Finance (No. 2) Act 1997
Every company which, on 2nd July 1997, was benefitting from a windfall from the flotation of an undertaking whose privatisation involved the imposition of economic regulation shall be charged with a tax (to be known as the “windfall tax”) on the amount of that windfall.
Windfall tax shall be charged at the rate of 23 per cent.
Schedule 1 to this Act (which sets out how to quantify the windfall from which a company was benefitting on 2nd July 1997) shall have effect.
For the purposes of this Part a company in existence on 2nd July 1997 was benefitting on that date from a windfall from the flotation of an undertaking whose privatisation involved the imposition of economic regulation if—
that company, or a company of which it was on that date a demerged successor, had before that date been privatised by means of a flotation;
there had, before that flotation, been a statutory transfer of property, rights and liabilities from a public corporation to the floated company or to a company which, at the time of the flotation, was a subsidiary undertaking of the floated company; and
at the time of the flotation, the floated company was carrying on an undertaking whose privatisation involved the imposition of economic regulation.
For the purposes of this Part a company was privatised by means of a flotation if—
an offer of shares in that company was at any time made to the public in the United Kingdom;
the shares which were the subject-matter of the offer were publicly-owned at the time of the offer;
the offer was or included an offer of shares for disposal at a fixed price; and
shares in that company were first admitted to listing on the Official List of the Stock Exchange in pursuance of an application made in connection with the offer.
In this Part references, in relation to a company privatised by means of a flotation, to the time of the company’s flotation are references to the time when shares in the floated company were first admitted to listing on the Official List of the Stock Exchange.
For the purposes of this Part a company in existence on 2nd July 1997 (“the relevant company”) was on that date a demerged successor of a company privatised by means of a flotation if—
after the flotation of the floated company but before 2nd July 1997, there had been a statutory transfer of property, rights and liabilities from the floated company to a company (“the transferee company”) which was a subsidiary undertaking of the floated company at the time of the transfer;
the transferee company was not a subsidiary undertaking of the floated company on 2nd July 1997 but was, on that date, a subsidiary undertaking of the relevant company; and
before 2nd July 1997 shares in the relevant company had been admitted to listing on the Official List of the Stock Exchange in pursuance of an application made in connection with the transaction, or series of transactions, by virtue of which the transferee company ceased to be a subsidiary undertaking of the floated company.
For the purposes of this section a company was, at the time of its flotation, carrying on an undertaking whose privatisation involved the imposition of economic regulation if that company, or a company which at that time was a subsidiary undertaking of that company, was at that time—
a public telecommunications operator, within the meaning of the Telecommunications Act 1984;
an airport operator in relation to an airport subject to economic regulation under Part IV of the Airports Act 1986;
the holder of an authorisation granted under section 7 of the Gas Act 1986, as originally enacted (public gas suppliers);
the holder of an appointment under section 11 of the Water Act 1989 as the water undertaker for any area of England and Wales;
the holder of a licence granted under section 6 of the Electricity Act 1989 or Article 10 of the Electricity (Northern Ireland) Order 1992 (licences authorising generation, transmission and supply of electricity); or
a company authorised by a licence under section 8 of the Railways Act 1993 to be the operator of a railway asset.
In subsection (5) above “airport operator” has the same meaning as in the Airports Act 1986.
The windfall tax shall be under the care and management of the Commissioners of Inland Revenue.
Schedule 2 to this Act (which makes provision with respect to the management and collection of the windfall tax) shall have effect.
Subject to paragraph 19(5) of Schedule 8 to the Taxes Act 1988 (which is the provision about profit-related pay schemes that is amended by section 4 below), nothing in this Act or the Tax Acts shall have the effect of allowing or requiring any amount of windfall tax to be deducted in computing income, profits or losses for any of the purposes of the Tax Acts.
In paragraph 19 of Schedule 8 to the Taxes Act 1988 (ascertainment of profits for the purposes of profit-related pay schemes)—
in sub-paragraph (5)(b), after “1985” there shall be inserted “ or section 3(3) of the Finance (No. 2) Act 1997 ”; and
after paragraph (ff) of sub-paragraph (6) there shall be inserted the following paragraph—.
Subsection (1) above has effect in relation to the preparation, for the purposes of any scheme, of a profit and loss account for any period ending on or after 2nd July 1997.
Subsection (1) above shall not have effect in relation to an existing scheme unless, before the end of the period of six months beginning with the day on which this Act is passed, the scheme is altered, with effect for all periods ending on or after 2nd July 1997, to take account of that subsection.
Provision made, in compliance with paragraph 20(1) of Schedule 8 to the Taxes Act 1988 (consistency in preparation of accounts), by any existing scheme that is altered to take account of subsection (1) above shall not prevent a profit and loss account from being prepared in accordance with the alteration.
An alteration of an existing scheme to take account of subsection (1) above shall be treated as being within section 177B of the Taxes Act 1988 (alterations which are registrable and which, when registered, cannot give rise to the Board’s power of cancellation).
In this section “existing scheme” means a scheme which at any time in the period beginning with 2nd July 1997 and ending immediately before the day on which this Act is passed was a registered scheme under Chapter III of Part V of the Taxes Act 1988.
The preceding provisions of this section shall cease to have effect, in accordance with the notes to Part VI(3) of Schedule 18 to the Finance Act 1997, as if they were included in the repeal of Schedule 8 to the Taxes Act 1988.
In this Part—
“company” means a company within the meaning of the Companies Act 1985 or the Companies (Northern Ireland) Order 1986;
“enactment” means an enactment contained in a public general Act or any provision of Northern Ireland legislation;
“company” means a company within the meaning of the Companies Act 1985 or the Companies (Northern Ireland) Order 1986;
a price subsequently fixed by a Minister of the Crown in a case in which the amount of a first instalment of the price was fixed by the offer;
“fixed price”, in relation to any offer of publicly-owned shares in a company, means—
“transferring enactment” means an enactment under which property, rights and liabilities of a person specified in the enactment became, by virtue of that enactment, the property, rights or liabilities of a company nominated under that enactment.
had been established by or in accordance with the provisions of any enactment; and
a nominee for a Minister of the Crown or for the Treasury;
in relation to a company so formed and registered, means a subsidiary undertaking within the meaning of Part VIII of the Companies (Northern Ireland) Order 1986.
contains provision for the division of property, rights and liabilities between different persons, or for the transfer of property, rights and liabilities to a company; and
Section 1.
Subject to paragraph 7 below, where a company was benefitting on 2nd July 1997 from a windfall from the flotation of an undertaking whose privatisation involved the imposition of economic regulation, the amount of that windfall shall be taken for the purposes of this Part to be the excess (if any) of the amount specified in sub-paragraph (2)(a) below over the amount specified in sub-paragraph (2)(b) below. Those amounts are the following amounts (determined in accordance with paragraphs 2 to 6 below), that is to say—
Subject to paragraph 4 below, the value in profit-making terms of the disposal made on the occasion of a company’s flotation is the amount produced by multiplying the average annual profit for the company’s initial period by the applicable price-to-earnings ratio. For the purposes of this paragraph the average annual profit for a company’s initial period is the amount produced by the following formula— Where— A is the average annual profit for the company’s initial period; P is the amount, ascertained in accordance with paragraph 5 below, of the total profits for the company’s initial period; and D is the number of days in the company’s initial period. For the purposes of this paragraph the applicable price-to-earnings ratio is 9.
Subject to paragraph 4 below, the value which for privatisation purposes was put on the disposal made on the occasion of a company’s flotation is the amount produced by multiplying the institutional price by the number of shares comprised in the ordinary share capital of the company at the time of its flotation. In this paragraph “the institutional price”, in relation to a company, means the highest fixed price per share at which publicly-owned shares in the company were offered for disposal on the occasion of the company’s flotation. Subject to sub-paragraph (4) below, where publicly-owned shares in a company were offered for disposal in accordance with any arrangements for the payment of the price in two or more instalments, the price per share at which those shares were offered shall be ascertained by aggregating the instalments. Where the arrangements under which any publicly-owned shares in a company were offered for disposal provided for any discount on the payment of the whole or any part of the price for those shares, that discount shall be disregarded for the purposes of this paragraph in determining the price per share at which those shares were offered.
For the purposes of this Schedule, where the disposal percentage in the case of any company was 85 per cent. or less— shall each be taken to be the disposal percentage of the amount which, under paragraph 2 or 3 above, would be the amount of that value but for this paragraph. For the purposes of this paragraph “the disposal percentage”, in relation to any company, means the percentage which expresses (in terms of nominal value) how much of the ordinary share capital of the company at the time of its flotation was represented by the publicly-owned shares in the company offered for disposal on the occasion of the company’s flotation.
For the purposes of paragraph 2 above the amount of the total profits for a company’s initial period is the sum of the amounts falling within sub-paragraph (2) below. Subject to sub-paragraph (3) and paragraph 6(3) below, those amounts are every amount which, for a financial year of the company ending in or at the end of its initial period, is shown in the relevant accounts for that year— Where— the amount shown as that profit in those accounts shall be deemed to be the amount (as ascertained from that information) which would have been so shown if that historical cost accounting method had been used. In this paragraph references, in relation to any financial year of a company, to the relevant accounts are references to any such accounts for that year as have been or are delivered to the registrar under section 242 of the Companies Act 1985 and consist— Subject to sub-paragraph (6) below, references in this paragraph to the amount shown in any accounts as the profit for any financial year are references to the amount of the profit (if any) for that year which is set out in the profit and loss account comprised in those accounts as the item which is, or is the equivalent of, the final item of the statutory format which for that year was used for that profit and loss account. Where any amount shown in any accounts is less than it would have been if no provision or other deduction had been made— this Schedule shall have effect as if the amount shown were the amount it would have been if that provision or deduction had not been made. Nothing in this paragraph shall, in the case of any company— and any power of the Board under that Schedule to make an assessment shall include power to make an assessment on the basis that accounts will be delivered to the registrar showing such amounts as may, to the best of their judgement, be determined by the Board. Subject to sub-paragraph (9) below, this paragraph shall have effect in relation to any time at which the Companies Act 1985 had effect without the amendments made by the Companies Act 1989— In relation to a company formed and registered in Northern Ireland, this paragraph shall have effect as if the references in sub-paragraphs (2) and (4) above to sections 226, 227 and 242 of the Companies Act 1985 were references, respectively, to Articles 234, 235 and 250 of the Companies (Northern Ireland) Order 1986. In this paragraph—
In this Schedule “initial period”, in relation to a company privatised by means of a flotation, means (subject to sub-paragraph (2) below) the period which— Where the initial period of a company privatised by means of a flotation would (but for this sub-paragraph) include any time on or after 1st April 1997, sub-paragraph (1) above shall not apply and the initial period of that company shall be taken, instead, to be the period which— Where— the amount which for that year is shown as mentioned in paragraph 5(2) above shall be included in the sums added together for the purposes of paragraph 5(1) above to the extent only that that amount is attributable, on an apportionment made in accordance with the following provisions of this paragraph, to the part of that year falling within the company’s initial period. Except in a case where sub-paragraph (5) below applies, an apportionment for the purposes of sub-paragraph (3) above shall be made on a time basis according to the respective lengths of— Where the circumstances of a particular case are such that— the apportionment shall be made, instead, on the alternative basis. For the purposes of this paragraph an apportionment in the case of any company of the amount shown for any financial year as a profit for that year is made on the alternative basis where it is made according to how much of that profit accrued in each of the two parts of that financial year that are mentioned in sub-paragraph (4) above.
This paragraph applies where— Where this paragraph applies— In this paragraph “the appropriate fraction” means the following fraction— Where— P is the amount produced by multiplying the number of shares comprised at the end of the relevant day in the ordinary share capital of the predecessor company by the market price on that day of an ordinary share in that company; and S is the amount produced by multiplying the number of shares comprised at the end of the relevant day in the ordinary share capital of the demerged successor by the market price on that day of an ordinary share in the demerged successor. For the purposes of this paragraph references to the market price of shares on any day are references to the sum of— In this paragraph “the relevant day” means the day on which shares in the demerged successor were first listed on the Official List of the Stock Exchange.
