Finance Act 2002

For the year 2003-04 the amount specified in section 257(1) of the Taxes Act 1988 (personal allowance for those aged under 65) shall be taken to be £4,615.

Accordingly, section 257C(1) of that Act (indexation), so far as it relates to the amount so specified, does not apply for that year.

For the year 2003-04—

Accordingly, section 257C(1), so far as it relates to the amounts specified in section 257(2) and (3), does not apply for that year (except as it applies for the purposes of subsection (1)(b) above).

In Part 5 of the Taxes Act 1988 (provisions relating to the Schedule E charge), section 197AB (exclusion of tax charge in respect of support by employer for certain transport services) is amended as follows.

In subsection (2) (main definitions), in the definition of “qualifying journey” after “means” insert “the whole or part of”.

For subsection (3) (conditions of exemption) substitute—.

“local bus service” means a local service as defined by section 2 of the Transport Act 1985;

After that subsection insert—.

This section has effect for the year 2002-03 and subsequent years of assessment.

In Part 5 of the Taxes Act 1988 (provisions relating to the Schedule E charge), section 158 (benefits in kind: car fuel) is amended as follows.

For subsections (2) to (2B) (calculation of cash equivalent) substitute—.

In subsection (4) (power to substitute different amounts by Treasury order), for “a different Table for any of the Tables in subsection (2) above” substitute “a different amount for that specified in subsection (2) above”.

For subsection (5) (proportionate reduction where car unavailable for part of the year) substitute—.

After subsection (6) (nil cash equivalent where fuel provided on terms that employee meets cost of private use or fuel is made available only for business travel) insert—.

At the end of the section add—.

After that subsection add—.

This section has effect for the year 2003-04 and subsequent years of assessment.

In section 155ZB of the Taxes Act 1988 (power to provide for exemption of minor benefits), after subsection (2) add—.

This section has effect for the year 2002-03 and subsequent years of assessment.

Schedule 6 to this Act (which makes a number of minor changes to the Schedule E charge to income tax) has effect.

The amendments made by that Schedule have effect for the year 2002-03 and subsequent years of assessment.

Schedule 12 to the Finance Act 2000 (c. 17) (provision of services through an intermediary) is amended as follows.

In Part 2 (the deemed Schedule E payment), after paragraph 7 insert—.

In Part 3 (supplementary provisions), in paragraph 12(2) (date of deemed payment where intermediary is a company), after “relevant events” insert—.

In that Part, in paragraph 18(3) (restriction on expenses deductible in calculating profits of partnership intermediary), for paragraph (a) substitute—.

This section has effect for the year 2002-03 and subsequent years of assessment.

Schedule 8 to the Finance Act 2000 (c. 17) (employee share ownership plans) is amended as follows.

In paragraph 94 (PAYE: shares ceasing to be subject to plan), for “, subsection (3) of section 203F of the Taxes Act 1988 (PAYE: tradeable assets)” substitute—.

In paragraph 95 (PAYE: shares ceasing to be subject to plan), in sub-paragraph (6), for the words from “a company” to “to whom” substitute “the company which employs the participant in relevant employment at the time when the shares cease to be subject to the plan (or, if the participant is not employed in relevant employment at that time, the company which last employed him in relevant employment before that time), provided that that company is one to whom”.

In paragraph 96 (PAYE: capital receipts), in sub-paragraph (2), for the words from “the company” to “to whom” substitute “the company which employs the participant in relevant employment at the time the trustees receive the sum of money referred to in sub-paragraph (1) (or, if the participant is not employed in relevant employment at that time, the company which last employed him in relevant employment before that time), provided that that company is one to whom”.

A company controlled by a jointly owned company may not—

In paragraph 128(2) (meaning of “readily convertible asset”), after “this Schedule” insert “(and that section in its application in relation to shares which cease to be subject to a plan)”.

This section has effect for the year 2002-03 and subsequent years of assessment.

However, nothing in subsection (5) prevents a company continuing to be a participating company in a group plan in which it was a participating company immediately before the day on which this Act is passed (and for the purposes of this subsection “participating company” and “group plan” have the same meaning as in Schedule 8 to the Finance Act 2000).

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In section 829 of the Taxes Act 1988 (application of Income Tax Acts to public departments), after subsection (2) insert—.

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This section has effect in relation to deductions made under section 559 of the Taxes Act 1988 on or after 6th April 2002. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

This section amends—

In subsection (3)(b) of section 200, and in paragraph (b) of the definition of “EU travel expenses” in subsection (3) of section 200ZA, after “of another member State” insert “or of a candidate country”.

