Other measures announced

Pension Protection Fund

The Pension Protection Fund (PPF) was formed as a by-product of the Pensions Act 2004 and 'tax-privileged' treatment will apply to it from 6 April 2005. The PPF will assume responsibility for defined benefit occupational pension schemes, and other pension schemes with defined benefit elements, whose sponsoring employers have become insolvent. It will pay compensation to the members of the schemes in lieu of the benefits that they would have received.

The PPF will not be a pension scheme, but will be taxed on the same basis as tax-privileged pension schemes. Up to 5 April 2006, the PPF will be treated as if it were an approved occupational pension scheme. After that date, it will benefit from the tax treatment of a registered pension scheme. Payment of the statutory levies to the PPF by a sponsoring employer will qualify for a tax deduction.

Alternative finance arrangements

Current tax law contains no specific rules to deal with finance arrangements that are structured so they do not involve the payment or receipt of interest. Individuals who wish to use such arrangements to finance the purchase of a property are therefore placed at a relative disadvantage.

The new provision will provide a level playing field for tax between equivalent financial products whether or not these involve the payment or receipt of interest, and will apply to arrangements entered into on or after 6 April 2005. The new provision will include application of the rules for deduction of tax at source.

There will also be changes to the Stamp Duty Land Tax regime, which will apply from the date of Royal Assent to the Finance Bill.

The changes will facilitate the use of alternative financial products including those developed to be Shari'a compliant.

Computer and bicycle exemptions

The benefit in kind rules on employer-provided computers and bicycles are being changed with effect from 6 April 2005. No tax charge will arise where employees acquire such assets, previously borrowed from their employer, at market value.

National Minimum Wage

It has previously been announced that the rate with effect from October 2005 will be Ł5.05 per hour. The Chancellor advised that this will increase to Ł5.35 per hour from October 2006.

Gift Aid and admissions

Currently, certain heritage and conservation charities can offer free admission to donors in return for a donation to allow them to view the work of the charity, without the admission being considered a benefit for Gift Aid purposes.

From 6 April 2006, the scope of the exemption will be broadened to apply where any type of charity grants to the public the right to pay to view property preserved, maintained, kept or created by a charity in relation to their charitable work. If the visitor makes a donation, rather than paying the admission charge, there will be two circumstances where Gift Aid may apply.

Firstly, where a right of admission given in return for the gift is valid for a period of at least one year for all times that the general public can gain admission.
Secondly, where the right of admission is for less than one year, the gift must be at least 10% more than the amount that any member of the public would have to pay to gain the same right of admission.

Where the new rules are met by the charity, the whole of the gift will be eligible for Gift Aid. This measure will prevent charities simply reclassifying admission fees as donations on which Gift Aid can be claimed.

Research & development (R&D)

It has been announced that at least 2.5% of all public sector extra-mural R&D contracts should be placed with small and medium sized enterprises. Guidance has been issued on claiming R&D tax credits for claimants and their professional advisors. A consultation will take place this year on the impact of the R&D tax credits regime.

Landlord's energy saving allowance (LESA)

From 7 April 2005, LESA will be extended to solid wall insulation of let residential property. The maximum amount which may be claimed under LESA is limited to Ł1,500 per building.