In this Schedule “financial year”, in relation to a company, means (subject to sub-paragraph (2) below)— Sub-paragraph (1) above does not apply to a company formed and registered in Northern Ireland; and in relation to such a company, references in this Schedule to a financial year are references to a financial year within the meaning of Part VIII of the Companies (Northern Ireland) Order 1986. In this Schedule references, in relation to a company privatised by means of a flotation, to the shares offered for disposal on the occasion of the company’s flotation are references to the following shares in that company, that is to say— References in this Schedule to an offer for the disposal of shares in a company include references to any offer to transfer or confer an immediate or contingent right to or interest in any such shares, whether or not for a consideration; and (subject to sub-paragraph (5) below) references to the shares that are the subject-matter of such an offer shall be construed accordingly. For the purposes of sub-paragraph (3) above where— shares which (apart from this sub-paragraph) would fall to be treated as the subject-matter of the offer by virtue only of that provision shall be treated as the subject-matter of the offer to the extent only that persons did in fact become entitled to them before 2nd July 1997 as a result of having satisfied the conditions in question. In this Schedule a reference, in relation to any time, to the ordinary share capital of a company is a reference to the following, taken together, that is to say—
Section 3.
The Board may by notice require any company which in their opinion is or may be a chargeable company to deliver to the Board a return complying with this paragraph. A company which has been required under this paragraph to deliver a return to the Board shall do so— A return delivered to the Board under this paragraph must— Those matters are— A return delivered to the Board under this paragraph— Where— that amount shall be taken, except in so far as any other amount is assessed or otherwise determined under the following provisions of this Schedule, to be the amount of windfall tax with which that company is charged. Where— that notice shall have effect on and after the day on which this Act is passed as if it were a notice given on that day in exercise of the power conferred by sub-paragraph (1) above.
If a chargeable company has not, before 1st December 1997, either— that company shall be liable to a penalty of an amount not exceeding the amount of the windfall tax with which it is charged. A company which— shall be liable to the penalties set out in sub-paragraph (3) below. Those penalties are— In sub-paragraph (3) above “the relevant time”, in relation to the delivery of a return, means the time by which that return should under paragraph 1(2) above have been delivered.
The amount of windfall tax with which a chargeable company is charged shall be paid by that company in two instalments as follows— The Board, if requested to do so, shall give a receipt for any windfall tax paid. The application by this Schedule of any enactment referring to the time at which an amount of tax becomes due and payable shall have effect, in relation to an amount of windfall tax, as if it referred to the time by which that amount is required to be paid under this paragraph.
Subject to the following provisions of this Schedule, the amount of windfall tax with which a company is charged may be assessed on that company by the Board. An assessment of the amount of windfall tax with which a company is charged may be made whether or not any amount has been paid by that company in respect of that tax when the assessment is made. Subject to sub-paragraph (4) below, where— the Board shall make an assessment in accordance with the return. The Board shall not be required to make an assessment under sub-paragraph (3) above in the case of a company whose return shows that it is not charged with windfall tax. Where the Board make an assessment under this paragraph in a case in which the assessment is not one which the Board are required to make under sub-paragraph (3) above in accordance with a return, the Board’s assessment shall be made to the best of their judgement.
If the Board discover that any company which— has not been assessed to as much windfall tax as it should have been, they may make an assessment or further assessment of the amount which, in their opinion, is windfall tax with which that company is charged but to which it has not been assessed. Where— that amount may be assessed by the Board, and recovered under this Schedule from the company to which it was repaid, as if it were an amount of windfall tax which that company is liable to pay. Where the amount of any assessment to windfall tax is reduced, the company assessed shall not for the purposes of this paragraph be treated, at any time after the reduction, as having been already assessed to the amount of windfall tax comprised in the reduction.
An assessment shall not be made under this Schedule at any time on or after 1st December 2003. Where an assessment is made under this Schedule, notice of that assessment shall be served on the company assessed. The notice of any assessment under this Schedule must state— After the notice of any assessment under this Schedule has been served on the company assessed— Where notice of any assessment under this Schedule has been served on the company assessed, the amount of the assessment— Liability to pay an instalment of windfall tax does not depend on the making of an assessment; and nothing in the provisions of this Schedule about the making of assessments shall affect the times which are taken for the purposes of this Part to be the times by which companies are required under paragraph 3 above to pay instalments of windfall tax.
If, on a claim made to the Board, it appears to their satisfaction that a company has been assessed to the same amount of windfall tax more than once, the Board shall direct that so much of any assessment made on that company under this Schedule as appears to them to be excessive is to be vacated. A claim under sub-paragraph (1) above— On the giving of a direction under this paragraph with respect to any assessment, that assessment shall be vacated to the extent specified in the direction.
If any company which has paid an amount of windfall tax assessed under this Schedule alleges that it has been, or continues to be, assessed to too much windfall tax by reason of— the company may make a claim for relief under this paragraph in respect of that error or mistake. A claim under this paragraph— On receiving a claim under this paragraph, the Board shall—
An appeal to the Special Commissioners shall lie against each of the following, that is to say— An appeal under sub-paragraph (1) above shall be made by notice to the Board. Subject to the following provisions of this paragraph, a notice of appeal under sub-paragraph (2) above— An appeal under this paragraph may be brought out of time if, on an application made for the purpose by the appellant, the Board are satisfied— and, where the Board are not so satisfied, they shall refer the application to the Special Commissioners, who (if they are so satisfied) may themselves allow the appeal to be brought out of time. The Special Commissioners— Section 55 of the Management Act (postponement of tax to which an appeal relates) shall apply to an appeal under this paragraph against an assessment under this Schedule as it applies to an appeal against an assessment mentioned in subsection (1) of that section but as if, in that section—
Where there is an appeal to the Special Commissioners against an assessment under this Schedule— Where an appeal is brought under paragraph 9 above against a decision of the Board on a claim under paragraph 7 or 8 above, the Special Commissioners shall hear and determine that appeal in accordance with the principles to be followed by the Board in determining claims under that paragraph. On an appeal to the Special Commissioners against a decision of the Board on a claim under paragraph 7 or 8 above, the powers of the Special Commissioners shall include power, if they think fit, to modify or cancel any decision made by the Board on that claim, including one made in favour of the appellant.
Subject to the following provisions of this paragraph, the following provisions of the Management Act shall apply for the purposes of and in relation to appeals to the Special Commissioners under paragraph 9 above as they apply for the purposes of or in relation to appeals to the Special Commissioners under the Tax Acts, that is to say— The Special Commissioners (Jurisdiction and Procedure) Regulations 1994 shall have effect, with the necessary modifications, in relation to appeals to the Special Commissioners under this Schedule as they have effect in relation to appeals to the Special Commissioners under the Tax Acts; but this sub-paragraph shall be without prejudice to the power of the Lord Chancellor, by virtue of sub-paragraph (1) above, to modify those regulations as applied by this sub-paragraph. Subject to paragraph 5 above and the provisions applied by sub-paragraphs (1) and (2) above, the determination of the Special Commissioners on an appeal under this Schedule shall be final and conclusive. Where an appeal has been made to the Special Commissioners against a decision of the Board on a claim under paragraph 8 above, neither the appellant nor the Board shall be entitled, by virtue of anything in sub-paragraph (1) above, to appeal except against so much (if any) of the decision of the Special Commissioners as relates to a point of law arising in connection with the computation in accordance with Schedule 1 to this Act of the amount of the windfall from which any company was benefitting on 2nd July 1997. Section 53 of the Management Act (appeal against the summary determination of a penalty) shall apply in relation to any summary determination of a penalty pursuant to— as it applies in relation to any other such summary determination as is mentioned in that section. Subsections (2B) and (2C) of section 58 of the Management Act (Northern Ireland modifications) shall apply as if the reference to the Taxes Acts included a reference to this Schedule and, accordingly, as if the reference to section 56A of that Act included a reference to that section as applied by this paragraph. In the application for the purposes of this Schedule of— references to proceedings in Northern Ireland shall have effect as references to proceedings on an appeal to the Special Commissioners by a company whose head office or principal place of business is in Northern Ireland. Sections 21 and 22 of the Interpretation Act Northern Ireland) 1954 (rules of court and powers of appellate courts) shall apply as if references in those sections to an enactment included a reference to sub-paragraphs (6) and (7) above.
Where any amount of windfall tax with which a company is charged is not paid before the time by which it is required to be paid under paragraph 3 above, that amount of that tax shall carry interest from that time until payment. Sub-paragraph (1) above applies to an amount whether or not the payment of that amount is postponed under section 55 of the Management Act (as applied by paragraph 9(6) above). Any amount paid by way of windfall tax which is repayable shall carry interest from whichever is the later of— until the time when that amount is repaid. The rate of interest under this paragraph for any period shall be— Where any amount paid by way of windfall tax is repayable to a person who has paid interest under sub-paragraph (1) above, that person shall be entitled to a repayment of so much of that interest as would represent the interest paid on that amount if, after— it is assumed that the amount repayable is to be equated with the most recent payment or payments made to the Board. Interest under sub-paragraph (1) above— and interest paid under sub-paragraph (3) above shall be disregarded in computing income, profits or losses for any such purposes.
For the purposes of this Part, section 20 of the Management Act (power to call for documents of taxpayer and others), together with sections 20B, 20BB and 20D(3) of that Act so far as they relate to section 20, shall be deemed to apply with the modifications set out in sub-paragraph (2) below. Those modifications are as follows— For the purposes of this Part subsection (1) of section 98 of the Management Act (failure to comply with notice) shall apply as if this paragraph were included in the reference in column 1 of the Table in that section to Part III of that Act.
Where a chargeable company fraudulently or negligently delivers an incorrect return in response to a requirement under paragraph 1 above, that company shall be liable to a penalty of an amount not exceeding the understated amount. In sub-paragraph (1) above “the understated amount”, in relation to a return delivered by a chargeable company, means the amount (if any) by which the amount of windfall tax with which that company is charged exceeds the amount set out in the return as the amount with which it is charged. For the purposes of this Part— Section 97(1) of the Management Act (obligation to correct incorrect return) shall apply for the purposes of this paragraph in relation to a return delivered in response to a requirement under paragraph 1 above as it applies for the purposes of section 96 of that Act in relation to such a return as is mentioned in that section.
The provisions of the Management Act which are set out in sub-paragraph (2) below (which all relate to the recovery of tax) shall apply, subject to the modifications set out in sub-paragraph (3) below, in relation to— as they apply in relation to sums charged by way of tax; and, in the case of amounts falling within paragraph (b) or (c) above, those provisions shall so apply as if those amounts were amounts of tax due and payable under an assessment. The provisions applied by sub-paragraph (1) above are— The modifications mentioned in that sub-paragraph are as follows—
Subject to sub-paragraph (3) below, where any amount of windfall tax with which a company is charged is not paid before the end of the period of six months beginning with the time by which it was required to be paid under paragraph 3 above (“the six month period”), any company falling within sub-paragraph (2) below may be assessed (in the name of the chargeable company) to all or any part of the unpaid windfall tax with which the chargeable company is charged. A company falls within this sub-paragraph if it is one or other or both of the following, that is to say— A company shall not be assessed under sub-paragraph (1) above to any amount of windfall tax at any time more than two years after that company first became assessable to that amount under that sub-paragraph. This Schedule shall have effect for the purposes of, and in relation to, an assessment under sub-paragraph (1) above as if the amount to which a company is assessable under this paragraph were an amount of windfall tax with which that company is charged. Where, by virtue of this paragraph, any company (“the group member”) pays any amount of windfall tax with which another company (“the charged company”) is charged—
Where a company which has become liable to a tax-geared penalty subsequently becomes liable to another such penalty, the amount or, as the case may be, maximum amount of the subsequent penalty shall be treated as reduced so that the aggregate of the tax-geared penalties to which the company has become liable does not exceed the greater or greatest of them. In sub-paragraph (1) above “tax-geared penalty” means (subject to sub-paragraph (3) below)— Where a company has become liable to both— the aggregate of those penalties shall be treated as only one tax-geared penalty for the purposes of sub-paragraph (1) above. The provisions of the Management Act set out in sub-paragraph (5) below shall apply, subject to the modifications set out in sub-paragraph (6) below, in relation to penalties under this Schedule as they apply in relation to the penalties mentioned in those provisions. The provisions applied by sub-paragraph (4) above are— The modifications mentioned in that sub-paragraph are— An appeal may be brought against any determination under section 100 of the Management Act of a penalty under this Schedule. Subject to sub-paragraph (9) below, the provisions of this Schedule relating to an appeal against an assessment to windfall tax shall apply (with the necessary modifications) in relation to any appeal under sub-paragraph (7) above. Paragraph 10 above shall not apply to an appeal under sub-paragraph (7) above and the powers of the Special Commissioners on an appeal under that sub-paragraph shall be those set out in section 100B(2)(a) and (b) of the Management Act. Subsection (3) of section 100B of the Management Act (further appeals) shall apply where there has been an appeal under sub-paragraph (7) above as it applies where there has been an appeal under subsection (1) of that section. The liabilities of any person under this Part shall be without prejudice to any criminal liability arising in relation to the same matter.