After subsection (3) of each section insert—.

This section applies in relation to sums paid on or after 1st April 2002.

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In Schedule 7B to that Act (modification of Act in relation to overseas life insurance companies), immediately before paragraph 8 insert—.

In section 97(1) of the Inheritance Tax Act 1984 (c. 51) (transfers within group, etc)—

This section applies—

After section 179A of the Taxation of Chargeable Gains Act 1992 (c. 12) (inserted by section 42 above) insert—.

After Schedule 7AA to the 1992 Act insert the Schedule 7AB set out in Schedule 7 to this Act.

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This section applies—

In Chapter 1 of Part 6 of the Taxation of Chargeable Gains Act 1992 (c. 12) (provisions relating to chargeable gains of companies), after section 192 insert—.

Schedule 8 to this Act (exemptions for disposals by companies with substantial shareholding) has effect. In that Schedule— Part 1 contains Schedule 7AC to be inserted after Schedule 7AB to the Taxation of Chargeable Gains Act 1992 (c. 12) (inserted by Schedule 7 to this Act); and Part 2 contains consequential amendments.

This section and Schedule 8 to this Act apply in relation to disposals on or after 1st April 2002.

Paragraph 38 of the Schedule 7AC inserted by that Schedule (degrouping: time when deemed sale and reacquisition treated as taking place) has effect where the time of degrouping or relevant time (as defined for the purposes of that paragraph) is on or after that date.

The amendment made by paragraph 2 of Schedule 8 to this Act has effect where the company in question ceases to be a member of the group in question on or after that date.

Schedule 9 to this Act (chargeable gains: share exchanges and company reconstructions) has effect.

In that Schedule— Part 1 provides for the replacement of sections 135 and 136 of the Taxation of Chargeable Gains Act 1992; Part 2 makes consequential amendments; and Part 3 provides for commencement.

In the table in section 2A(5) of the Taxation of Chargeable Gains Act 1992 (calculation of taper relief), for the first two columns (under the heading “Gains on disposals of business assets”) substitute— Number of whole years in qualifying holding period Percentage of gain chargeable 1 50 2 or more 25

This section applies to disposals on or after 6th April 2002.

In section 72 of the Finance Act 1991 (c. 31) (use of trading losses against chargeable gains), in subsection (4) (which has the effect that the maximum amount of trading loss that may be so used is calculated by reference to the amount of chargeable gains after taper relief) for “disregarding section 3(1)” substitute “disregarding sections 2A (taper relief) and 3(1) (annual exempt amount)”.

The amendment in subsection (1) has effect in relation to claims under that section in respect of trading losses sustained in the year 2004-05 or subsequent years of assessment, subject to the following provisions.

A person making a claim under section 72 of that Act in respect of a trading loss sustained in the year 2002-03 may elect that, for the purposes of the claim, the amendment made by subsection (1) above shall have effect—

A person making a claim under that section in respect of a trading loss sustained in the year 2003-04 may elect that, for the purposes of the claim, the amendment made by subsection (1) above shall have effect—

An election under subsection (3) or (4) must be made— and must specify the year or years of assessment in relation to the chargeable gains of which it is made.

After section 162 of the Taxation of Chargeable Gains Act 1992 (c. 12) (roll-over relief on transfer of business) insert—.

This section applies in relation to a transfer of a business on or after 6th April 2002.

After section 105 of the Taxation of Chargeable Gains Act 1992 (c. 12) (disposal on or before day of acquisition of shares and other unidentified assets) insert—.

The amendment made by subsection (1) has effect in relation to shares acquired by an individual on or after 6th April 2002.

For this purpose— shall be treated as acquired by the individual on the day on which they were issued.

In subsection (3)(a), the references to Chapter 3 of Part 7 and section 304 of the Taxes Act 1988 shall be read as references to those provisions as they apply to shares issued after 31st December 1993 (enterprise investment scheme).

In section 62(7) of the Taxation of Chargeable Gains Act 1992 (c. 12) (election to treat subsequent variation of dispositions taking effect on death as if effected by deceased) for the words from “unless” to the end of the subsection substitute “ unless the instrument contains a statement by the persons making the instrument to the effect that they intend the subsection to apply to the variation. ”.

This section applies in relation to instruments made on or after 1st August 2002.

Schedule 12 to this Act has effect for accounting periods ending on or after 1st April 2002.

