Annex 1: Minor Changes in the Law Change 35: Trading income etc: combine pools payments rules: sections 138 and 978
This change combines sections 126 of FA 1990 and 121 of FA 1991.
It brings the income tax and corporation tax codes back into line.
Section 138 of this Act does not specify that payments in consequence of the 1990 reduction in pool betting duty must be made for the safety and comfort of football spectators, and that payments in consequence of the 1991 reduction in pool betting duty must be made to the Foundation for Sport and the Arts. Instead payments in consequence of any reduction in pool betting duty for either purpose will qualify.
Lord Justice Taylor’s report into the Hillsborough disaster, published on 18 January 1990, recommended that significant capital expenditure should be incurred to improve safety and comfort at football grounds. To facilitate this the rate of pool betting duty was reduced from 42.5% to 40% in FA 1990, in exchange for an agreement that the money saved by pools promoters would be given to the Football Trust 1990, which would use it to implement the Taylor recommendations.
The following year the government agreed to a further reduction of 2.5% in pool betting duty on condition that the money saved was paid to a charitable trust to be set up by the three main pools companies. The trust is called the Foundation for Sport and the Arts. For legal reasons connected with pool betting duty, the Foundation’s main purpose is the support of athletic sports and games, but up to one third of its funds may be used to promote the arts.
The objectives of sections 126 of FA 1990 and 121 of FA 1991 are to ensure that the money saved in pool betting duty can flow through to its intended purpose in full, without tax liabilities.
Because the source sections have very similar objectives and consequences, this Act combines them.
In principle a company could divert payments from one destination to the other and still obtain a deduction, but in practice (because the payments are made under agreements with the bodies concerned) this is not possible. Even if it were possible the payments would still be supporting the defined good causes.
Section 978 of this Act adopts the same approach to rewriting section 126(3) of FA 1990 and section 121(3) of FA 1991. The payments made are not treated as annual payments.
The payments covered by this change are allowed as trading deductions. And the payer does not have to deduct income tax from them.
This change is in taxpayers’ favour in principle. But is expected to have no practical effect as it is in line with generally accepted practice.