The provisions of the Management Act which are set out in sub-paragraph (2) below shall apply for the purposes of this Schedule— Those provisions are—
In this Schedule— In this Schedule references to the repayment of an amount of windfall tax include references to making an allowance by way of set-off of an amount of windfall tax against any liability. References in this Schedule to a penalty under this Schedule include references to a penalty under a provision of the Management Act as applied by this Schedule.
Section 23.
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In section 432E of the Taxes Act 1988 (section 432B apportionment: participating funds) paragraph (b) of subsection (6) (which provides for the adjustment of the net amount referable to overseas life assurance business) shall cease to have effect. This paragraph has effect in relation to distributions made on or after 2nd July 1997.
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In section 434A of the Taxes Act 1988 (computation of losses and limitation on relief) subsection (1) (which falls as a result of new section 434(1) to (1B)) shall cease to have effect. This paragraph has effect for accounting periods beginning on or after 2nd July 1997.
In section 436 of the Taxes Act 1988 (pension business: separate charge on profits) in subsection (3), paragraphs (d) and (e) (which make provision, for the purposes of the computation of profits arising from pension business, for group income and non-qualifying distributions to be left out of account) shall cease to have effect. This paragraph has effect in relation to distributions made on or after 2nd July 1997.
Section 438 of the Taxes Act 1988 (pension business: exemption from tax) shall be amended as follows. Subsections (3) and (3AA) (which fall as a result of new section 434(1) to (1B)) shall cease to have effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Subsection (5) (which falls with the substitution of subsection (4)) shall cease to have effect. Subsections (6) to (7) (which fall with the repeal of subsections (3), (3AA) and (5) and the substitution of subsection (4)) shall cease to have effect. Subsection (9) (which falls with the repeal of subsections (6), (6B) and (6E) and the repeal of section 440B(2)) shall cease to have effect. Sub-paragraphs (2) to (4) above have effect in relation to distributions made on or after 2nd July 1997. Sub-paragraphs (5) and (6) above have effect for accounting periods beginning on or after 2nd July 1997. In determining, for the purposes of subsections (6) to (7) of section 438 of the Taxes Act 1988, the franked investment income of, or foreign income dividends arising to, an insurance company for an accounting period beginning before 2nd July 1997 and ending on or after that date, there shall be left out of account any distributions which are made on or after 2nd July 1997.
In section 439B of the Taxes Act 1988 (life reinsurance business: separate charge on profits) subsection (7) (which falls as a result of new section 434(1) to (1B)) shall cease to have effect. This paragraph has effect in relation to distributions made on or after 2nd July 1997.
Section 440B of the Taxes Act 1988 (modifications where tax charged under Case I of Schedule D) shall be amended as follows. Subsection (1A) (which falls as a result of new section 434(1) to (1B)) shall cease to have effect. Subsection (2) (which falls with the repeal of section 438(6), (6B) and (6E)) shall cease to have effect. Sub-paragraph (2) above has effect in relation to distributions made on or after 2nd July 1997. Sub-paragraph (3) above has effect for accounting periods beginning on or after 2nd July 1997.
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Section 89 of the Finance Act 1989 (policy holders’ share of profits) shall be amended as follows. In subsection (2)— Subsection (8) (meaning of “unrelieved” franked investment income) shall cease to have effect. This paragraph has effect in relation to distributions made on or after 2nd July 1997.
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Section 34.
In section 7 of the Taxes Management Act 1970 (notice of liability to income tax and capital gains tax) in subsection (6) (sources of income which fall within that subsection) after the words “other than the basic rate” there shall be inserted “ , the Schedule F ordinary rate ”. This paragraph has effect for the year 1999-00 and subsequent years of assessment.
In section 42 of the Taxes Management Act 1970 (procedure for making claims), as it has effect in relation to corporation tax for accounting periods ending before the day appointed under section 199 of the Finance Act 1994, the following provisions shall cease to have effect— This paragraph has effect in relation to tax credits in respect of distributions made on or after 6th April 1999.
In section 42 of the Taxes Management Act 1970 (procedure for making claims), as it has effect in relation to corporation tax for accounting periods ending on or after the day appointed under section 199 of the Finance Act 1994, the following provisions shall cease to have effect— This paragraph has effect in relation to tax credits in respect of distributions made on or after 6th April 1999.
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Sections 235 to 237 of the Taxes Act 1988 (distributions of exempt funds and bonus issues) shall cease to have effect. This paragraph has effect in relation to distributions made on or after 6th April 1999.
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In section 709 of the Taxes Act 1988 (meaning of tax advantage etc) in subsection (2A) (references to a relief and to repayment of tax to include references to a tax credit and payment of any amount in respect of a tax credit) the words “and to a repayment of tax”, “respectively” and “and to a payment of any amount in respect of a tax credit” shall be omitted. This paragraph has effect for the year 1999-00 and subsequent years of assessment.
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In section 231B of the Taxes Act 1988, in subsection (4)(b), the words “or 441A(7)” shall be omitted. This paragraph has effect in relation to distributions made on or after 6th April 1999.
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In section 441A, subsections (2) to (8) (regulations about tax credits to which insurance companies are entitled) shall cease to have effect. This paragraph has effect in relation to distributions made on or after 6th April 1999.
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In Schedule 20 to the Finance Act 1993 (Lloyd’s underwriters: special reserve funds) the following provisions shall cease to have effect— Sub-paragraph (1) above has effect in relation to distributions made on or after 6th April 1999.
Section 35.
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would, apart from paragraph 2 below, be entitled to a payment under section 35(1) of this Act in respect of a distribution, and
his holding (together with any associated holding) of any one class of the shares, securities or rights by virtue of which he is entitled to the distribution amounts to not less than 10 per cent of that class.
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to which profits arising after the date of acquisition are attributable in accordance with section 236 of the Taxes Act 1988, or
in relation to which the date of acquisition is earlier than 6th April 1965,
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on the consideration provided by him for the relevant shares or securities, that is to say, those in respect of which the bonus issue was made; and
if the relevant shares or securities are derived from shares or securities previously acquired by the claimant, on the shares or securities which were previously acquired.
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if the consideration provided by the claimant for any of the relevant shares or securities was in excess of their market value at the time he acquired them, or if no consideration was provided by him for any of the relevant shares or securities, the claimant shall be taken to have provided for those shares or securities consideration equal to their market value at the time he acquired them; and
in determining whether an amount received by way of dividend exceeds a normal return, regard shall be had to the length of time previous to the receipt of that amount since the claimant first acquired any of the relevant shares or securities and to any dividends and other distributions made in respect of them during that time.
Section 36.
Section 13 of the Taxes Act 1988 (small companies’ relief) shall be amended as follows. In subsection (7) (profits of a company for an accounting period to include foreign income dividends) the words “and with the addition of foreign income dividends arising to the company” shall cease to have effect. Subsection (8A) (definition of “foreign income dividends”) shall cease to have effect. This paragraph has effect for accounting periods beginning on or after 6th April 1999.
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Sections 246A to 246Y of the Taxes Act 1988 (foreign income dividends) shall cease to have effect. The repeal of sections 246A to 246E and 246G of the Taxes Act 1988 has effect in relation to distributions made on or after 6th April 1999. The repeal of sections 246F, 246H to 246J and 246N to 246Y of the Taxes Act 1988 has effect for accounting periods beginning on or after 6th April 1999. The repeal of sections 246K to 246M of the Taxes Act 1988 has effect for accounting periods of the parent (within the meaning of those sections) beginning on or after 6th April 1999.
In section 247 of the Taxes Act 1988 (dividends etc paid by one member of a group to another) subsections (5A) to (5D) (which relate to foreign income dividends) shall cease to have effect. This paragraph has effect in relation to distributions made on or after 6th April 1999.
In section 431(2) of the Taxes Act 1988 (interpretation of Chapter I of Part XII) the definition of “foreign income dividends” shall cease to have effect. This paragraph has effect for accounting periods beginning on or after 6th April 1999.
Section 434 of the Taxes Act 1988 (franked investment income etc) shall be amended as follows. Subsections (3B) to (3D) (which relate to foreign income dividends) shall cease to have effect. In subsection (6A), paragraphs (aa) to (ac) (which define expressions used in subsections (3B) to (3D)) shall cease to have effect. This paragraph has effect for accounting periods beginning on or after 6th April 1999.
In section 458 of the Taxes Act 1988 (capital redemption business) in subsection (2) (certain foreign income dividends treated as part of profits in ascertaining loss) the words “and foreign income dividends arising to” shall cease to have effect. This paragraph has effect in relation to distributions made on or after 6th April 1999.
In section 468H of the Taxes Act 1988 (interpretation of sections 468I to 468R)— In section 468I of the Taxes Act 1988 (distribution accounts)— In section 468J of the Taxes Act 1988 (dividend distributions)— Section 468K of the Taxes Act 1988 (foreign income distributions) shall cease to have effect. In section 468M of the Taxes Act 1988 (deduction of tax: simple case) in subsection (5) (definition of “eligible income”) paragraph (c) shall cease to have effect. In section 468Q of the Taxes Act 1988 (dividend distribution to corporate unit holder)— Section 468R of the Taxes Act 1988 (foreign income distribution to corporate holder) shall cease to have effect. Sub-paragraphs (1)(a), (5) and (6) above have effect for distribution periods beginning on or after 6th April 1999. Sub-paragraphs (1)(b), (2) to (4) and (7) above have effect for distribution periods the distribution date for which falls on or after 6th April 1999.
Section 490 of the Taxes Act 1988 (companies carrying on a mutual business or not carrying on a business) shall be amended as follows. In subsection (1) (which contains a reference to foreign income dividends) the words “or out of foreign income dividends” shall cease to have effect. In subsection (4) (which contains a reference to foreign income dividends) the words “or foreign income dividends” shall cease to have effect. Subsection (5) (definition of “foreign income dividends”) shall cease to have effect. This paragraph has effect in relation to distributions made on or after 6th April 1999.
In section 687 of the Taxes Act 1988 (payments under discretionary trusts) in subsection (3), paragraph (aaa) (which concerns any sums treated under section 246D(4) as income of trustees) shall cease to have effect. This paragraph has effect in relation to distributions made on or after 6th April 1999.
In section 689B of the Taxes Act 1988 (order in which expenses to be set against income) in subsection (2)(b) the words “246D(4) or” shall cease to have effect. This paragraph has effect in relation to distributions made on or after 6th April 1999.
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Section 802 of the Taxes Act 1988 (UK insurance companies trading overseas) shall be amended as follows. In subsection (2) (which contains a reference to foreign income dividends) the words “foreign income dividends” shall cease to have effect. Subsection (4) (definition of “foreign income dividends”) shall cease to have effect. This paragraph has effect in relation to distributions made on or after 6th April 1999.