In that Schedule— Part 1 makes provision about tax relief for large companies on expenditure on research and development; Part 2 makes provision about tax relief for small companies on expenditure on research and development that is sub-contracted to them; Parts 3 to 6 make provision about the form of the relief, special provision about insurance companies and supplementary and general provision.

Schedule 13 to this Act (which makes provision for tax relief for companies' expenditure on vaccine research etc) has effect.

Schedule 14 to this Act (which makes provision consequential on Schedule 13) has effect.

This section applies where, for humanitarian purposes, a company makes a gift from trading stock of medical supplies, or medical equipment, for human use.

For the purposes of the Tax Acts, no amount shall be required to be brought into account as a trading receipt of the company in consequence of the making of the gift.

Any costs of transportation, delivery or distribution incurred by the company in making the gift may be deducted in computing for the purposes of corporation tax the profits of the company’s trade for the accounting period in which the costs are incurred.

In any case where— the company shall in respect of that period be charged to corporation tax under Case I of Schedule D or, if the company is not chargeable to corporation tax under that Case for that period, under Case VI of Schedule D on an amount equal to the amount of that benefit.

Section 839 of the Taxes Act 1988 (connected persons) applies for the purposes of subsection (4).

The Treasury may by order provide that this section is not to have effect in relation to medical supplies or medical equipment of such descriptions as may be specified in the order.

This section has effect in relation to gifts made on or after 1 April 2002.

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Schedule 17 to this Act (which makes provision consequential on the introduction of community investment tax relief) has effect.

Schedules 16 and 17 shall come into force on such day as the Treasury may by order appoint.

On and after that day—

Schedule 18 to this Act (relief for community amateur sports clubs) has effect.

Parts 1, 5 and 6 of that Schedule shall be deemed to have come into force on 1st April 2002. Accordingly, an application under that Schedule by a club to be registered as a community amateur sports club may be granted with effect from that date or any subsequent date before the passing of this Act.

Parts 2 and 4 of that Schedule have effect in relation to accounting periods ending on or after 1st April 2002.

Part 3 of that Schedule has effect in relation to gifts made on or after 6th April 2002.

In section 578A of the Taxes Act (expenditure on car hire) after subsection (2) (cars to which section 578A applies) insert—.

The amendment made by this section has effect in relation to expenditure—

In section 46 of the Capital Allowances Act 2001 (c. 2) (general exclusions affecting first-year qualifying expenditure) after subsection (4) (which is inserted by Schedule 19) insert—.

The amendment made by this section has effect in relation to expenditure incurred on or after 17th April 2002.

Schedule 21 to this Act shall have effect.

In that Schedule—

The amendments made by that Schedule have effect in relation to expenditure incurred on or after 17th April 2002.

The provisions of Schedule 22 to this Act have effect as to the adjustment or adjustments to be made for tax purposes where—

A “change of basis” means—

A “relevant change of accounting approach” means a change of accounting principle or practice that, in accordance with generally accepted accounting practice, gives rise to a prior period adjustment.

A “tax adjustment” means any such adjustment as is mentioned in section 42(1) of the Finance Act 1998 (c. 36) (adjustments required or authorised by law in computing profits for tax purposes).

A “change in the tax adjustments applied”—

The provisions of this section and Schedule 22 to this Act have effect in place of the provisions of section 44 of, and Schedule 6 to, the Finance Act 1998 (c. 36).

This section applies in relation to the computation in accordance with the provisions applicable for the purposes of section 35 of the Corporation Tax Act 2009 (charge on trade profits) of the profits of the insurance business, other than life assurance business, of—

For periods of account to which this section applies nothing in— prevents the company from computing the profits of that business on a realisation basis rather than a mark to market basis. A “realisation basis” means not recognising a profit or loss on an asset until it is realised, and a “mark to market basis” means bringing assets into account in each period of account at a fair value.

Subject to subsection (4), this section applies in relation to any period of account that—

This section does not apply if—

In this section—

Where section 65 (postponement of change to mark to market in certain cases) applies in relation to a period of account, the company may elect that it shall continue to apply in relation to subsequent periods of account as regards assets held by it on 1st January 2002. Any such election must be made within twelve months after the end of the accounting period of the company current on that date.

An insurance company that carries on both long-term business and business other than long-term business may make an election under this section limited to assets held by the company otherwise than in the company’s long-term insurance fund.

For the purpose of determining whether an election under this section applies to an asset in a case where— assets realised shall be identified with assets acquired on the same basis as that used by the company for accounting purposes, unless the basis used by the company is “last in, first out” in which case assets realised shall be identified with assets acquired on or before 1st January 2002 in priority to assets acquired after that day.

