is a payment falling within subsection (2D)(b), the relevant time is 31 January next following the end of the tax year in which the entitlement to relief arose; ” .

8. In Part 2 of Schedule 54 to the Finance Act 2009( 10 ) (repayment interest: special provision as to repayment interest start date), after paragraph 9C( 11 ) insert—

“ Payments in connection with life assurance premium relief

9D. In the case of a payment made under paragraph 6(1) of Schedule 14 to ICTA (payment where entitlement to life assurance premium relief has not been given by deduction), the repayment interest start date is 31 January next following the end of the tax year in which the entitlement to relief arose. ” .

9. —(1) The amendments made by article 7 have effect in relation to any repayment or (as the case may be) payment made by HMRC on or after 1st April 2011.

(2) The amendment made by article 8 has effect in relation to any payment made by HMRC on or after 1st April 2011.

Certain employee legal costs paid by employer not taxed

10. —(1)The Income Tax (Earnings and Pensions) Act 2003( 12 ) is amended as follows.

(2) In section 401(2) (application of Chapter 3 of Part 6), for “413” substitute “413A”.

(3) After section 413( 13 ) insert—

“ 413A Exception for payment of certain legal costs

(1) This Chapter does not apply to a payment which meets conditions A and B.

(2) Condition A is that the payment meets the whole or part of legal costs incurred by the employee exclusively in connection with the termination of the employee’s employment.

(3) Condition B is that either—

(a) the payment is made pursuant to an order of a court or tribunal, or

(b) the termination of the employee’s employment results in a compromise agreement between the employer and the employee and —

(i) the compromise agreement provides for the payment to be made by the employer, and

(ii) the payment is made directly to the employee’s lawyer.

(4) In this section—

“compromise agreement” means an agreement that satisfies the conditions regulating compromise agreements under the Employment Rights Act 1996 (see section 203(3)) or the Employment Rights (Northern Ireland) Order 1996 (see article 245(3));

“lawyer” has the same meaning as “qualified lawyer” in section 203(4) of the Employment Rights Act 1996 or article 245(4) of the Employment Rights (Northern Ireland) Order 1996;

“legal costs” means fees payable for the services and disbursements of a lawyer. ” .

(4) The amendments made by this article have effect in relation to payments made on or after 6th April 2011.

Wear and tear allowance

11. —(1)The Income Tax (Trading and Other Income) Act 2005( 14 ) is amended as follows.

(2) After section 308 (furnished lettings) insert—

“ Furnished accommodation: wear and tear allowance

308A Wear and tear allowance election

(1) Where—

(a) a person (“P”) carries on a property business in a tax year which consists of or includes a furnished letting, and

(b) a dwelling-house that is subject to the letting is eligible in relation to P at any time in the year,

P may make an election (a “wear and tear allowance election”) in relation to the business for the year.

(2) A wear and tear allowance election for a tax year must be made on or before the first anniversary of the normal self-assessment filing date for the tax year.

(3) In this section and sections 308B and 308C, “furnished letting” means a furnished letting as defined in section 308 but does not include a commercial letting of furnished holiday accommodation (within the meaning of Chapter 6).

(4) See—

section 308B for the meaning of “eligible” in relation to a dwelling-house, and

section 308C for the effect of a wear and tear allowance election.

308B Meaning of “eligible” in relation to a dwelling-house

(1) A dwelling-house is “eligible” at any time in relation to a person (“P”) who carries on a property business in a tax year if, at that time—

(a) the dwelling-house is subject to a furnished letting comprised in the business,

(b) the dwelling-house contains sufficient furniture, furnishings and equipment for normal residential use, and

(c) P is responsible for the state of affairs mentioned in paragraph (b).

(2) P is so responsible if—

(a) any of the furniture, furnishings and equipment contained in the dwelling-house at the time mentioned in subsection (1) is provided by P,

(b) that furniture, furnishings and equipment, together with any furniture, furnishings and equipment in the dwelling-house at that time provided by a superior landlord of P, is sufficient for normal residential use, and

(c) the conditions in paragraphs (a) and (b) are not met in relation to a superior landlord of P.