Schedule 13 to the Taxes Act 1988 shall be amended as follows. In paragraph 1 (duty to make returns), in sub-paragraph (1)— In sub-paragraph (4) of that paragraph— shall cease to have effect. In paragraph 2 (content of returns)— In paragraph 3 (payment of tax)— shall cease to have effect. Paragraphs 3A and 3B (which make provision in relation to international headquarters companies paying foreign income dividends) shall cease to have effect. In paragraph 4 (receipt of franked investment income after payment of advance corporation tax) in sub-paragraph (2) the words “or paid any foreign income dividends” shall cease to have effect. Paragraph 4A (receipt of foreign income dividends after payment of advance corporation tax) shall cease to have effect. Paragraph 6A (claims for set-off in respect of foreign income dividends received by a company) shall cease to have effect. In paragraph 7 (qualifying distributions which are not payments and payments of uncertain nature) in sub-paragraph (3) the words “and no foreign income dividend is paid” shall cease to have effect. Paragraph 9A (manufactured foreign income dividends) shall cease to have effect. Sub-paragraph (2) above has effect for accounting periods beginning on or after 6th April 1999. Sub-paragraphs (3) to (10) above have effect for return periods beginning on or after 6th April 1999. Sub-paragraph (11) above has effect in relation to manufactured dividends which are representative of dividends paid on or after 6th April 1999.
Schedule 23A to the Taxes Act 1988 (manufactured dividends and interest) shall be amended as follows. In paragraph 1(1) (interpretation) the definition of “foreign income dividend” shall cease to have effect. In paragraph 2 (manufactured dividends on UK equities: general) in sub-paragraph (6) the words “Subject to paragraph 2B(2)(b) below” shall cease to have effect. Paragraph 2B (manufactured dividends representative of foreign income dividends) shall cease to have effect. This paragraph has effect in relation to manufactured dividends which are representative of dividends paid on or after 6th April 1999.
In section 88A of the Finance Act 1989 (lower corporation tax rate on certain insurance company profits) in subsection (3)— This paragraph has effect in relation to distributions made on or after 6th April 1999.
Section 89 of the Finance Act 1989 (policy holders’ share of profits) shall be amended as follows. In subsection (2), paragraph (c) (which provides for Case I profits to be reduced by the shareholders’ share of any foreign income dividends from investments held in connection with life assurance business) shall cease to have effect. Subsection (2A) (which explains certain expressions used in subsection (2)(c)) shall cease to have effect. This paragraph has effect in relation to distributions made on or after 6th April 1999.
Section 171 of the Finance Act 1993 (taxation of profits and allowance of losses of Lloyd’s underwriters) shall be amended as follows. Subsection (2A) (which makes provision in relation to foreign income dividends) shall cease to have effect. This paragraph has effect in relation to distributions made on or after 6th April 1999.
Schedule 7 to the Finance Act 1997 shall be amended as follows. Paragraph 2 (distributions treated as FIDs) shall cease to have effect. Paragraphs 4 to 6 (exceptions for stock options, dividends on fixed rate preference shares and pre-sale distributions) shall cease to have effect. Sub-paragraphs (2) and (3) above have effect in relation to distributions made on or after 6th April 1999.
Where, in the case of an accounting period of a company beginning before 6th April 1999 and ending on or after 5th April 1999 (“a transitional period”), there would (apart from this sub-paragraph) be such an excess as is mentioned in section 246F(3) of the Taxes Act 1988, no such excess shall be deemed to have arisen. In their application in relation to foreign income dividends paid in an accounting period of a company beginning before 6th April 1999, sections 246J(5) and 246K(10) of the Taxes Act 1988 shall have effect as if the reference to any subsequent accounting period—
Where a foreign income dividend paid by a company before 6th April 1999— the recipient shall be treated, for all purposes of the Tax Acts, as receiving instead a ... distribution made by a company resident in the United Kingdom of an amount equal to ... the amount of the foreign income dividend.
is received by a person on or after that date, and
is not one in relation to which section 246D of the Taxes Act 1988 applies,
Section 41.
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Section 52.
Chapter Short title Extent of repeal 1994 c. 22. The Vehicle Excise and Registration Act 1994. Sections 22(3).
(1) Relief for mortgage interest payments Chapter Short title Extent of repeal 1988 c. 1. The Income and Corporation Taxes Act 1988. In section 353(1G), the words after paragraph (b). In section 369(1A), the words after paragraph (b). These repeals have effect in accordance with section 15 of this Act.
(2) Medical insurance relief Chapter Short title Extent of repeal 1989 c. 26. The Finance Act 1989. Sections 54 to 57. 1994 c. 9. The Finance Act 1994. Section 83. Schedule 10. 1996 c. 8. The Finance Act 1996. In section 129— (a) paragraph (a) of subsection (1); (b) in subsection (2), the words “section 54(6)(b) of the 1989 Act and”; and (c) subsections (3) and (5). In Schedule 18— (a) paragraph 12; and (b) in paragraph 17, the words “12(2)(a) and (b)” and “12(2)(c) and (3)” wherever occurring and the words “12(2)(d)” in sub-paragraph (8). These repeals have effect for the year 1997-98 and subsequent years of assessment except in relation to the cases in which the relief that has been or may be given under section 54 of the Finance Act 1989 in respect of any payment is unaffected by the provisions of section 17(1) of this Act. (3) Corporation tax rates Chapter Short title Extent of repeal 1997 c. 16. The Finance Act 1997. Section 58. Section 59(a). (4) Taxation of distributions: surplus franked investment income Chapter Short title Extent of repeal 1988 c. 1. The Income and Corporation Taxes Act 1988. In section 6(4), the words “242, 243”. In section 75(5), the words “or against a decision on a claim under section 242”. Sections 242 to 244. In section 704, in paragraph A, sub-paragraph (e). Section 825(4)(d). Section 826(7B). 1990 c. 1. The Capital Allowances Act 1990. In Schedule 1, paragraph 8(11). 1991 c. 31. The Finance Act 1991. In Schedule 15, paragraphs 5 and 6. 1993 c. 34. The Finance Act 1993. In section 78, subsections (8) to (10), and in subsection (11) the words from “but this subsection” to the end. 1995 c. 4. The Finance Act 1995. In Schedule 8, in paragraph 18, sub-paragraphs (7) and (8). 1996 c. 8. The Finance Act 1996. In Schedule 14, paragraph 12. 1997 c. 16. The Finance Act 1997. Section 71. These repeals have effect in accordance with section 20 of this Act (and, accordingly, the repeal of subsection (7B) of section 826 of the Income and Corporation Taxes Act 1988 has effect only where the earlier period mentioned in that subsection begins on or after 2nd July 1997).
(5) Lloyd’s underwriters Chapter Short title Extent of repeal 1993 c. 34. The Finance Act 1993. In paragraph 13 of Schedule 19— (a) in sub-paragraph (1), paragraph (b) and the word “or” immediately preceding it; (b) in sub-paragraph (3), the words “or paid” and, in paragraph (a), the words “or (as the case may be) that part of that income which includes the “qualifying distribution”;” (c) sub-paragraph (3A); and (d) sub-paragraph (4A). 1994 c. 9. The Finance Act 1994. In section 219(4), the words “(and any associated tax credits)”. In section 221(2), paragraph (b), and paragraph (d) and the word “and” immediately preceding it. In Schedule 21, paragraph 11. These repeals have effect in relation to distributions made on or after 2nd July 1997.
(6) Insurance companies and friendly societies: repeals other than those relating to self-assessment Chapter Short title Extent of repeal 1988 c. 1. The Income and Corporation Taxes Act 1988. In section 76(8), the definition of “relevant franked investment income”. In section 432E(6), paragraph (b) and the word “and” immediately preceding it. In section 434, in subsection (3), the words from “but it may be the subject of a claim” onwards, and, in subsection (8), the words from “or by payment of tax credit” onwards. Section 434A(1). In section 436(3), paragraphs (d) and (e). In section 438, subsections (3), (3AA), (5) to (7) and (9). Section 439B(7). Section 440B(1A) and (2). Section 441A(1). In paragraph 1 of Schedule 19AB— (a) in sub-paragraph (1), the words “the aggregate of”, and paragraph (b) and the word “and” immediately preceding it; (b) in sub-paragraph (7), the words “paid or”, paragraph (b) and the word “and” immediately preceding it, and the words “or in section 42(5A) of the Management Act”; (c) sub-paragraph (8); and (d) in sub-paragraph (10), the words “and payments of tax credits” and “or in section 42(5A) of the Management Act”. In Schedule 19AC, paragraph 2, in paragraph 5(1), the notionally inserted section 76(6B), in paragraph 5B, sub-paragraphs (1) to (3), and paragraphs 9A, 10, 10A, 11A(1), 12(1) and 15(1). 1989 c. 26. The Finance Act 1989. In section 89, in subsection (2), paragraph (a) and, in paragraph (b), the words “other unrelieved”, and subsection (8). 1990 c. 29. The Finance Act 1990. Section 45(9). In Schedule 6, paragraph 5. 1994 c. 9. The Finance Act 1994. In Schedule 16, paragraph 6. 1995 c. 4. The Finance Act 1995. In Schedule 8, paragraphs 19(2), 28(2), 29, 35(2), 36, 41, 43 and 47. 1996 c. 8. The Finance Act 1996. Section 164(2)(b) and (3)(a). In Schedule 14, paragraph 51. In Schedule 27, paragraph 5. In Schedule 34, paragraphs 1(7) and 5(2). Except for the repeals in Schedule 34 to the Finance Act 1996, these repeals have effect in accordance with the provisions of Schedule 3 to this Act, other than paragraph 11.
(7) Insurance companies and friendly societies: repeals relating to self-assessment Chapter Short title Extent of repeal 1988 c. 1. The Income and Corporation Taxes Act 1988. In paragraph 1 of Schedule 19AB, in sub-paragraph (7), the words “paid or”, paragraph (b) and the word “and” immediately preceding it, and the words “or section 42(4) of the Management Act”. In paragraph 3 of Schedule 19AB— (a) in sub-paragraph (1A), the words “paid or” and “or section 42(4) of the Management Act”, and paragraph (b) and the word “and” immediately preceding it; (b) in sub-paragraph (1B), the words “payments or” and paragraph (b) and the word “or” immediately preceding it; and (c) in sub-paragraph (8), the words “paid or” and paragraph (b) and the word “or” immediately preceding it. These repeals have effect in accordance with paragraphs 11 and 12 of Schedule 3 to this Act. (8) Taxation of dealers in respect of distributions etc. Chapter Short title Extent of repeal 1988 c. 1. The Income and Corporation Taxes Act 1988. In section 95, in subsection (1A), paragraphs (b) and (d), subsection (1B), in subsection (2), the word “qualifying” in both places where it occurs, and subsections (4) and (5). In section 234(1), the words “but subject to section 95(1A)(c)”. In section 732, subsections (2) and (2A), in subsection (4) the words “on a stock exchange outside the United Kingdom”, and subsections (5) to (7). Section 738(1)(a) and (b). In Schedule 23A, paragraph 2A(2). In Schedule 28B, in paragraph 13(5), paragraph (b) and the word “and” immediately preceding it. 1990 c. 29. The Finance Act 1990. Section 53(1). 1991 c. 31. The Finance Act 1991. Section 56. 1997 c. 16. The Finance Act 1997. In Schedule 7, paragraph 2(3)(a).