Where a company has made an election under this section and—

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In section 81 of the Finance Act 1999 (c. 16) (acquisitions disregarded under insurance companies concession), at the end add—.

The provisions of this section come into force as follows—

In section 577A(1) of the Taxes Act 1988 (no deduction to be made for expenditure incurred in making a payment the making of which constitutes a criminal offence)—

This section applies in relation to expenditure incurred on or after 1st April 2002.

After section 168 of the Finance Act 1994 (c. 9) insert—.

Subject to subsection (3), this section has effect for accounting periods ending on or after 26th July 2001 in relation to any qualifying contract to which a company is party, unless the company has ceased to be a party to the contract before that date.

Where such an accounting period begins before 26th July 2001, there shall not be included in the amounts, which by virtue of section 168A(1) of the Finance Act 1994 (c. 9) (as it has effect subject to section 168A(2) (maximum amount)) are not to be brought into account, such part of those amounts as, on a just and reasonable apportionment, is attributable to the part of the accounting period which falls before 26th July 2001.

For the purposes of subsection (3), section 168A(3) shall have effect for the purposes of determining the maximum amount in section 168A(2) as if the references in section 168A(3) to amount A and amount B were references to such part of amount A or amount B as, on a just and reasonable apportionment, is attributable to the part of the accounting period which falls after 25th July 2001.

In section 153 of the Finance Act 1994 (c. 9) (qualifying payments), for subsections (4) and (5) (premiums and discounts) substitute—.

This section has effect for accounting periods ending on or after 26th July 2001 in relation to any currency contract to which a company is party, unless the company has ceased to be a party to the contract before that date.

After section 88 of the Finance Act 1996 (c. 8) insert—.

This section has effect on and after the relevant day.

Where an authorised mark to market basis of accounting— the asset representing the relationship shall be treated for the purposes of Chapter 2 of Part 4 of the Finance Act 1996 as having been acquired by the company for the asset’s fair value (as determined for the purposes of section 88A of that Act) on the relevant day.

For the purposes of this section “the relevant day” is—

Section 92 of the Finance Act 1996 (c. 8) (convertible securities etc) is amended as follows.

Amend subsection (1) (the assets to which section 92 applies) in accordance with subsections (3) to (9).

In paragraph (b) (which requires the asset to carry rights to acquire any shares in a company) for “any shares in a company” substitute “shares in a company”.

After paragraph (b) insert—.

In paragraph (c) (extent to which shares may be acquired under that provision not to be determined using specified cash value) for “that provision”, where first occurring, substitute “any such provision”.

In paragraph (d) (asset not to be a relevant discounted security within the meaning of Schedule 13 to the Finance Act 1996) after “Act” insert “or an excluded indexed security within the meaning of that Schedule”.

After paragraph (d) insert—.

In paragraph (e) (more than negligible likelihood of the right to acquire shares being exercised to significant extent)—

After paragraph (e) insert—.

After subsection (1) insert—.

After subsection (1C) insert—.

In consequence of the amendments made by this section and sections 73 and 74, the sidenote becomes “Convertible securities etc: creditor relationships”.

The amendments made by this section do not have effect for the purpose of determining, in relation to such part of an accounting period as falls before 26th July 2001, whether an asset is, or has ceased to be, an asset to which section 92 of the Finance Act 1996 (c. 8) applies.

Subsection (15) has effect where—

Where this subsection has effect, the asset shall be taken to have ceased immediately before 26th July 2001 to be an asset to which section 92 of the Finance Act 1996 (c. 8) applies and, accordingly, any deemed disposal and re-acquisition under subsection (7) of that section shall be treated as having taken place immediately before that date.

Subject to subsections (13) to (15), the amendments made by this section have effect for accounting periods ending on or after 26th July 2001 in relation to any asset representing a creditor relationship of a company, unless the creditor relationship in question is one to which the company ceased to be a party before that date.

In section 92 of the Finance Act 1996 (convertible securities etc) after subsection (1D) (which is inserted by section 72) insert—.

The amendments made by this section do not have effect for the purpose of determining, in relation to such part of an accounting period as falls before 19th December 2001, whether an asset is, or has ceased to be, an asset to which section 92 of the Finance Act 1996 applies.

Subsection (4) has effect where—

Where this subsection has effect, the asset shall be taken to have ceased immediately before 19th December 2001 to be an asset to which section 92 of the Finance Act 1996 applies and, accordingly, any deemed disposal and re-acquisition under subsection (7) of that section shall be treated as having taken place immediately before that date.