(3) References in this section to a superior landlord of P are to any person who—

(a) has an interest in the dwelling-house that is superior to that of P, and

(b) carries on a property business in the tax year that consists of or includes a furnished letting to which the dwelling-house is subject.

308C Effect of wear and tear allowance election

(1) This section applies where a person (“P”) makes a wear and tear allowance election that has effect in relation to a property business (“the property business”) for a tax year (“the tax year”).

(2) In calculating the profits of the property business for the tax year—

(a) a wear and tear allowance is allowed as a deduction, and

(b) no deduction is allowed—

(i) whether under section 68 or otherwise, for expenses incurred on replacing or altering any tool (within the meaning of subsection (3) of that section), so far as the expenses are within subsection (6), or

(ii) whether under section 308 or otherwise, for expenses incurred in connection with the provision of furniture, so far as the expenses are within subsection (6).

(3) The amount of the wear and tear allowance is 10% of the relevant rental amount.

(4) In subsection (3) “the relevant rental amount” means—

(a) the sum of the amounts brought into account as receipts by P in calculating the profits of the property business, so far as the receipts are within subsection (6), less

(b) the sum of any amounts brought into account as relevant expenses by P in calculating the profits of the property business, so far as the expenses are within subsection (6).

(5) In subsection (4)(b) “relevant expenses” means expenses in relation to utilities, council tax or anything else the cost of which is, in the case of a furnished letting, normally borne by the lessee.

(6) Receipts or expenses are within this subsection so far as they are attributable to a dwelling-house that is subject to a furnished letting comprised in the property business, but disregarding any amounts that are so attributable in respect of a time at which the dwelling-house is not eligible in relation to P.

(7) Receipts and expenses are to be attributed for the purposes of subsection (6) on a just and reasonable basis.

Furnished accommodation: rent-a-room relief ” .

(3) In section 327 (separate profit calculations), in subsection (2)( 15 ), at the end of paragraph (b) insert—

“ , or

(c) a wear and tear allowance is allowed in relation to the business under section 308C of this Act. ” .

12. —(1)The Corporation Tax Act 2009( 16 ) is amended as follows.

(2) After section 248 (furnished lettings) insert—

“ Furnished accommodation: wear and tear allowance

248A Wear and tear allowance: election

(1) Where—

(a) a company (“C”) carries on a property business in an accounting period which consists of or includes a furnished letting, and

(b) a dwelling-house that is subject to the letting is eligible in relation to C at any time in the period,

C may make an election (a “wear and tear allowance election”) in relation to the business for the period.

(2) A wear and tear allowance election for an accounting period must be made within the period of two years beginning at the end of the accounting period.

(3) In this section and sections 248B and 248C, “furnished letting” means a furnished letting as defined in section 248 but does not include a commercial letting of furnished holiday accommodation (within the meaning of Chapter 6).

(4) See—

section 248B for the meaning of “eligible” in relation to a dwelling-house, and

section 248C for the effect of a wear and tear allowance election.

248B Meaning of “eligible” in relation to a dwelling-house

(1) A dwelling-house is “eligible” at any time in relation to a company (“C”) that carries on a property business in an accounting period if, at that time—

(a) the dwelling-house is subject to a furnished letting comprised in the business,

(b) the dwelling-house contains sufficient furniture, furnishings and equipment for normal residential use, and

(c) C is responsible for the state of affairs mentioned in paragraph (b).

(2) C is so responsible if—

(a) any of the furniture, furnishings and equipment contained in the dwelling-house at the time mentioned in subsection (1) is provided by C,

(b) that furniture, furnishings and equipment, together with any furniture, furnishings and equipment in the dwelling-house at that time provided by a superior landlord of C, is sufficient for normal residential use, and

(c) the conditions in paragraphs (a) and (b) are not met in relation to a superior landlord of C.