The repeals in sections 95 and 234 of, and Schedule 23A to, the Income and Corporation Taxes Act 1988 and in Schedule 7 to the Finance Act 1997 have effect in accordance with section 24 of this Act. The repeals in sections 732 and 738 of the Income and Corporation Taxes Act 1988 and section 53 of the Finance Act 1990, and the repeal of section 56 of the Finance Act 1991, have effect in accordance with section 26 of this Act. The repeal in Schedule 28B to the Income and Corporation Taxes Act 1988 has effect in accordance with section 25 of this Act. (9) Tax credits and Schedule F income Chapter Short title Extent of repeal 1970 c. 9. The Taxes Management Act 1970. In section 42, subsections (4) and (4A) and in subsection (5), the words from “and the reference in subsection (4) above” onwards. In section 42, in subsection (5), the words “Subject to subsection (5A) below,” and subsections (5A) and (10A). 1988 c. 1. The Income and Corporation Taxes Act 1988. In section 231, subsection (2), in subsection (3), the words from“and subject to” onwards and subsections (3A) to (3D). Section 231A. Section 232(2) and (3). Sections 235 to 237. In section 246(6)(a)(ii) the words “section 231(1) and”. In section 709(2A), the words “and to a repayment of tax”, “respectively” and “and to a payment of any amount in respect of a tax credit”. 1989 c. 26. The Finance Act 1989. Section 106. 1990 c. 29. The Finance Act 1990. Section 97. 1993 c. 34. The Finance Act 1993. In Schedule 6, paragraph 3. 1994 c. 9. The Finance Act 1994. In Schedule 9, paragraph 2. 1995 c. 4. The Finance Act 1995. Section 107(5) and (6). 1997 c. 16. The Finance Act 1997. Section 70. In Schedule 7, paragraph 3. 1997 c. 58. The Finance (No. 2) Act 1997. Section 19.
The repeals in section 42 of the Taxes Management Act 1970 (and the related repeals of section 97 of the Finance Act 1990 and in section 107 of the Finance Act 1995) have effect in accordance with paragraphs 2 and 3 of Schedule 4 to this Act. The repeal in section 709 of the Income and Corporation Taxes Act 1988 has effect for the year 1999-00 and subsequent years of assessment. The other repeals have effect in relation to distributions made on or after 6th April 1999. (10) Tax credits etc: insurance companies and Lloyd’s underwriters Chapter Short title Extent of repeal 1988 c. 1. The Income and Corporation Taxes Act 1988. In section 231B, in subsection (4)(b), the words “or 441A(7)”. In section 434(1A), the words from “but this subsection” onwards. Section 441A(2) to (8). In Schedule 19AC, in paragraph 9(1), in the notionally inserted section 434(1D), the words from “but this subsection” onwards and paragraph 11A(2). 1993 c. 34. The Finance Act 1993. In Schedule 20, paragraph 9(3) and, in paragraph 11(3)(c), the words “or tax credit received” and “or (3)”. 1995 c. 4. The Finance Act 1995. In Schedule 8, paragraph 31. These repeals have effect in relation to distributions made on or after 6th April 1999.
(11) Foreign income dividends Chapter Short title Extent of repeal 1988 c. 1. The Income and Corporation Taxes Act 1988. In section 13, in subsection (7), the words “and with the addition of foreign income dividends arising to the company”, and subsection (8A). In section 75, in subsection (2), the words “foreign income dividends”, and subsection (6). Sections 246A to 246Y. Section 247(5A) to (5D). In section 431(2), the definition of “foreign income dividends”. In section 434, subsections (3B) to (3D) and, in subsection (6A), paragraphs (aa) to (ac). In section 458(2), the words “and foreign income dividends arising to”. Section 468H(5). In section 468I, in subsection (2), the words “which are not foreign income dividends”, and subsections (3), (5), (5A) and (7). In section 468J, in subsection (1), the words “or a part of the total amount” and “which are not foreign income dividends”, in subsection (2), the words “or, as the case may be, the part”, and subsection (3). Section 468K. Section 468M(5)(c). In section 468Q, in subsection (2)(a), the words “a foreign income distribution”, in subsection (3), the definition of “B”, and subsection (4). Section 468R. In section 490, in subsection (1), the words “or out of foreign income dividends”, in subsection (4), the words “or foreign income dividends”, and subsection (5). In section 687(3), paragraph (aaa). In section 689B(2)(b), the words “246D(4) or”. In section 699A, in subsections (1)(a) and (4)(a), the word “246D(3)”. In section 701(8), the word “246D(3)”. In section 731, in subsection (9A), the words “other than a foreign income dividend”, and subsections (9B) to (9D). In section 802, in subsection (2), the words “foreign income dividends”, and subsection (4). In paragraph 1 of Schedule 13— (a) in sub-paragraph (1), paragraph (b), in paragraph (c) the words “and foreign income dividends paid”, and the words following paragraph (c); and (b) in sub-paragraph (4), the word “4A(2),”, and paragraph (b) and the word “and” immediately preceding it. In paragraph 2 of Schedule 13, sub-paragraphs (1)(d) to (f) and (5) and (6). In paragraph 3 of Schedule 13, in sub-paragraph (1), the words “and foreign income dividends”, and in sub-paragraph (3), the words “or foreign income dividend”. In Schedule 13, paragraphs 3A and 3B. In paragraph 4(2) of Schedule 13, the words “or paid any foreign income dividends”. In Schedule 13, paragraphs 4A and 6A. In paragraph 7(3) of Schedule 13, the words “and no foreign income dividend is paid”. In Schedule 13, paragraph 9A. In Schedule 23A, in paragraph 1(1), the definition of “foreign income dividend”, in paragraph 2(6), the words “Subject to paragraph 2B(2)(b) below”, and paragraph 2B. 1989 c. 26. The Finance Act 1989. In section 88A(3), paragraph (d)(ii) and the word “or” immediately preceding it, and the words “(or by that subsection as applied by section 468R(2) of that Act)”. In section 89, in subsection (2), paragraph (c) and the word “and” immediately preceding it, and subsection (2A). 1993 c. 34. The Finance Act 1993. Section 171(2A). 1994 c. 9. The Finance Act 1994. In Schedule 16, paragraph 1, in paragraph 3, sub-paragraphs (5) to (10) and (12), and paragraphs 4, 5(4) and (5), 7 to 9 and 11 to 16. In Schedule 21, paragraph 1(1) and (3)(a). 1995 c. 4. The Finance Act 1995. Section 76(1). 1996 c. 8. The Finance Act 1996. Section 122(5)(a). In Schedule 6, paragraph 5. In Schedule 23, paragraphs 4 and 6. In Schedule 27, paragraphs 1 to 4 and 6. In Schedule 38, in paragraph 6, sub-paragraph (2)(c) and, in sub-paragraph (5), the words “(2)(c) and”. 1997 c. 16. The Finance Act 1997. Section 72. In Schedule 7, paragraphs 2, 4 to 6 and 9 to 11. In Schedule 10, paragraphs 9 and 10(2) and (3). These repeals have effect in accordance with section 36 of, and Schedule 6 to, this Act. (12) Distributions: consequential repeals Chapter Short title Extent of repeal 1997 c. 16. The Finance Act 1997. In Schedule 7, paragraphs 1 and 7.
The repeal of paragraph 1 of Schedule 7 to the Finance Act 1997 has effect in relation to distributions made on or after 6th April 1999. The repeal of paragraph 7 of that Schedule has effect in relation to payments which are representative of distributions made on or after 6th April 1999. (13) Interest on gilt-edged securities, etc. Chapter Short title Extent of repeal 1988 c. 1. The Income and Corporation Taxes Act 1988. In section 50(1), paragraphs (a), (c) and (d). Section 51A. In section 118G— (a) in subsection (3), paragraphs (b) and (d) to (f); (b) subsections (8) and (10); and (c) in subsection (9), the words “or (8)”, “or subject to deduction of tax at a reduced rate” and “subsection (10) below and to”. In section 118H— (a) in subsection (2), the words from “or (8), or” to the words “case may be” in the first place where they occur and the words “or (8)” in the second place where they occur; and (b) in subsections (3) and (4), the words “or (8)”, wherever they occur. 1995 c. 4. The Finance Act 1995. Section 77. These repeals have effect in relation to payments falling due on or after 6th April 1998. (14) Group Relief Chapter Short title Extent of repeal 1988 c. 1. The Income and Corporation Taxes Act 1988. Section 403(9). Sections 408 and 409. Section 411(2) to (9). 1990 c. 29. The Finance Act 1990. Section 96(11). These repeals have effect, subject to the provisions of paragraph 9 of Schedule 7 to this Act, for accounting periods ending on or after 2nd July 1997.
Chapter Short title Extent of repeal 1993 c. 34. The Finance Act 1993. Section 206(3).
a price subsequently fixed by a Minister of the Crown in a case in which the amount of a first instalment of the price was fixed by the offer;
“public corporation”, in relation to a statutory transfer, means any body corporate in existence at the time of the transfer which—
had been established by or in accordance with the provisions of any enactment; and
in relation to a company so formed and registered, means a subsidiary undertaking within the meaning of Part VIII of the Companies (Northern Ireland) Order 1986.
In this section—
a price set out in the offer; or
In subsection (2) above the reference, in relation to a scheme, to its having been approved by a Minister of the Crown includes a reference to its having been made by a Minister of the Crown.
The reference in subsection (1) above to Part VII of the Companies Act 1985 shall be construed, in relation to times in relation to which that Part had effect without the amendments made by the Companies Act 1989, as if those amendments did have effect in relation to those times.
In section 2(1A) of the Value Added Tax Act 1994 (rate of VAT on fuel and power for domestic use etc.), for “8 per cent.” there shall be substituted “5 per cent.”.
This section applies in relation to any supply made on or after 1st September 1997 and any acquisition or importation taking place on or after that date.
In section 5 of the Alcoholic Liquor Duties Act 1979 (spirits), for “£18.99” there shall be substituted “ £19.56 ”.
This section shall come into force on 1st January 1998.
In section 36(1) of the Alocoholic Liquor Duties Act 1979 (beer), for “£10.82” there shall be substituted “ £11.14 ”.
This section shall come into force on 1st January 1998.
For the Table of rates of duty in Schedule 1 to the Alocoholic Liquor Duties Act 1979 (wine and made-wine) there shall be substituted—Table of Rates of Duty on Wine and Made-Wine
This section shall come into force on 1st January 1998.
In section 62 of the Alcoholic Liquor Duties Act 1979 (cider), for subsection (1A) there shall be substituted—
This section shall come into force on 1st January 1998.
In relation to times before the coming into force of section 7(2) and (3) of the Finance Act 1997 (which makes amendments specifying separate rates of duty for light oil, for ultra low sulphur diesel and for heavy oil which is not ultra low sulphur diesel), section 6(1) of the Hydrocarbon Oil Duties Act 1979 (“the 1979 Act”) shall have effect as follows—
for “£0.4168” (rate of duty on light oil) there shall be substituted “ £0.4510 ”; and
for “£0.3686” (rate of duty on heavy oil) there shall be substituted “ £0.4028 ”.
In relation to times after the coming into force of section 7(2) and (3) of the Finance Act 1997, section 6(1A) of the 1979 Act (which is inserted by section 7(3) of the Finance Act 1997) shall have effect as follows—
in paragraph (a) (rate of duty on light oil), for “£0.4168” there shall be substituted “ £0.4510 ”;
in paragraph (b) (rate of duty on ultra low sulphur diesel), for “£0.3586” there shall be substituted “ £0.3928 ”; and
in paragraph (c) (rate of duty on heavy oil that is not ultra low sulphur diesel), for “£0.3686” there shall be substituted “ £0.4028 ”.
In section 11(1) of the 1979 Act (rebate on heavy oil), for “£0.0194” (fuel oil) and “£0.0250” (gas oil) there shall be substituted “ £0.0200 ” and “ £0.0258 ”, respectively.
In section 14(1) of the 1979 Act (rebate on light oil for use as furnace fuel), for “£0.0194” there shall be substituted “ £0.0200 ”.
This section shall be deemed to have come into force at 6 o’clock in the evening of 2nd July 1997.
TABLE 1. Cigarettes... An amount equal to 21 per cent. of the retail price plus £72.06 per thousand cigarettes. 2. Cigars... £105.86 per kilogram. 3. Hand-rolling tobacco... £87.74 per kilogram. 4. Other smoking tobacco and chewing tobacco... £46.55 per kilogram.
This section shall come into force on 1st December 1997.