Subject to subsections (2) to (4), the amendments made by this section have effect for accounting periods ending on or after 19th December 2001 in relation to any asset representing a creditor relationship of a company—

The first condition is that, during any period before 19th December 2001 when the creditor company was holding the asset, there was an accounting period in which there was no connection between the creditor company and the issuing company.

The second condition is that immediately before 19th December 2001—

Section 87(3) of the Finance Act 1996 (c. 8) (connection between a company and another person for an accounting period) applies for the purposes of subsection (6).

In its application for the purposes of subsection (7), section 838 of the Taxes Act 1988 (meaning of “subsidiaries” for the purposes of the Tax Acts) has effect as if in subsection (1)(b) of that section—

After section 92 of the Finance Act 1996 insert—.

The amendments made by this section have effect—

Section 93 of the Finance Act 1996 (c. 8) (relationships linked to the value of chargeable assets) is amended as follows.

In subsection (1) (application of section and exclusion of cases where dealing in loan relationships is part of a trade)—

In subsection (10) (meaning of chargeable asset) for the words from “if” to the end substitute—the asset is—.

Subsection (11) (assumptions applying to determine if disposal is chargeable gain for the purposes of subsection (10)) shall cease to have effect.

After subsection (12) insert—.

Subsection (13) (which makes provision in respect of certain indices which, in consequence of the amendment made by subsection (3) above, cannot be indices of chargeable assets) shall cease to have effect.

At the end of the section add—.

The amendments made by this section do not have effect for the purpose of determining, in relation to such part of an accounting period as falls before 26th July 2001, whether a loan relationship is, or has ceased to be, a loan relationship to which section 93 of the Finance Act 1996 (c. 8) applies.

Subject to subsection (8), the amendments made by this section have effect for accounting periods ending on or after 26th July 2001 in relation to any loan relationship of a company, unless the loan relationship in question is one to which the company ceased to be a party before that date.

After section 93 of the Finance Act 1996 insert—.

The amendment made by this section has effect for accounting periods ending on or after 26th July 2001 in relation to any loan relationship of a company, unless the loan relationship in question is one to which the company ceased to be a party before that date.

After section 93A of the Finance Act 1996 (c. 8) (which is inserted by section 76) insert—.

The amendment made by this section does not have effect in relation to a loan relationship which, before 26th July 2001, ceased to be a loan relationship to which section 93 of the Finance Act 1996 (c. 8) (as it has effect by virtue of section 75(8) above) applies.

Subject to subsection (2), the amendment made by this section has effect for accounting periods ending on or after 26th July 2001 in relation to any loan relationship of a company, unless the loan relationship in question is one to which the company ceased to be a party before that date.

Schedule 5AA to the Taxes Act 1988 (guaranteed returns on transactions in futures and options) is amended as follows.

This Schedule also applies to a transaction if it is one of the disposals of futures or options to which section 93A of the Finance Act 1996 (loan relationships linked to the value of chargeable assets designed to produce guaranteed returns when taken together with disposals of options and futures) refers.

Where this paragraph has effect in relation to one of the associated transactions to which section 93A of the Finance Act 1996 refers, sub-paragraph (4) shall have effect as if for paragraph (a) of that sub-paragraph there were substituted—.

Where this paragraph has effect in relation to one of the associated transactions to which section 93A of the Finance Act 1996 refers—

Where this paragraph has effect in relation to one of the associated transactions to which section 93A of the Finance Act 1996 refers—

This section has effect for accounting periods ending on or after 26th July 2001 in relation to profits and gains realised, and losses sustained, on or after that date.

The following provisions shall cease to have effect—

Schedule 23 to this Act (which makes provision in relation to exchange gains and losses from loan relationships etc) shall have effect.

The amendments made by subsection (1) and by Parts 1 and 2 of Schedule 23 have effect in relation to accounting periods beginning on or after 1st October 2002.

Schedule 24 to this Act (which makes provision in relation to corporation tax and currency) shall have effect.

This section has effect in relation to accounting periods beginning on or after 1st October 2002.

The Treasury may by regulations make such transitional or consequential provision, or such savings (with or without modifications), as they may from time to time consider appropriate in consequence of, or otherwise in connection with, any provision of section 79 or 80 or Schedule 23 or 24 (or any repeal consequential on any such provision).

The power conferred by subsection (1) includes power—

The provision that may be made by virtue of subsection (1) or (2) includes provision for or in connection with bringing amounts into account—

Nothing in any provision of Schedule 23 or 24 shall prejudice the operation of this section.