(3) References in this section to a superior landlord of C are to any person who—

(a) has an interest in the dwelling-house that is superior to that of C, and

(b) carries on a property business in the accounting period that consists of or includes a furnished letting to which the dwelling-house is subject.

248C Effect of wear and tear allowance election

(1) This section applies where a company (“C”) makes a wear and tear allowance election that has effect in relation to a property business (“the property business”) for an accounting period (“the accounting period”).

(2) In calculating the profits of the property business for the accounting period—

(a) a wear and tear allowance is allowed as a deduction, and

(b) no deduction is allowed—

(i) whether under section 68 or otherwise, for expenses incurred on replacing or altering any tool (within the meaning of subsection (3) of that section), so far as the expenses are within subsection (6), or

(ii) whether under section 248 or otherwise, for expenses incurred in connection with the provision of furniture, so far as the expenses are within subsection (6).

(3) The amount of the wear and tear allowance is 10% of the relevant rental amount.

(4) In subsection (3) “the relevant rental amount” means—

(a) the sum of the amounts brought into account as receipts by C in calculating the profits of the property business so far as the receipts are within subsection (6), less

(b) the sum of any amounts brought into account as relevant expenses by C in calculating the profits of the property business so far as the expenses are within subsection (6).

(5) In subsection (4)(b) “relevant expenses” means expenses in relation to utilities, council tax or anything else the cost of which is, in the case of a furnished letting, normally borne by the lessee.

(6) Receipts or expenses are within this subsection so far as they are attributable to a dwelling-house that is subject to a furnished letting comprised in the property business, but disregarding any amounts that are so attributable in respect of a time at which the dwelling-house is not eligible in relation to C.

(7) Receipts and expenses are to be attributed for the purposes of subsection (6) on a just and reasonable basis. ” .

(3) In section 269 (separate profit calculations), in subsection (2)( 17 ), at the end of paragraph (b) insert—

“ , or

(c) a wear and tear allowance is allowed in relation to the business under section 248C of this Act. ” .

13. —(1) The amendments made by article 11 have effect for the tax year 2011-12 and subsequent tax years.

(2) The amendments made by article 12 have effect for accounting periods beginning on or after 1st April 2011.

Fund raising events

14. —(1) In section 529(2) of the Income Tax Act 2007( 18 ) (exemption for profits of a trade carried on by charitable trust which arise from VAT-exempt events) for “applied to the purposes of the charitable trust only” substitute “either applied for charitable purposes or transferred to another charity”.

(2) The amendment made by this article has effect in relation to profits applied or transferred on or after 6th April 2011.

Qualifying life assurance policies

15. —(1) In Schedule 15 to the Income and Corporation Taxes Act 1988( 19 ) (qualifying policies), after paragraph 20( 20 ) insert—

“ (viii) Policy reinstated after non-payment of premium

20ZA. —(1) This paragraph applies to a qualifying policy (“the original policy”) if conditions A to D are satisfied.

(2) Condition A is that one or more premiums due under the original policy are not paid on or before the date on which they become due.

(3) Condition B is that the original policy, in accordance with its terms, is treated as having lapsed or is converted into a paid-up policy—

(a) by reason only of the failure to pay that premium or those premiums, and

(b) within the period of 12 months beginning with the day following the day on which the earliest unpaid premium becomes due.

(4) Condition C is that the original policy—

(a) is reinstated on the same terms, or

(b) is replaced by another policy in the same terms (“the replacement policy”),

on or before the thirtieth day after the first anniversary of the day following the day on which the earliest unpaid premium becomes due.

(5) Condition D is that all unpaid premiums due under the original policy are paid on or before the date on which the policy is reinstated or replaced.

(6) Where condition C is satisfied by virtue of sub-paragraph (4)(b) the replacement policy is to be treated for the purposes of this Schedule as if it were the original policy.

(7) The policy is to be treated for the purposes of this Schedule as if the premiums payable under it had been paid on their due dates. ” .

(2) The amendment made by this article has effect in any case where the policy is reinstated or (as the case may be) replaced on or after 1st April 2011.