In Schedule 1 to the Vehicle Excise and Registration Act 1994 (annual rates of duty) in paragraph 1(2) (the general rate), for “£145” there shall be substituted “ £150 ”.
Revenue weight of vehicle Rate (1) Exceeding (2) Not Exceeding (3) Two axle vehicle (4) Three axle vehicle (5) Four or more axle vehicle kgs kgs £ £ £ 3,500 7,500 160 160 160 7,500 12,000 300 300 300 12,000 13,000 470 490 350 13,000 14,000 650 490 350 14,000 15,000 840 490 350 15,000 17,000 1,320 490 350 17,000 19,000 1,320 850 350 19,000 21,000 1,320 1,020 350 21,000 23,000 1,320 1,470 510 23,000 25,000 1,320 2,230 830 25,000 27,000 1,320 2,340 1,470 27,000 29,000 1,320 2,340 2,320 29,000 31,000 1,320 2,340 3,360 31,000 44,000 1,320 2,340 4,400
Revenue weight of tractive unit Rate for tractive unit with two axles Rate for tractive unit with three or more axles (1) Exceeding (2) Not exceeding (3) Any no. of semi-trailer axles (4) 2 or more semi-trailer axles (5) 3 or more semi-trailer axles (6) Any no. of semi-trailer axles (7) 2 or more semi-trailer axles (8) 3 or more semi-trailer axles kgs kgs £ £ £ £ £ £ 3,500 7,500 160 160 160 160 160 160 7,500 12,000 300 300 300 300 300 300 12,000 16,000 460 460 460 460 460 460 16,000 20,000 520 460 460 460 460 460 20,000 23,000 810 460 460 460 460 460 23,000 26,000 1,190 590 460 590 460 460 26,000 28,000 1,190 1,130 460 1,130 460 460 28,000 31,000 1,740 1,740 1,090 1,740 660 460 31,000 33,000 2,530 2,530 1,740 2,530 1,000 460 33,000 34,000 5,170 5,170 1,740 2,530 1,470 570 34,000 36,000 5,170 5,170 2,840 2,530 2,100 860 36,000 38,000 5,170 5,170 3,210 2,820 2,820 1,280 38,000 44,000 5,170 5,170 3,210 2,820 2,820 1,280
This section applies in relation to licences taken out after 15th November 1997.
In section 7 of the Vehicle Excise and Registration Act 1994 (issue of vehicle licences), in subsection (3B) (conditions that may be imposed in place of requirement to make a declaration), after “include” there shall be inserted “ (a) ” and at the end there shall be inserted; and
Subsection (1) above applies to applications made on or after the day on which this Act is passed.
In section 22 of the Vehicle Excise and Registration Act 1994, after subsection (2) (regulations about registration and identification of exempt vehicles, etc.) there shall be inserted the following subsections—
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In section 369 of that Act (deduction at source of mortgage interest relief), in subsection (1A) (percentage of interest deductible), for paragraph (a) there shall be substituted—.
Subsection (1) above has effect in relation to any payment of interest (whenever falling due) made in the year 1998-99 or any subsequent year of assessment; and subsection (2) above has effect in relation to any payment of interest which becomes due in the year 1998-99 or any subsequent year of assessment.
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Subject to subsections (2) and (3) below, relief under section 54 of the Finance Act 1989 (medical insurance) shall not be given in respect of any payment where either—
the premium in respect of which the payment is made is a premium under a contract entered into on or after 2nd July 1997; or
the payment is received by the insurer on or after 6th April 1999.
Subsection (1) above shall not affect the giving of relief in respect of a payment received by an insurer before 6th April 1999 where—
the premium in respect of which the payment is made is a premium under a contract entered into on or after 2nd July 1997 but before 1st August 1997;
the contract is one entered into in pursuance of a written proposal received by or on behalf of the insurer before 2nd July 1997;
the contract is not a contract entered into by way of the renewal of an earlier contract; and
if the payment is not itself a payment received before 1st August 1997, the insurer had before 1st August 1997 received an earlier payment in respect of a premium under the contract in question.
Subsection (1) above shall not affect the giving of relief in respect of a payment received by an insurer before 6th April 1999 where—
the premium in respect of which the payment is made is a premium under a contract entered into on or after 2nd July 1997 but before 1st August 1997;
that contract is one entered into by way of the renewal of an earlier contract;
the period of insurance under the earlier contract ended before 2nd July 1997; and
if the payment is not itself a payment received before 1st August 1997, the insurer had before 1st August 1997 received an earlier payment in respect of a premium under the renewal contract.
For the purposes of the preceding provisions of this section a contract shall be taken to have been entered into by way of the renewal of an earlier contract only if—
it was entered into by way of the renewal of a contract which was an eligible contract for the purposes of section 54 of the Finance Act 1989 when that earlier contract was entered into;
the insurer under the earlier contract and the insurer under the contract by which it has been renewed are the same; and
the period of insurance under the earlier contract ended immediately before the beginning of the period of insurance under the contract by which it has been renewed.
This section has effect for the year 1997-98 and subsequent years of assessment.
The rate at which corporation tax is charged for the financial year 1997 shall be, and shall be deemed always to have been, 31 per cent. (and not 33 per cent. as provided by section 58 of the Finance Act 1997).
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All such adjustments shall be made, whether by way of discharge or repayment of tax or otherwise, as may be required in consequence of the provisions of this section.
In section 231 of the Taxes Act 1988 (tax credits for certain recipients of qualifying distributions)—
in subsection (2) (payment of tax credits to companies resident in the United Kingdom) for “Subject to section 241(5)” there shall be substituted “ Subject to sections 231A and 241(5) ”; and
at the beginning of subsection (3) (claims by other persons to set tax credits against income tax liability and to receive payment of any excess of tax credit over that liability) there shall be inserted “ Subject to section 231A, ”.
After section 231 of the Taxes Act 1988 there shall be inserted—
This section has effect in relation to qualifying distributions made on or after 2nd July 1997.
No claim shall be made under section 242 or 243 of the Taxes Act 1988 (set off of losses etc against surplus of franked investment income) for any accounting period beginning on or after 2nd July 1997; and section 244(1) of that Act shall cease to have effect accordingly.
Sections 242(5) and (6) and 243(4) of the Taxes Act 1988 (restoration of loss etc in later accounting period for which there is a surplus of franked payments) shall not have effect where the later accounting period mentioned in section 242(5)(b) begins on or after 2nd July 1997.
No amount shall be deducted under paragraph (a), or carried forward and deducted under paragraph (b), of section 244(2) (deduction of tax credit paid from ACT subsequently available for set off or surrender) for any accounting period beginning on or after 2nd July 1997.
For the purposes of sections 242 and 243 of the Taxes Act 1988, if— the surplus shall be treated as reduced by the excess.
a company has a surplus of franked investment income for an accounting period beginning before 2nd July 1997 and ending on or after that date, and
that surplus exceeds the surplus of franked investment income which the company would have had for that accounting period had it ended on 1st July 1997,
Sections 242 to 244 of the Taxes Act 1988 cease to have effect in consequence of, and in accordance with, the foregoing provisions of this section.
In section 237(4) of the Taxes Act 1988 (bonus issue and related tax credit not to be franked investment income for the purposes of sections 241 and 244) for “sections 241 and 244” there shall be substituted “ section 241 ”.
Subsection (6) above has effect in accordance with subsection (5) above.
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Section 699A of the Taxes Act 1988 (untaxed sums comprised in the income of the estate) shall be amended as follows.
or out of any sums included in the aggregate income of the estate of the deceased which fall within subsection (1A) below.
After subsection (1) there shall be inserted—
In subsection (4) (rate at which sums are assumed to bear tax) after paragraph (b) there shall be inserted ; and
This section has effect in relation to amounts which a person is deemed by virtue of Part XVI of the Taxes Act 1988 (estates in the course of administration) to receive, or to have a right to receive, on or after 2nd July 1997.
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In subsection (4) of that section (subsection (2) applies in relation to distributions and associated tax credits notwithstanding section 11(2)(a) or 208 of the Taxes Act 1988)—
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the words “(and any associated tax credits)” shall cease to have effect.
After that subsection there shall be inserted—
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In section 231(1) of the Taxes Act 1988 (recipient of distribution made by UK resident company entitled to tax credit subject to sections 247 and 441A) after “441A,” there shall be inserted “ section 171(2B) of the Finance Act 1993 and section 219(4B) of the Finance Act 1994, ”.
This section has effect in relation to distributions made on or after 2nd July 1997.
Schedule 3 to this Act (which makes provision in relation to insurance companies and friendly societies) shall have effect.
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in the words preceding paragraph (a), for “qualifying distribution to which Schedule 7 to the Finance Act 1997 applies” there shall be substituted “relevant distribution”;
paragraph (b) (distribution not to be treated for the purposes of sections 246D and 246F as a FID received by the dealer) shall cease to have effect;
in paragraph (c), for “sections 208 and 234(1)” there shall be substituted “section 208”;
paragraph (d) (which disapplies paragraph 2A(2) of Schedule 23A to the Taxes Act 1988 which is repealed by this section) shall be omitted; and
the following paragraph shall be inserted at the appropriate place—
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the word “qualifying” shall be omitted in both places where it occurs; and
in paragraph (a), after “shares” there shall be inserted “or stock”.
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In section 234 of the Taxes Act 1988 (information relating to distributions) in subsection (1), the words“but subject to section 95(1A)(c)” shall be omitted.
In section 246D(1) of the Taxes Act 1988 (individuals entitled to FIDs treated as receiving grossed-up amount) after “that individual shall be treated” there shall be inserted “ (except for the purposes of section 95(1)) ”.
In Schedule 23A to the Taxes Act 1988 (manufactured dividends and interest) paragraph 2A(2) (which provides that if the dividend manufacturer is a company not resident in the UK no amount shall be deductible in the case of that company in respect of the manufactured dividend) shall be omitted (and accordingly paragraph 2(3)(c) of that Schedule has effect instead).
In Schedule 7 to the Finance Act 1997 (special treatment for certain distributions) in paragraph 2 (distributions treated as FIDs) in sub-paragraph (3)—
paragraph (a) (subjection to section 95(1A)(b)) shall be omitted; and
in paragraph (b) (subjection to section 247(5B) to (5D)) for “of that Act” there shall be substituted “ of the Taxes Act 1988 ”.
This section has effect in relation to—
any distribution made on or after 2nd July 1997; and
any payment which is representative of such a distribution.
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in paragraph (a) for “section 95 of” there shall be substituted “paragraph 13 of Schedule 28B to”; and
in paragraph (b) for “section 95(5)(c)(i) of that Act” there shall be substituted “paragraph 13(6)(c)(i) of that Schedule”.
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This section has effect on and after 2nd July 1997.
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Section 732 of the Taxes Act 1988 (dealers in securities) shall Purchase and sale be amended as follows. of securities.
After subsection (1) (dealers in securities: reduction for tax purposes of price paid by the appropriate amount in respect of interest) there shall be inserted—
Subsections (2) and (2A) (exceptions from subsection (1) for certain market makers, recognised clearing houses and members of recognised investment exchanges) shall cease to have effect.
In subsection (4) (exception from subsection (1) for overseas securities bought on a stock exchange outside the United Kingdom if conditions as to computation of profits and non-allowance of credit for foreign tax are satisfied) the words “on a stock exchange outside the United Kingdom” shall be omitted.
In this subsection “overseas securities” means securities issued—
Subsections (5) and (5A) (exceptions from subsection (1) for Eurobonds bought by dealers and for rights in a unit trust scheme where first buyer sells as manager) shall cease to have effect.
Subsections (6) and (7) (definitions for the purposes of subsections (2) and (2A)) shall cease to have effect.
This section has effect where, for the purposes of section 731(2) of the Taxes Act 1988, the interest receivable by the first buyer is paid on or after 2nd July 1997.
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After section 687 of the Taxes Act 1988 (payments under discretionary trusts) there shall be inserted—
This section has effect in relation to payments made by trustees to companies on or after 2nd July 1997.