Nothing in this section or in Schedule 23 or 24 limits the operation of section 16 or 17 of the Interpretation Act 1978 (c. 30) (effect of repeals).

Schedule 25 to this Act (which makes provision in relation to loan relationships) shall have effect.

The amendments made by Parts 1 and 2 of that Schedule have effect in relation to accounting periods beginning on or after 1st October 2002.

The following shall have effect—

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This section has effect in relation to accounting periods beginning on or after 1st October 2002.

Subsection (3) is subject to any specific provision of Schedule 28.

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Schedule 30 to this Act contains consequential amendments.

In Chapter 3 of Part 6 of the Taxation of Chargeable Gains Act 1992 (c. 12) (insurance), after section 211 insert—.

After Schedule 7AC to that Act (inserted by Part 1 of Schedule 8 to this Act) insert the Schedule 7AD set out in Schedule 31 to this Act.

Schedule 32 to this Act (which makes provision about the taxation of Lloyd’s underwriters) has effect.

The amendments in that Schedule have effect in relation to quota share contracts (within the meaning of section 178 of the Finance Act 1993 (c. 34) or section 225 of the Finance Act 1994) entered into on or after 17th April 2002.

Chapter 2 of Part 13 of the Taxes Act 1988 (life policies, life annuities and capital redemption policies) is amended in accordance with the following provisions of this section.

Section 541 (computation of gain in case of life policy or, as applied by section 545, capital redemption policy) is amended as follows.

In subsection (1)(c) (amounts and values to be brought into account in computing gain on an assignment) before “of any previously assigned share in the rights conferred by the policy” insert “, subject to subsection (3A) below,”.

After subsection (3) (assignments between connected persons) insert—.

Section 543 (life annuity contracts: computation of gain) is amended as follows.

In subsection (1)(b) (amounts and values to be brought into account in computing gain on an assignment) before “of any previously assigned share in the rights conferred by the contract” insert “, subject to subsection (2A) below,”.

After subsection (2) (which applies section 541(3): assignments between connected persons) insert—.

Section 546B (special provision in respect of certain section 546 excesses) is amended as follows.

This subsection is subject to subsection (1A) below.

After subsection (1) insert—.

The amendments made by subsections (2) to (7) have effect in relation to any assignment on or after 6th April 2002 of the rights conferred by a policy or contract.

The amendments made by subsections (8) to (10) have effect and shall be taken always to have had effect, in relation to any policy, in relation to any year (as defined in section 546(4) of the Taxes Act 1988) beginning on or after 6th April 2001.

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The following amendments are consequential on that above—

This section applies on and after the date on which this Act is passed in relation to arrangements made before that date (as well as in relation to arrangements made on or after that date).

In section 748 of the Taxes Act 1988 (controlled foreign companies: cases where no apportionment falls to be made under section 747(3)) after subsection (5) insert—.

After section 748 of the Taxes Act 1988 insert—.

This section has effect in relation to accounting periods of controlled foreign companies beginning on or after the day on which this Act is passed.

In this section “accounting period” and “controlled foreign company” have the same meaning as in Chapter 4 of Part 17 of the Taxes Act 1988.

In section 747 of the Taxes Act 1988 (imputation of chargeable profits and creditable tax of controlled foreign companies), after subsection (1A) insert—.

Subsection (1)—

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In section 59E of the Taxes Management Act 1970 (c. 9) (further provision as to when corporation tax is due and payable) in subsection (11) (extension of references in the section to corporation tax) after paragraph (b) add—.

section 501A(1) of that Act (supplementary charge in respect of ring fence trades), and

In paragraph 8 of that Schedule (calculation of tax payable) after paragraph number 1 of the third step insert—.

Regulation 3 of the Instalment Payment Regulations (large companies) is amended as follows.

In paragraph (1) (which, subject to paragraphs (2) and (3), defines a large company) for “paragraphs (2) and (3),” substitute “ paragraphs (2) to (3A), ”.

After paragraph (3) insert—.

The amendment by this section of any provision contained in regulations shall not be taken to have prejudiced any power to make further regulations revoking or amending that provision, whether in relation to the same or any other chargeable periods.

In this section “the Instalment Payment Regulations” means the Corporation Tax (Instalment Payments) Regulations 1998 (S.I. 1998/3175).

In the case of a straddling period, that is to say, an accounting period which begins before 17th April 2002 and ends on or after that date—

In the case of a straddling period, the Instalment Payment Regulations shall apply separately—

In their application by virtue of paragraph (a) of subsection (2), the Instalment Payment Regulations shall have effect in relation to the tax mentioned in that paragraph as if—

Any reference in the Instalment Payment Regulations to the total liability of a company shall accordingly be construed—

For the purposes of the Instalment Payment Regulations—

In this section “the Instalment Payment Regulations” has the same meaning as in section 92.

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In section 98 of the Taxes Management Act 1970 (c. 9) (special returns, etc), in subsection (4B)—

In that section, for subsection (4C) substitute—.

The amendments made by this section apply for the purposes of payments made on or after 1st October 2002.

Section 349 of the Taxes Act 1988 (payment of annual interest etc) is amended as follows.

In subsection (3) (cases where obligation to make interest payments net of tax does not apply), at the end insertor.

After subsection (4) insert—.

This section applies in relation to the payment of interest on or after 1st October 2002.

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In section 98 of the Taxes Management Act 1970 (c. 9) (special returns etc)—

This section applies in relation to payments made on or after 1st October 2002.

In section 587B of the Taxes Act 1988 (gifts of shares and securities to charities) in subsection (9), in the definition of “qualifying investment”, omit the word “and” immediately preceding paragraph (d) and at the end of that paragraph insert; and.

After that subsection insert—.

After subsection (11) of that section insert—.

In consequence of the amendments made by subsections (1) to (3), the sidenote of section 587B becomes “Gifts of shares, securities and real property to charities etc”.

After section 587B of the Taxes Act 1988 insert—.

This section has effect in relation to any disposal of a qualifying interest in land to a charity where the disposal is made—

Subsection (9E)(a) of section 587B of the Taxes Act 1988 has effect until the appointed day as if for “the interest of the owner” there were substituted “the estate or interest of the proprietor of the dominium utile (or, in the case of property other than feudal property, of the owner)”.

For the purposes of subsection (7) “the appointed day” means such day as may be appointed by the Scottish Ministers under section 71 of the Abolition of Feudal Tenure etc (Scotland) Act 2000 for the purposes of the Act.

A person (“the donor”) who makes a gift that is a qualifying donation within section 25 of the Finance Act 1990 (c. 29) (gift aid) may elect to be treated for the purposes of that section as if the gift were a qualifying donation made by him in the previous year of assessment.

Any such election must be made by notice in writing to an officer of the Inland Revenue—

No such election may be made unless in the previous year the grossed up amount of the gift would, if made in that year, be payable out of profits or gains brought into charge to income tax or capital gains tax.

The effect of an election under this section is that the provisions of section 25(6) to (9A) of the Finance Act 1990 (c. 29) have effect in relation to the donor as if the gift were a qualifying donation made in the previous year of assessment.

An election under this section does not affect the position of the recipient of the gift. The reference in section 25(10) of the Finance Act 1990 to the relevant year of assessment shall be construed accordingly as a reference to the year of assessment in which the gift is actually made.

This section has effect in relation to gifts made on or after 6th April 2003.

Relief under the following provisions is available only for a film that is genuinely intended for theatrical release—

For the purposes of subsection (1)—

Subject to the following provisions, this section applies to any film— unless an application for certification was received by the Secretary of State before 17th April 2002. References in this subsection to certification are to certification of the master version of the film under Schedule 1 to the Films Act 1985 (c. 21) as a qualifying film, tape or disc.

This section does not apply to a film completed on or after 17th April 2002 if—

For the purposes of subsection (4) “drama” does not include— but it includes a documentary involving the dramatic reconstruction of events if the dramatic content forms 50% or more of the running time.

For the purposes of this section—

Section 48 of the Finance (No. 2) Act 1997 (c. 58) (relief for expenditure on production or acquisition of qualifying film with total production expenditure of £15 million or less) is amended as follows.

In subsection (6) (meaning of “total production expenditure”), for “subject to subsection (7)” substitute “subject to subsections (6A) and (7)”.

After that subsection insert—.

This section applies to films completed on or after 17th April 2002. For this purpose a film is completed at the time when it is first in a form in which it can reasonably be regarded as ready for copies of it to be made and distributed for presentation to the general public.

Relief under section 48 of the Finance (No. 2) Act 1997 (relief for expenditure on production or acquisition of film with total production expenditure of £15 million or less) in respect of acquisition expenditure is available only in relation to an acquisition— and not in relation to any subsequent acquisition (or in relation to any acquisition within paragraph (a) or (b) other than the first).