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After section 231A of the Taxes Act 1988 (which is inserted by section 19 of this Act) there shall be inserted—
This section has effect in relation to distributions made on or after 2nd July 1997.
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Where a qualifying distribution— the trustees shall be treated for all purposes of the Tax Acts (apart from this section) as if the qualifying distribution were a foreign income dividend.
is made on or after 2nd July 1997 but before 6th April 1999 by a company resident in the United Kingdom, and
falls to be regarded by virtue of subsection (2) of section 469 of the Taxes Act 1988 (unit trusts other than authorised unit trusts) as income of the trustees of a unit trust scheme to which that section applies, and
is not a foreign income dividend and does not fall to be regarded by virtue of any provision of the Tax Acts apart from this section as a foreign income dividend arising to the trustees,
Subsection (1) above shall not apply—
if the unit trust scheme is a common investment fund established under section 42 of the Administration of Justice Act 1982; or
if, apart from section 469(2) of the Taxes Act 1988, the whole of the qualifying distribution would fall to be regarded as income of section 505 bodies.
In this section—
“publicly-owned”, in relation to any shares, means held by—
a body mentioned in section 507 of that Act (heritage bodies); or
“statutory transfer” means a transfer under a transferring enactment or by or in accordance with a statutory scheme;
Section 231 of the Taxes Act 1988 (tax credits for certain recipients of qualifying distributions) shall be amended in accordance with subsections (2) to (7) below.
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after “where” there shall be inserted “, in any year of assessment for which income tax is charged,”; and
for “the rate of advance corporation tax in force for the financial year in which” there shall be substituted “the tax credit fraction in force when”.
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Subsection (2) (payment of tax credit to company resident in UK) shall cease to have effect.
In subsection (3) (which includes provision for payment of excess of tax credit over income tax liability to person not being a company resident in the UK)—
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the words “and subject to subsections (3A) and (3D) below where the credit exceeds that income tax, to have the excess paid to him” shall cease to have effect.
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In consequence of subsection (5) above, subsections (3A) to (3D) shall cease to have effect.
Section 231A of the Taxes Act 1988 (which is superseded by the foregoing provisions of this section) shall cease to have effect.
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arrangements having effect by virtue of section 788 of the Taxes Act 1988 confer on a person not resident in the United Kingdom the right to a tax credit under section 231 of the Taxes Act 1988 in respect of a dividend of a company resident in the United Kingdom, and
the arrangements contain provision for permitting— by reference to the aggregate of the dividend and the tax credit, and
tax to be charged or deducted, or
a reduction in the amount of the tax credit that is paid to be made,
the amount of that tax or that reduction exceeds the amount of the tax credit,
This section has effect in relation to distributions made on or after 6th April 1999.
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Section 1A of the Taxes Act 1988 (application of lower rate to income from savings and distributions) shall be amended in accordance with subsections (2) to (4) below.
In subsection (1) (certain savings and distribution income to be charged at the lower rate to the exclusion of basic rate) for “lower rate” there shall be substituted “rate applicable in accordance with subsection (1A) below”.
After subsection (1) there shall be inserted—
For subsection (5) (income to which section 1A applies to be treated as the highest part of a person’s income) there shall be substituted—
After section 1A of the Taxes Act 1988 there shall be inserted—
This section has effect in relation to distributions made on or after 6th April 1999.
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Section 686 of the Taxes Act 1988 (income arising to trustees which is to be chargeable at the rate applicable to trusts) shall be amended as follows.
In subsection (1) (income to which the section applies to be chargeable at the rate applicable to trusts instead of at the basic rate or, in accordance with section 1A, the lower rate)—
for “at the rate applicable to trusts” there shall be substituted “at the rate applicable in accordance with subsection (1AA) below”; and
after “at the lower rate” there shall be inserted “or the Schedule F ordinary rate”.
After subsection (1) there shall be inserted—
In subsection (1A) (the rate applicable to trusts etc) for the words from the beginning to “Parliament may determine” there shall be substituted—
For the purposes of assessments
In subsection (2AA) (income treated by s.689B as applied in defraying trustees' expenses to be taxed at the rate that would apply apart from s.686, instead of the rate applicable to trusts) after “instead of the rate applicable to trusts” there shall be inserted “or the Schedule F trust rate (as the case may be)”.
In this section “Schedule F type income”, in relation to trustees, means—
For the sidenote there shall be substituted “Accumulation and discretionary trusts: special rates of tax.”
After section 686 of the Taxes Act 1988 there shall be inserted—
The amendment made by subsection (5) above has effect on and after 6th April 1999.
The other amendments made by this section have effect in relation to distributions made on or after 6th April 1999.
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after “it shall be assumed” there shall be inserted “(i)”;
after “lower rate” there shall be inserted “or the Schedule F ordinary rate”; and
at the end of the paragraph there shall be added ; and
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Schedule 4 to this Act (which contains provisions relating to tax credits and the taxation of distributions) shall have effect.
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In any case where— the section 505 body, on a claim made under this section to the Board, shall be entitled to be paid by the Board out of money provided by Parliament an amount determined in accordance with subsection (2) below.
a qualifying distribution is made on or after 6th April 1999 and before 6th April 2004 by a company resident in the United Kingdom, and
the recipient of the distribution is a section 505 body, and
if the section 505 body falls within neither paragraph (b) nor paragraph (c) of subsection (3) below, entitlement to exemption from tax by virtue of subsection (1)(c)(iii) of section 505 of the Taxes Act 1988 (charities) in respect of the distribution is not prevented by anything in that section,
The amount referred to in subsection (1) above is an amount equal to—
21 per cent of the amount or value of the distribution if the distribution is made on or after 6th April 1999 and before 6th April 2000;
17 per cent of that amount or value if the distribution is made on or after 6th April 2000 and before 6th April 2001;
13 per cent of that amount or value if the distribution is made on or after 6th April 2001 and before 6th April 2002;
8 per cent of that amount or value if the distribution is made on or after 6th April 2002 and before 6th April 2003;
4 per cent of that amount or value if the distribution is made on or after 6th April 2003 and before 6th April 2004.
For the purposes of this section each of the following is a section 505 body—
any charity (as defined in section 506(1) of the Taxes Act 1988);
each of the bodies mentioned in section 507 of that Act (heritage bodies);
any Association of a description specified in section 508 of that Act (scientific research organisations).
Schedule 5 to this Act shall have effect to remove or restrict entitlement to payment under this section in certain circumstances.
For the purposes of Chapter I of Part XVII of the Taxes Act 1988 (cancellation of tax advantages) payment of an amount under this section shall be treated as repayment of tax.
Any entitlement of a section 505 body to a payment under subsection (1) above shall be subject to a power of the Board to determine (whether before or after any payment is made) that, having regard to the operation in relation to the distribution in question of section 703 of the Taxes Act 1988 (cancellation of tax advantages), that body is to be treated as if it had had no entitlement to that payment or to so much of it as they may determine.
No claim may be made under this section later than two years after the end of the chargeable period of the section 505 body in which the distribution is made.
An appeal may be brought against any decision of the Board under this section or under Schedule 5 to this Act by giving written notice to the Board within thirty days of receipt of written notice of the decision.
An appeal under this section shall lie to the Special Commissioners, and the provisions of the Taxes Management Act 1970 relating to appeals under the Tax Acts shall apply to an appeal under this section as they apply to those appeals.
Any payment of an amount under this section shall be treated for the purposes of section 252 of the Taxes Act 1988 (rectification of excessive set-off etc of ACT or tax credit) as a payment of tax credit.
No election shall be made under section 246A of the Taxes Act 1988 (election for dividend to be treated as foreign income dividend) in respect of any distributions made on or after 6th April 1999.
No amount shall be shown as available for distribution as foreign income dividends in the distribution accounts of an authorised unit trust for a distribution period the distribution date for which falls on or after 6th April 1999.
No distribution made on or after 6th April 1999 shall be treated as a foreign income dividend by virtue of paragraph 2(1) of Schedule 7 to the Finance Act 1997 (Tax Acts to have effect as if qualifying distributions to which Schedule 7 applies were foreign income dividends).
Schedule 6 to this Act (which makes provision for and in connection with the repeal of provisions relating to foreign income dividends) shall have effect.
In subsection (2) above, “distribution accounts”, “distribution date” and “distribution period” shall be construed in accordance with section 468H of the Taxes Act 1988 (interpretation of sections 468I to 468R of that Act).
The Taxes Act 1988 shall be amended as follows.
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in subsection (1), after “following securities” there shall be inserted “in so far as they are not gilt-edged securities”;
in subsection (2), after “by virtue of” there shall be inserted “subsection (A1) above or of”;
in subsection (3), for “to which subsection (1) above applied” there shall be substituted “the interest on which is to be paid without deduction of income tax”; and
in subsections (4) and (5), for the words “two months”, in each place where they occur, there shall be substituted “one month”.
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Section 51A (interest on gilt-edged securities held under authorised arrangements to be paid without deduction of tax) shall cease to have effect.
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... this section has effect in relation to payments of interest falling due on or after 6th April 1998.
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any person holds any gilt-edged securities in relation to which a direction was given under section 50(1) of the Taxes Act 1988 at any time before 6th April 1998, and
that person at any time before that date made an application under section 50(2) of that Act with respect to those securities,
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are securities the interest on which, if paid immediately before that date, would have fallen to be paid after deduction of income tax, and
are registered within the meaning of section 50 of that Act but are not securities in relation to which any direction under section 50 of that Act was given before that date,
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in the case of securities transferred before 6th April 1998 but after the time when the balance was struck for a dividend on them falling due on or after that date, the person who held the securities at the time when the balance was so struck;
in any other case, the person holding the securities in question immediately before 6th April 1998.
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Chapter VIIA of Part IV of the Taxes Act 1988 (paying and collecting agents) shall be amended as follows.
Section 118A (interpretation of Chapter) shall become subsection (1) of that section and, in paragraph (k) of that subsection (meaning of “international organisation”), for “has the meaning given by section 51A(8)” there shall be substituted “ means an organisation of which two or more sovereign powers, or the governments of two or more sovereign powers, are members ”.
After that subsection there shall be inserted the following subsection—
In section 118D(4) (payments of interest payable without deduction of tax not to be chargeable payments), after “by virtue of” there shall be inserted “ section 50(A1) or of ”.
In subsection (3) of section 118G (United Kingdom public revenue dividends excluded from being chargeable payments)—
paragraphs (b) and (d) to (f) shall be omitted; and
for paragraph (c) there shall be substituted the following paragraph—
In section 118G(7), for paragraphs (a) and (b) there shall be substituted “ foreign dividends on foreign holdings held by a nominee approved for the purposes of this subsection ”.
Section 118G(8) and (10) shall cease to have effect.
This section has effect in relation to payments falling due on or after 6th April 1998.
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Section 393A of the Taxes Act 1988 (set-off of trading losses against profits of previous three years) shall be amended in accordance with subsections (2) to (6) below.
In subsection (2) (three year carry-back period), for “is the period of three years” there shall be substituted “is (subject to subsection (2A) below) the period of twelve months”.
After that subsection there shall be inserted the following subsections—
In subsection (7) (application of section 393(9))—
at the beginning there shall be inserted “Subject to subsection (7A) below,”; and
for “the accounting period in which the cessation occurs” there shall be substituted “an accounting period ending with the cessation, or ending at any time in the twelve months immediately preceding the cessation,”.
After that subsection there shall be inserted the following subsection—
After subsection (11) there shall be inserted the following subsection—
In section 343 of that Act (company reconstructions without a change of ownership), the following subsection shall be inserted after subsection (4)—
Subject to subsection (9) below, this section applies to any loss incurred in an accounting period ending on or after 2nd July 1997.
Where a loss in any trade is incurred by a company in an accounting period ending on or after 2nd July 1997 but beginning before that date, section 393A of the Taxes Act 1988 shall have effect as if subsection (2A) of that section applied to the pre-commencement part of any amount of that loss to which that subsection would not apply apart from this subsection.