For this purpose—

This section applies to acquisition expenditure incurred on or after 30th June 2002. For this purpose when expenditure is incurred shall be determined as for the purposes of section 48 of the Finance (No. 2) Act 1997 (c. 58) (see subsection (9) of that section).

In section 209 of the Taxes Act 1988 (meaning of “distribution”) after subsection (3A) insert—.

After that section insert—.

This section has effect in relation to interest and other distributions out of assets of a company in respect of securities of the company where the interest is paid, or the distribution is made, on or after 17th April 2002.

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“period of account” has the meaning given by section 832(1) of the Taxes Act;

In the following provisions for “normal accounting practice” or “normal accountancy practice”, wherever occurring, substitute “ generally accepted accounting practice ”

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The amendments made by subsections (1) to (3) above have effect for the purposes of provisions of this Act using the expressions mentioned (including provisions inserted by amendment in other enactments) whenever those provisions are expressed to have effect or to come, or to have come, into force. This is without prejudice to the general effect of those amendments.

Schedule 13 to the Finance Act 1996 (discounted securities: income tax provisions) is amended as follows.

After paragraph 3 (meaning of “relevant discounted security”) insert—.

After paragraph 9 (other transactions deemed to be at market value) insert—.

Schedule 13 to the Finance Act 1996 (c. 8) shall have effect, and be deemed always to have had effect, with the amendment made by subsection (2).

The amendment made by subsection (3) has effect in relation to transfers on and after 26th March 2002.

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In Schedule 12 to the Finance Act 1988 (c. 39) (building societies: change of status)—

In section 100 of the Taxes Act 1988 (valuation of trading stock at discontinuance of trade), after subsection (2) insert—.

Subsection (1) applies where the sale or transfer in question takes place after the passing of this Act.

Schedule 12 to the Finance (No. 2) Act 1992 (c. 48) is amended is follows.

In paragraph 3 (taxation of certain receipts under Case VI of Schedule D) omit paragraph (c) of sub-paragraph (3) (which has become unnecessary because no interest or dividends any longer fall within it).

This paragraph and paragraph 4 below have effect for the purposes of corporation tax notwithstanding anything in section 80(5) of the Finance Act 1996 (matters to be brought into account in the case of loan relationships only under Chapter 2 of Part 4 of that Act).

In paragraph 4 (relief from tax) omit sub-paragraph (3) (which provides for deductions from sums excluded from paragraph 3(2) by paragraph 3(3)(c)).

The amendments made by this section have effect in relation to accounting periods beginning on or after 1st October 2002.

Schedule 23A to the Taxes Act 1988 (manufactured dividends and interest) is amended as follows.

In paragraph 2A (manufactured dividends on UK equities: deductibility of manufactured payment in case of manufacturer) at the end of sub-paragraph (1) (amount paid to be deductible against total income) insert “, subject to sub-paragraph (1A) below”.

An amount shall be allowable under sub-paragraph (1) above as a deduction against total income only to the extent that— but the amount allowable by virtue of paragraph (c) above is limited to so much of the chargeable gain as does not exceed the manufactured dividend paid as a result of the transaction. Where an amount is allowable under sub-paragraph (1) above by reference to the whole or any part of— (the “utilised portion” of the dividend, other payment or chargeable gain) no other amount shall be allowable under sub-paragraph (1) above by reference to all or any of the utilised portion of the dividend, other payment or chargeable gain.

In paragraph 3 (manufactured interest on UK securities) in sub-paragraph (2) (tax treatment of interest manufacturer) in paragraph (c) (amount allowable as a deduction) at the end add, but only to the extent that—.

An amount of manufactured interest falls within this sub-paragraph if and to the extent that the interest manufacturer— Where an amount is allowable under sub-paragraph (2)(c) above by reference to the whole or any part of— (the “utilised portion” of the interest, sum or other payment) no other amount shall be allowable under sub-paragraph (2)(c) above by reference to all or any of the utilised portion of the interest, sum or other payment.

The amendments made by subsections (2) and (3) have effect in relation to manufactured dividends paid on or after 17th April 2002.

The amendments made by subsections (4) and (5) have effect in relation to manufactured interest paid on or after 17th April 2002.

Schedule 33 to this Act has effect.

In that Schedule— Part 1 enables regulations to make provision for cases where a venture capital trust is being wound up, Part 2 enables regulations to make provision for cases where there is a merger of two or more venture capital trusts, Part 3 enables regulations to make provision about the time allowed for venture capital trusts to invest money raised from issues (other than initial issues) of ordinary share capital, and Part 4 contains supplementary provisions.