In subsection (9) above “the pre-commencement part”, in relation to the amount of the whole or any part of a loss in an accounting period, means the part of that amount which, on an apportionment in accordance with subsection (11) or, as the case may be, (12) below, is attributable to the part of that accounting period falling before 2nd July 1997.
Except in a case where subsection (12) below applies, an apportionment for the purposes of subsection (10) above shall be made on a time basis according to the respective lengths of the part of the accounting period falling before 2nd July 1997 and the remainder of that accounting period.
Where the circumstances of a particular case are such that the making of an apportionment on the time basis mentioned in subsection (11) above would work in a manner that would be unjust or unreasonable in relation to any person, the apportionment shall be made instead (to the extent only that is necessary in order to avoid injustice and unreasonableness) in such other manner as may be just and reasonable.
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Chapter II of Part IV of the Finance Act 1996 (loan relationships) shall be amended as follows.
In paragraph 3(7) of Schedule 8 (permitted period of three years for carry-back of deficits), for “three years” and “three year” there shall be substituted, in each case, “twelve months”.
In sub-paragraph (3) of paragraph 4 of Schedule 11 (carry-back of deficit by insurance companies)—
for paragraph (a) there shall be substituted the following paragraph—; and
in paragraph (b), for “those periods” there shall be substituted “up to three such periods”.
In sub-paragraph (5) of that paragraph (mechanism for carry-back in the case of insurance companies), for “the three accounting periods preceding the deficit period” there shall be substituted “accounting periods falling wholly or partly within the period of twelve months mentioned in sub-paragraph (3)(a) above”.
In sub-paragraph (8) of that paragraph (which defines the set-off periods), in each of paragraphs (b) and (c), for “immediately preceding” there shall be substituted “(if any) which falls wholly or partly within the period of twelve months mentioned in sub-paragraph (3)(a) above and immediately precedes”.
In sub-paragraph (9) of that paragraph (adjusted amount of a company’s eligible profit), after “is” there shall be inserted “(subject to sub-paragraph (9A) below)”; and after that sub-paragraph there shall be inserted the following sub-paragraph—
Subject to subsection (8) below, this section has effect in relation to any deficit for a deficit period ending on or after 2nd July 1997.
Paragraph 3 of Schedule 8 to the Finance Act 1996 shall have effect in relation to any deficit for a deficit period beginning before but ending on or after 2nd July 1997 as if the permitted period in relation to the pre-commencement part of the deficit were the period beginning with 1st April 1996 and ending immediately before the beginning of the deficit period.
Where for the purposes of paragraph 23 of Schedule 15 to the Finance Act 1996 (transitional provision in connection with the carrying back of exchange losses) there is a relievable amount for an accounting period ending on or after 2nd July 1997, that paragraph shall have effect, except in relation to any pre-commencement part of that amount, as if, in section 131(10)(b) of the Finance Act 1993 (the permitted period) as applied by that paragraph, the words “twelve months” were substituted for the words “three years”.
In this section “pre-commencement part”, in relation to the deficit for any deficit period or the relievable amount for any accounting period, means the part (if any) of that deficit or relievable amount which, on an apportionment in accordance with subsection (11) or, as the case may be, (12) below, is attributable to such part (if any) of that period as falls before 2nd July 1997.
Except in a case where subsection (12) below applies, an apportionment for the purposes of subsection (10) above shall be made on a time basis according to the respective lengths of the part of the deficit period or, as the case may be, accounting period falling before 2nd July 1997 and the remainder of that period.
Where the circumstances of a particular case are such that the making of an apportionment on the time basis mentioned in subsection (11) above would work in a manner that would be unjust or unreasonable in relation to any person, the apportionment shall be made instead (to the extent only that is necessary in order to avoid injustice and unreasonableness) in such other manner as may be just and reasonable.
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In subsection (1) of section 22 of the Capital Allowances Act 1990 (first-year allowances), after “40 per cent. of that expenditure” there shall be inserted “, in the case of expenditure to which this section applies by virtue only of subsection (3C) below, shall be of an amount equal to the percentage of that expenditure that is given by subsection (1AA) below”.
After that subsection there shall be inserted the following subsection—
After subsection (3B) of that section there shall be inserted the following subsection—
In subsection (4) of that section, after “any expenditure” there shall be inserted “to which this section applies otherwise than by virtue only of subsection (3C) above”.
After subsection (6A) of that section there shall be inserted the following subsections—
In sections 23(6), 42(9), 44(5), 46(8), 48(7) and 50(3) and (4A) of that Act (which contain provisions referring to the temporary first-year allowances under section 22(3B) of that Act), after the words “subsection (3B)”, in each place where they occur, there shall be inserted the words “or (3C)”.
In section 39(2)(a) of that Act (definition of a qualifying purpose), for “subsections (2) to (3B)” there shall be substituted “subsections (2) to (3C)”.
In section 43 of that Act (provisions relating to joint lessees in cases involving new expenditure), after subsection (4) there shall be added the following subsection—
This section shall have effect in relation to every chargeable period ending on or after 2nd July 1997.
After section 22 of the Capital Allowances Act 1990 there shall be inserted the following section—
This section shall have effect in relation to every chargeable period ending on or after 2nd July 1997.
Section 25 of the Capital Allowances Act 1990 (qualifying expenditure for writing-down allowances) shall be amended as follows.
After subsection (5) there shall be inserted the following subsections—
In subsection (6) (disposal values brought into account on an assignment)—
for the words “subsection (5) above”, in the first place where they occur, there shall be substituted “subsection (5) or (5B) above”; and
for “, as modified by subsection (5) above,” there shall be substituted “(as modified, where subsection (5) above applies, by that subsection)”.
In subsection (8) (adjustments), after “subsections (5)” there shall be inserted “, (5B)”.
This section has effect for chargeable periods ending on or after 2nd July 1997 except in relation to—
expenditure incurred before that date; and
expenditure incurred in the twelve months beginning with that date in pursuance of a contract entered into before that date.
In section 60 of the Capital Allowances Act 1990 (machinery and plant on hire-purchase), after subsection (2) there shall be inserted the following subsection—
This section has effect for chargeable periods ending on or after 2nd July 1997 except in relation to—
expenditure incurred before that date; and
expenditure incurred in the twelve months beginning with that date in pursuance of a contract entered into before that date.
In the Capital Allowances Act 1990—
in section 75(1), (2) and (3) (further restrictions on allowances), for the words “sections 76 and 77”, in each place where they occur, there shall be substituted “sections 76, 76A and 77”; and
in section 76, after subsection (6) there shall be inserted the following subsection—
After section 76 of that Act there shall be inserted the following section—
This section has effect for chargeable periods ending on or after 2nd July 1997 except in relation to expenditure incurred before 2nd July 1998 in a case in which—
the sale referred to in subsection (1) of section 75 of that Act is a sale under a contract entered into before 2nd July 1997;
the contract referred to in subsection (2) of that section is itself a contract entered into before 2nd July 1997; or
the assignment referred to in subsection (3) of that section is an assignment made before 2nd July 1997 or in pursuance of a contract entered into before that date.
After section 82 of the Capital Allowances Act 1990 there shall be inserted the following section—
This section has effect in relation to any case in relation to which the Capital Allowances Act 1990 has effect as amended by any of sections 44 to 46 above.
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Subject to subsection (4) below, section 42 of the Finance (No. 2) Act 1992 shall have effect in relation to any expenditure to which this section applies as if the following subsection were substituted for subsections (4) and (5) (which for any period limit relief for film production and acquisition expenditure to a third, or a proportionately reduced fraction, of the relievable expenditure)—
Subject to subsection (3) below, this section applies to so much of any expenditure falling within paragraphs (a) and (b) of section 42(1) of the Finance (No. 2) Act 1992 as is expenditure in relation to which each of the following conditions is satisfied, that is to say—
the expenditure is expenditure incurred on or after 2nd July 1997 and before 2nd July 2000;
the film concerned is a film with a total production expenditure of £15 million or less; and
the film concerned is a film completed on or after 2nd July 1997.
This section does not apply to so much of any expenditure falling within section 42(3) of the Finance (No. 2) Act 1992 (acquisition expenditure) as exceeds the amount of the total production expenditure on the film concerned.
Where this section applies to only part of any expenditure to which subsection (2) or (3) of section 42 of the Finance (No. 2) Act 1992 applies in the case of any film, the amount deducted by virtue of subsection (1) of that section for a relevant period shall not exceed the sum of the following amounts—
the maximum amount of expenditure to which this section applies that is deductible for that period in accordance with subsection (1) above; and
the maximum amount specified in subsection (5) below.
The amount mentioned in subsection (4) above is the maximum amount which would be deductible for the relevant period in accordance with subsection (4) of section 42 of the Finance (No. 2) Act 1992 if—
in paragraphs (a) and (b) of that subsection (but not in paragraph (c)) the references to expenditure incurred by the claimant did not include references to any expenditure to which this section applies; and
the maximum amount mentioned in subsection (4)(a) above had already been deducted by virtue of that section.
In this section “total production expenditure”, in relation to any claim for relief under section 42 of the Finance (No. 2) Act 1992 in the case of any film, means (subject to subsection (7) below) the total of all expenditure on the production of the film, whenever incurred and whether or not incurred by the claimant.
For the purposes of this section where— that part of that expenditure shall be deemed, for the purpose of determining the amount of the total production expenditure on the film, to have been expenditure of an amount equal to the arm’s length amount.
any part of the expenditure incurred by any person on the production of a film is incurred under or by virtue of any transaction directly or indirectly between that person and a person connected with him, and
that part of that expenditure might have been expected to have been of a greater amount (“the arm’s length amount”) if the transaction had been between independent persons dealing at arm’s length,
Subsection (3) of section 43 of the Finance (No. 2) Act 1992 (time of completion of a film) shall apply for the purposes of this section as it applies for the purposes of sections 41 and 42 of that Act, but with the omission of paragraph (b) (completion on incurring acquisition expenditure) and the word “or” immediately preceding it.
Subsections (3) to (6) of section 159 of the Capital Allowances Act 1990 (time when expenditure incurred) shall apply for determining when for the purposes of this section any expenditure is incurred as they apply for determining when for the purposes of that Act any capital expenditure is incurred, but as if, in subsection (6) of that section, the words “at a time” were substituted for the words “in a chargeable period”.
Section 839 of the Taxes Act 1988 (meaning of “connected person”) applies for the purposes of this section.
This section applies for the making of a deduction for any relevant period ending on or after 2nd July 1997.
Section 55 of the Finance Act 1963 and section 4 of the Finance Act Northern Ireland) 1963 (both of which provide for rates of stamp duty on conveyance and transfer on sale) shall each be amended in accordance with the provisions of subsections (2) to (4) below.
Subject to the modification mentioned in subsection (5) below, in subsection (1) (which specifies rates of stamp duty), for paragraphs (b) and (c) there shall be substituted—.
In subsection (1A) (disregard of paragraph (a) to paragraph (c) of subsection (1) in relation to conveyances or transfers of stock or marketable securities) for “paragraph (c)” there shall be substituted “ paragraph (e) ”.
In subsection (2) (disregard of paragraph (a) for the purposes of leases where consideration includes rent which exceeds £600 a year)—
after the words “shall have effect as if” there shall be inserted “ (a) ”, and
and
In section 4 of the Finance Act Northern Ireland) 1963, for the words “section 34(4) of the Finance Act 1958”, wherever they occur, there shall be substituted the words “ section 7(4) of the Finance Act Northern Ireland) 1958 ”.
This section shall apply to instruments executed on or after 8th July 1997, except where the instrument in question is executed in pursuance of a contract made on or before 2nd July 1997.
This section shall be deemed to have come into force on 8th July 1997.
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In this Act “the Taxes Act 1988” means the Income and Corporation Taxes Act 1988.
The enactments mentioned in Schedule 8 to this Act (which include spent provisions) are hereby repealed to the extent specified in the third column of that Schedule.
The repeals specified in that Schedule have effect subject to the commencement provisions and savings contained or referred to in the notes set out in that Schedule.
This Act may be cited as the Finance (No. 2) Act 1997.